How are Blockchain, NFTs and Web3 connected to the Metaverse?
Updated: Oct 4, 2022
The underlying principles of how the Metaverse is being built and operated are rooted in a Web3 philosophy; which is considered to be the next iteration of the internet.
To understand Web3, it is important to understand its precedents, Web1 and Web2.
The first iteration, Web1, was a space with open protocols, in which individuals and communities held power and made the rules, but the technology interfaces were clunky and not intuitive.
Enter Web2. The technology became user-friendly (grandparents could use it) but the price was walled gardens. A handful of big corporations like Google, Amazon, Facebook and Apple, become gatekeepers and claimed ownership over all our content.
Web3 proponents argue that it is time to break the shackles and give the power back to people. This means that we will own our data and content, and be able to profit from it. This idea of decentralization lies at the heart of Web3 philosophy.
The vision is that the evolution of the mobile internet will result in a user-friendly, open source and equitable space. Curiously, though the biggest investors and loudest champions of Web3 are billionaire VCs.
Not only would we have control over our identity, our data and content but we would be able to move it around (interoperability) across the metaverse; freely. No more walled gardens or corporations like TikTok, Instagram and Google profiting off our personal data and creativity.
To be clear, Web3 and the Metaverse are not the same thing. However, for me they related because the technologies being used to build the metaverse utilise the blockchain, cryptocurrency and NFTs - all of which form the underlying mechanics for participation in the metaverse.
Also, the vision for Bitcoin is based on decentralized finance (DeFi); i.e. get rid of middlemen like banks, clearinghouses, brokerages, exchanges and let people transact, invest and store money directly. Which is the core philosophy behind Web3.
Beyond work, games and socialising, remember the metaverse is a thriving virtual economy. Every platform has a marketplace where users can buy, sell and exchange digital assets like avatars, virtual goods (clothing, sneakers, etc.) in the form of NFTs.
The simplest way to explain how it all works:
NFTs (non-fungible tokens) allow unique items to exist in the virtual world, cryptocurrencies facilitate payment (Bitcoin, Ethereum or platform native currencies like V-Bucks on Fortnite) and the blockchain is a ledger or “smart contract” that records every transaction in a secure and publicly transparent manner.
NOTE: Metaverse platforms are free to sign-up, create an avatar and roam but you need a digital wallet, capable of storing crypto, to participate in the virtual economy.
Next installment: "How should brands think about marketing in the Metaverse?"