NFTs, or Non-Fungible Tokens, are a revolutionary technology for creating and tracking unique digital items on blockchain networks. Moreover, they’re fundamental to the emergence of another crucial development — the metaverse.
If you’re following the moves made by Facebook (now Meta), Microsoft, and Adidas, you know the metaverse is a centerpiece technology for the future. The reason is immersion — the metaverse takes a virtual world and makes them feel as authentic and interactive as a physical one.
The metaverse will bring about crucial changes in how we move through the world. For instance, the pandemic sped up a shift to remote work culture, but the requisite Zoom meetings often feel two-dimensional and inadequate compared to the office. In their place, the metaverse will open up shared virtual environments that restore a feeling of being somewhere.
But what have NFTs got to do with this new digital world? Here are four reasons why NFTs are crucial to developing the metaverse.
NFTs are Non-Fungible Tokens — so what’s the non all about? When something is fungible, it lacks uniqueness and can be traded 1:1 with its exact likeness.
What about pieces of art? If I have a Picasso and you have a Rembrandt, can we trade them interchangeably? No, because paintings are unique one-of-one objects and don’tcontaina set value or equivalence. Uniqueness in the world makes physical reality special — some things are unlike anything else and can’t be copied and pasted.
Since the dawn of the digital age, developers have been unable to inscribe effective borders around digital objects. As such, it’s been impossible to own digital things like we do physical ones. That’s made the conversation around creating an effective economy for digital objects a non-starter.
That is — until now. In a nutshell, an NFT is a blockchain-based deed of ownership that proves the uniqueness of a given digital object. Put another way, NFTs work like receipts that immutably show who owns what and allow owners to freely buy, sell, or store their belongings on the blockchain.
For the first time, digital things such as generative art, in-game items, 3D sculptures, and digitally-mirrored physical objects can trade just as physical items do. As such, NFTs are the perfect vehicle for ownership in the metaverse. That’s also why massive multi-billion-dollar NFT marketplaces such as OpenSea are now thriving.
Metaverses are shared virtual environments in the digital sphere, so they don’t need to adhere to land borders as national citizenship schemas do. But if the metaverse is meant to be global, then undoubtedly, the technology for enabling and proving ownership in the metaverse needs to be as well.
That’s where NFTs come in for the save. Remember, an NFT is a token that records the unique existence of digital objects and who owns them. NFTs live on global blockchains, e.g., permissionless networks that host and transact information without intermediaries such as big corporations.
Moreover, metaverses are already being built on blockchains such as Ethereum. When a metaverse is natively built on a blockchain, users can seamlessly bring their NFTs over. In cases where different blockchains host different metaverses, interoperable bridges exist to join them.
So, suppose the traditional world is all about creating borders. In that case, the metaverse enabled by blockchain and NFTs is all about dismantling them to make the various networks out there, along with their assets, fully compatible.
When you own something, you naturally want to ensure its security. Your car has an alarm, the door to your home is locked, and your phone has a passcode. What about your digital objects? How do you secure those?
Emails, passwords, photos, and dates of birth are all digital objects you own yet entrust to centralized entities to secure. But they appear to lose these things to hackers every day. Based on that track record, you’d be forgiven for feeling iffy about giving those same companies your metaverse objects for safekeeping.
However, NFTs are built differently. Because they’re on blockchain networks, you, and no one else, will own and store them. The blockchain itself requires a tremendous 51% commitment of the network’s consensus resources to approve each block of transactions. Such a titanic commitment means any potential bad actor needs to raise an impossible amount of liquidity — think billions — just to try and snag an NFT from your wallet.
Aside from going the 51% route, there is no other realistic option for hacking a blockchain’s security defenses. Therein lies the strength of NFTs for retaining security — each NFT on the blockchain has the entire network’s security built inside. Which begs the question — which is more secure, a blockchain that’s virtually impossible to hack or the lock on your front door?
Right now, there is simply no other technology in existence that creates, ensures, and securitizes digital ownership and object scarcity like NFTs do. For a prime example of how an NFT-based metaverse economy works, look no further than the Axie Infinity game.
In the Axie ‘verse, players own everything. Your character (called an axie), the land your axie walks on, the weapons it wields — every game element is based on unique 1-of-1 scarcity. If you pop into the Axie Marketplace, you’ll find a bubbling scene where players sell upgraded axie characters, special weapons, developed land, and other valuable items.
The Sandbox is another bustling metaverse built on Ethereum that features a fully-fledged virtual real-estate marketplace. Every day, Sandbox players are developing their unique plots of land with storefronts and venues such as nightclubs. Just as in real life, those pieces of land — and the businesses established on them — go up for sale. Sometimes, that land even fetches millions of dollars.
Today, it seems everyone is building a metaverse, including names you’d hardly expect, such as Chevron and Budweiser. As more household names climb aboard the metaverse train, a significant transition of the world’s economy to digital object ownership is clear.
However, without NFTs, such a transition is impossible, which is why blockchain networks such as Ethereum, Tezos, Polkadot, and Solana are crucial infrastructures for tomorrow’s virtual reality.
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