How Metaverse will change cryptocurrency

Metaverse and cryptocurrency seem like concepts that go hand in hand – virtual worlds and virtual money to spend there.

Both are an integral part of what is being hyped these days as “web3” – the third generation of the internet, after web1 – world-wide-web and web2 – social media. The idea is that this version of the Internet will be more experiential and engaging and involve virtual and augmented reality (VR / AR) to create immersive 3D environments.

Metaverse and cryptocurrency are separate concepts and can happily exist without each other – as we saw with Bitcoin, which is useful in the real world as well as in the virtual world. And many visions of the meta-verse – including from Mark Zuckerberg alone – involve tangential crypto and blockchain.

However, it is clear that there is a potential synergy between the two ideas. People love to spend money and shopping has quickly become a key element in web1 and web2, so there is no reason why web3 should be any different! It is also becoming more and more clear that although no one knows exactly what form the meta-verse will take, it has the potential to influence how cryptocurrency develops and what impact it may have on society.

Virtual world, real value

One of the great advantages of the virtual world is that there is far less friction than in the real world. If we want to go somewhere, we just click on a link or press a button, then we (or our avatar at least) are there. No more need for expensive and cumbersome transport infrastructure, passports or packing of our suitcases.

The same goes for cryptocurrency. Traditional currency transactions (known as “fiat” for crypto-aficionados – because its value is allegedly based on government decrees) require a comprehensive infrastructure of banks and regulators to act as custodian banks, intermediaries and clearing houses. Cryptocurrency transactions, on the other hand, usually require only software running on standard computers.

Of course, we must not forget that the energy that this software uses to paint the cryptography that makes the currencies work uses a lot of energy. But the protocols are constantly being refined, and new technologies are being developed with the aim of reducing energy consumption. For example, new proof-of-stake cryptocurrencies would be far less harmful to the environment than older proof-of-work currencies like Bitcoin.

As Metaverse becomes more popular and more and more of our lives are spent online – working in virtual offices, playing games with our friends or even taking Metaverse vacations – we need frictionless ways to pay for the virtual goods and services . Maybe we will use it on virtual real estate – if we want to own our own piece of digital land where we can entertain friends or start a business!

In fact, the meta-verse could add significant value to the global economy – worth $ 1.5 trillion by 2030. And much of that value could be realized in cryptocurrency. This may mean that cryptocurrencies are really getting into the mainstream as more and more of us get used to using them as a form of payment.

If this happens, governments and legislators will no doubt feel the need to step up their efforts to regulate and to some extent control cryptocurrencies. Although things have improved in recent years – with a growing number of countries starting to adopt regulatory frameworks around digital currency – it is still a “wild west” environment. This means that there is little protection for buyers or companies that rely on coins like Bitcoin, Litecoin or Dogecoin to do business, and there is little access for consumers if they fall victim to the large number of scams out there. .

As this becomes more popular, governments may also choose to regulate cryptocurrencies based on their energy efficiency or pollution. For example, networks that rely on more expensive proof-of-work algorithms may attract higher tax rates on transactions, while those that use the more efficient proof-of-stake algorithms may be taxed at a higher rate.

The road to adoption

As cryptocurrency becomes the primary means of exchange for people buying and selling in the meta-verse, its users will become more and more familiar with the methods of acquisition, manipulation and storage. This means that it will also be used more frequently outside the meta-verse – for example to send money to friends and family – especially if it involves money across national borders, which with traditional currency can often lead to high fees (if at all). possible).

This in turn will mean that existing banks and other financial institutions are likely to step up their efforts to facilitate financial models derived from cryptocurrency or blockchain. In order to remain competitive in an age of financial systems without borders or intermediaries, they will have to rationalize their own infrastructure. While some – like the head of the IMF – have predicted that cryptocurrency could ultimately mean the end of banking as we know it, in the short term it is likely that companies in particular will still hold on to the protective layer. and regulation that banks and central banks bring to transaction networks. But it seems to me likely that those who thrive in this new environment of digital currencies and peer-to-peer financing will be those who are flexible and forward-looking with their own policies around the adoption of cryptocurrency. Pay Pal and MasterCard are examples of payment systems that are now fully engaged with cryptocurrency, especially Bitcoin – and both said it is because it is clear that it will play an important role in future payments.

What happens afterwards?

It is certainly true that no one – even those like Mark Zuckerberg – knows what form the meta-verse will actually take, when (and if) it will be fully integrated into our lives. But based on past experience, one thing we can say for sure is that companies will use it to make money and consumers will use it to use it!

When it comes to establishing currency in the virtual world, cryptocurrencies are clearly a natural choice – and because this revolutionary technology is also in its infancy, its development is likely to be affected by changes in the way we live our lives. life. For better or worse, more and more of us are choosing to spend more time online and it will only accelerate as the online world becomes more immersive, entertaining and engaging. It also means that cryptocurrency will play a bigger role in our lives. As a result, we are likely to see it become more regulated, more environmentally friendly and more useful.

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