Virtual worlds and virtual money to spend in such a world appear to be the concepts that go hand in hand with the metaverse and cryptocurrency.
Both are part of what is now known as "web3," the internet's third generation, which follows web1 – the World Wide Web – and web2 – social media. Virtual and augmented reality (VR/AR) will be used to construct immersive 3D worlds, with the goal of making this version of the internet more engaging.
The metaverse and cryptocurrencies are two distinct concepts that may coexist happily — as we have seen with Bitcoin, which has both real-world and virtual-world applications. Cryptocurrency and blockchain are only tangentially integrated in several metaverse concepts, including Mark Zuckerberg's, ‘Meta’.
People want to spend money, and shopping was a big part of web1 and web2, so there is no reason to think web3 will be any different. It is also becoming clear that, while no one knows precisely what shape metaverse will take in the future and the impact it may have on cryptocurrencies.
One of the major benefits of the virtual world is that it has significantly less friction than the real world. If we want to go anywhere, all we have to do is click a link or press a button, and we are there. There is no transit infrastructure, no packing bags, and no passport concept here.
The same may be said for cryptocurrencies. Traditional money necessitates a massive infrastructure of custodians, middlemen, and clearinghouses, which are provided by banks and regulators. Bitcoin transactions, on the other hand, normally simply require the usage of standard computer software.
Of course, we must not neglect the fact that this program consumes a significant amount of energy in order to crack the encryption that allows currencies to function. Protocols are always being modified, and new technologies are being developed with the purpose of reducing energy consumption. Recent proof-of-stake cryptocurrencies, for example, are claimed to be significantly less environmentally harmful than previous proof-of-work currencies such as Bitcoin.
We will need frictionless ways to pay for virtual products and services as the metaverse grows in popularity and more of our lives are spent online — working in virtual offices, playing games with our friends in the virtual environment, or even enjoying metaverse holidays. If we want to buy our own piece of digital land to entertain guests or create a business, we might choose to spend money on virtual real estate.
In fact, the metaverse has the potential to add $1.5 trillion in value to the global economy by 2030, and a significant portion of that value might be achieved through bitcoin. As more of us become accustomed to utilizing cryptocurrencies as a means of payment, this might imply cryptocurrency actually entering the mainstream.
If this happens, governments and politicians will almost certainly feel obligated to step up their efforts to regulate and control cryptocurrencies. Although things have been more organized in recent years, with a rising number of nations introducing legislative frameworks around digital currency, the situation remains somewhat of a "wild west." This implies that purchasers and firms who do business with a currency like Bitcoin, Litecoin, or Dogecoin have minimal protection, and customers have little recourse if they fall victim to one of the many frauds out there.
Governments may decide to regulate cryptocurrencies depending on how energy-efficient or polluting they are as they become more popular. For example, networks that utilize inefficient proof-of-work algorithms may face higher transaction tax rates, whereas networks that use more efficient proof-of-stake algorithms may have lower tax rates.
Users will get more acquainted with methods of acquiring, handling, and keeping cryptocurrency as it becomes the primary medium of exchange for those buying and selling in the metaverse. This means it will be used more frequently outside of the metaverse, too – for sending money to friends and relatives, for example – especially if the money has to cross national borders, which can be costly with fiat currency.
As a result, banks and other traditional financial institutions are likely to increase their efforts to support cryptocurrency and blockchain-based financial models. They will have to streamline their own infrastructure to stay competitive in an age of borderless, middleman-free financial systems. While some believe that cryptocurrency will eventually mean the end of banking as we know it, businesses, in particular, will likely want to retain the layer of protection and regulation that banks and central banks provide to transactional networks in the short term.
However, it appears to me that those who succeed in this new world of digital currencies and peer-to-peer banking will be those who are flexible and forward-thinking with their own bitcoin adoption policy. PayPal and Mastercard are two instances of payment systems that have completely embraced cryptocurrency, particularly Bitcoin, and both have stated that it is evident that it will play a significant role in the future of payments.
No one can predict what shape the metaverse will take when (or if) it becomes fully interwoven into our lives. However, one thing is guaranteed based on recent experience: corporations will use it to generate money, and consumers will use it to spend it.
Cryptocurrencies are certainly a logical match for creating the virtual world's currency – and because this groundbreaking technology is still in its early stages, its development path is likely to be impacted by changes in how we live our lives. For better or worse, an increasing number of people are choosing to spend more time online, and this trend is only anticipated to increase as the online world becomes more immersive, entertaining, and engaging. This also means that cryptocurrencies will become increasingly common in our everyday lives. As a result, in the future, we may expect it to become more controlled, environmentally friendly, and useful.