By Nathan Ferguson
The linkage between finance, digital worlds and physical spaces have gained a massive level of importance and interest around the globe, especially since the rise of digital currencies and interconnected game worlds. People taking advantage of advanced devices like smartphones and tablets have experienced a complete change in life since they have access to all the world’s information just by pressing a few buttons.
In reference to the crypto space, services and projects such as NFTs, blockchain-powered games and cryptocurrency payment systems have also managed to make a presence to the general public, and not just computer and internet enthusiasts, because of the increase in level of easiness in access to these beneficial services and products.
With that in mind, the Metaverse project is one that hopes to bring together everything as it continues to grow and develop with the passage of time. The article will now discuss further in detail about how decentralized finance (DeFi), GameFi and SocialFi is coming together. However first we must first have a general idea about what the Metaverse is.
The Metaverse
The basic concept behind the creation of the metaverse is to develop a three dimensional online digital space that helps to bring together users via their digital identities. The service is said to become a hub containing several internet platforms and service, which can be accessible using only a single browser. Before its development, this concept was seen to be fictional across many novels, however it has now become a reality with the development of the internet.
The Metaverse is said to be operated by the utilization of gear that will enable virtual reality spaces, letting users take control of an avatar that represents them. Its basically converting your daily life physical tasks into a virtual space, however it will have more opportunities to explore with the development of more platforms and solutions.
To better understand this, we can look at an example. For instance, you purchase a virtual reality headset, plug it in, gain access to the digital metaverse world, have a unique identity and avatar and then perform tasks like business meetings, playing blockchain games and managing your cryptocurrency finances, all in a single digital space, making it truly immersive and convenient.
According to many experts around the world, the Metaverse is seen by many as the future of the internet, especially with the coming of Web3. The Metaverse is said to contain various digital economic models that are influenced by the development of Web3. These models can be surrounded by finance, gaming or social activity, with the level of interactions increasing, as they work together inside of the Metaverse.
With regards to Web3, DeFi, GameFi and SocialFi have often considered to be quite different from each other. These three factors have established at different times but have now somehow started to interconnect with each other especially with the development of Web3 and the concept of the metaverse becoming more polished with the passage of time.
The thing to note that these factors are still under development and are mostly reliant on crypto to help carry their economic models. Currently, majority of the solutions regarding these three factors mostly comprise of separate decentralized applications (DApps). But as the Metaverse starts to evolve and become accessible to the major public, there are some huge changes expected to arrive in the coming times.
Differentiating Conscious and Unconscious Experiences
There is quite a difference between the potential behind verticals versus horizontals. If we look at GameFi, we can see that it uses games to attract people into the Metaverse. Similarly, DeFi and SocialFi applications either help people to perform transactions or let people socialize with each other.
With this, all these three are said to be vertical, however the metaverse does not only contain a set of applications, rather it has a collection of unconscious as well as conscious user experiences inside of an economic model that can be scaled. The conscious experiences can be represented as verticals and the unconscious experiences can be considered as horizontals.
Defining the differences between verticals and horizontals can help to highlight if they should operate separately or fuse together. For example, a person visits a ticket booth, uses 10$ from their wallet to purchase a ticket for London, this is said to be conscious experience. If the same person uses NFC technology to just scan a permit and take the train, it is considered as an unconscious experience.
A main goal of traditional fintech-based applications is developing an ecosystem, where financial activities can become effortless, free of hurdles and unconscious. Likewise, you do not have to go against your friends in a game to prove your worth in a competitive game, however the level of competitiveness can be gained via the simultaneous use of social media apps like Facebook, Instagram to share one’s accomplishments, provoking friends to get better scores.
In the case of the Metaverse, the three factors DeFi, GameFi and SocialFi can be considered as embedded experiences. Although there are many Metaverses, the experiences will become more unconscious, overall leading to a more parallel nature of work, rather than vertical.
Video Games and the Metaverse
Due to the nature of the metaverse that is reliant upon the use of three-dimensional virtual reality spaces, videogames are generally considered to have the most accurate relation to the metaverse in terms of experience. Video games of this day and age are not just games but have started to integrate into different aspects of life as well.
Video games like Fortnite is not just about eliminating other players and taking the win anymore, as the game has had quite the history of hosting public events like concerts, meetups and adding buyable in-game character skins by collaborating with popular artist like Ariana Grande and Travis Scott, so because of this, the players are always engaged inside of a digital world not only to compete, but also to socialize and buy digital items to represent their favorite artists.
Various video games already have in game economy systems, but with the latest titles coming, developers have started to provide access to crypto and blockchain solutions. The implementation of blockchain technology helps to make video gaming become more decentralized. Many blockchain developers are inspired by video games as the concept of gamification is connected to both DeFi and GameFi.
Crypto and the Metaverse
Although gaming contributes towards the digital space aspect, however it does not overlap over everything that is required for a virtual space to consider other aspects of life. The utilization of crypto can help to cover other parts such as providing digital proof of ownership, value shifts, governance and many others. But it is important to understand what all this means.
In the coming times, we will work, perform social activities and purchase digital items in the metaverse, but it will also be important to have a good way of providing proof of ownership. Additionally, we must also have access to secure ways of transferring payments and items around the metaverse and we would also like to take part in decisions in the metaverse.
The section below will discuss these aspects in further detail.
Key Aspects of Blockchain for Metaverse
Blockchain is one factor that can bring all the three aspects of DeFi GameFi and SocialFi together, so it is very important to understand the perks of blockchain technology. Below mentioned are a few aspects of blockchain technology in the Metaverse.
- Digital Ownership Evidence
Having a digital wallet and private keys can help to provide immediate ownership proof of any asset or proof of performing any activity over the blockchain. For instance, in the case of a situation involving accountability, a user can easily present proof and records of the assets or activity on the blockchain. Having a wallet is considered the best and reliable way of developing a digital identity and having secure proofs.
- Digital Collectables
Similarly, to how users can present proof of ownership, the unique identification and originality of a digital item can also be proved. As the metaverse is looking to integrate more aspects of life, this is quite an important factor. In the case of NFTs, these digital items are fully unique and are not able to be copied or reformed, so blockchain also comes in handy here to ensure this.
- Shifting of Value
It is quite essential that a metaverse should have a quick and secure method of transferring valuation between separate entities. Native video game currencies are far less superior to crypto stored on a blockchain, so for users to spend their time in the metaverse and make some capital, they will require a currency that is secure.
- Governance Ability
Having power of over the rules of your interactions in the metaverse is also another key factor. Similarly, to how we have the power to vote on governments and have rights, the metaverse will also require ways for its users to take part in fair governance decisions and with the implementation of blockchain, this is already satisfied.
- Accessibility
With blockchains, the option of creation of a secure digital wallet is free and open for literally any individual around the world. Traditional bank accounts require users to pay them on a yearly basis, while also having them follow certain regulations, and since digital wallets are free from this, it is a very accessible and easy solution to perform financial activities and maintain a digital identity.
- Interoperability
With continuous advancement in blockchain technology, the level of compatibility between chains and platforms have improved to levels never seen before. Polkadot (DOT) and Avalanche (AVAX) let their users to make their own blockchains which can communicate with each other. And since a metaverse will require various projects to work in parallel, having a secure and solid blockchain ensures that easily.
Developing Specific Ecosystem Use cases
In the coming times, asset transfer will have no limitations as they will follow a complete ecosystem, so the use cases must be specific to the ecosystem too. DeFi, GameFi and SocialFi is expected to fuse together in the metaverse, however a solid ecosystem will also be required to make sure of that the metaverse has experience-based, utility-based and gamification-based elements in it.
For example, a metaverse having DeFi should have ways for microtransactions to be implemented. A metaverse having SocialFi should have an ecosystem that caters creators, awards them for their contributions and hosting events. The below section discusses the three factors in better detail.
- Planting DeFi
With the evolution of DeFi, microtransactions, NFTs, NFT marketplaces, tokens, token economies and many other beneficial aspects will help develop the primary economy of a metaverse. Every single one of these aspects contribute towards the growth of a scalable economy inside of the Metaverse. The user interface, especially in the case of NFT platforms is highly important to make sure that transactions are smooth.
NFTs have seen an unimaginable rise in popularity since the past few years, so it is extremely important that the systems behind these platforms are smooth and secure to keep users engaged and bring in more sales numbers that eventually lead to a booming economy inside of a metaverse. Millions of dollars’ worth of NFTs have managed to make their way into the financial space, so the responsibility of handling them is key to gain trust of more users.
Is it vital that the function of transactions becomes seamless and free of any hurdles to ensure greater efficiency and better sales. NFTs developed over the best and latest mechanisms will add more value to them. With users investing more time and efforts into developing the value of their assets in the ecosystem, the assets will play a major part in defining the goal of DeFi and the economic development of a metaverse.
- Implementing GameFi
GameFi is mostly seen in conjunction to opportunities related to large-scale play-to-earn games such as Axie Infinity, however in different cases, the gamification of an experience is as vital as GameFi itself. Developers can utilize leaderboards, “surprise mechanics” also known as loot boxes, battle passes and lottery systems to enhance the gamifying experiences.
Like how DeFi components contributing value to economic models, GameFi elements not only helps to develop user enjoyment, but also keep players engaged and focused on the opportunity at hand via different games and platforms.
The components associated with GameFi are reliant on both DeFi and SocialFi to gain success. For example, if anyone wants to compete on a leaderboard, they can buy or rent an NFT to take part in the competition. Leaderboards help to increase competition, but also help to develop SocialFi elements that are catered towards gamers.
- Setting SocialFi
In a metaverse, SocialFi helps to maintain the backbone of economies. There are many stakeholders, asset developers, asset holders, gamers and all sorts of users that take part in a metaverse. A sustained model is maintained when all these types of users become interested in adding value to the metaverse.
This is where the GameFi experience comes to work in conjunction with SocialFi elements. We can take the example of a gamer who is competitive and seeks to make it to the top of the leaderboard. Not only will the game score more points, but the player will also have a higher reputation and rating in the community.
SocialFi is also important in terms of transactions in DeFi. Gamers and creators with an impressive level of reputation or record can gain access to better deals as they explore the aspects of DeFi in the metaverse. With more reputation, more people will be incentivized to contribute to the ecosystem inside of the metaverse. And since majority of the activities are on-chain, other aspects surrounding tokens can be utilized to develop economic credibility
Future Vision of the Metaverse
To develop the best metaverse experience, the combined power of GameFi, DeFi and SocialFi is necessary. Despite the metaverse having its focus towards a primary goal, all three of these elements are vital to maintain reliability and scalability of a metaverse. It is important that all three of these elements work seamlessly in conjunction with each other to help scale a metaverse.
DeFi would handle the financial aspects, GameFi would handle the experience-based aspects and SocialFi would handle the credibility factors in terms of the economic actors. Without these, scalability would have no practical existence. If there are no GameFi elements, there would be no purpose to move forward, without SocialFi there would be no credibility and without DeFi there would be no economic expansion.
There might be metaverses focused towards specific areas like sports, arts and gaming, however elements such as mini games, microtransactions and ranking systems will be crucial to maintain the scaling factor. As of now there are many SAAS platforms that are working towards developing working with different entities to bring motive behind metaverses.
All three of the elements, GameFi, SocialFi and DeFi must be combined to maintain an economy that is stable and platforms that are enjoyable and competitive for both the users and the creators working in the metaverse.
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