It seems as though the world of blockchain has come in waves. First came the idea of Bitcoin and its exponential rise in value. Next came NFT art and the likes of Bored Ape Yacht Club making it to mainstream television. And today, the Metaverse is showing the world what it may or may not be capable of. In this article, we cover each element before highlighting the power that all three can have when working in tandem.
What is blockchain?
At a very fundamental level, blockchain is a decentralised public ledger that exists on a network. Within a blockchain system, transactions are made and proven to be accurate by many computers within the peer-to-peer network. This ledger is immutable, meaning it cannot be edited over time, which is what makes it incredibly reliable and free of human error.
Blockchain is the technology that underpins cryptocurrencies like Bitcoin, Ethereum, and NFTs. Its power of being free of government and intermediaries, as well as being incredibly fast and frictionless, lends itself to the idea of being the next industrial revolution. It’s not all about transacting money either, as there are benefits like farmers entering data about their produce on the blockchain, meaning the supply chain becomes incredibly transparent, accurate, and reliable.
Smart contracts can also be programmed on a blockchain, meaning more complicated transactions can take place. A smart contract is a way to deliver some (i.e., money or a contract) once some rules are successfully triggered by the program. This self-executing contract could be a safe way to transfer the ownership of a house to someone without the need for an estate agent or bank. It can operate as an escrow, and the transactions are irreversible to limit fraud.
Smart contracts could be used to deliver loans, pay royalties to artists, facilitate gambling and bets, and administrate payroll… the possibilities here are endless.
The Metaverse appears to confuse a lot of people, and we can in part thank Mark Zuckerberg for that and his very manipulative rebranding. What many of us think is the Metaverse is this one virtual space created by Facebook’s owner where we can all meet up virtually, work in a virtual office, and so on. In truth, Zuckerberg offers his Metaverse, but it’s far from the only one. This is equivalent to thinking there is only one website on the internet…
There can be infinite Metaverses, as all it means is cyberspace. However, we cannot deny that Zuckerberg’s version of the Metaverse is and will be the industry leader. “The best way to understand the Metaverse is to experience it”, says Zuckerberg, and he is right. With the VR headset on, you can meet up with friends in this virtual space, watch films together, work together, have dance raves together, and so on.
But, outside of just his version, the possibilities are again endless. We will see things like casinos crop up and facilitate gambling in a virtual space using blockchain, which is one example of how everything ties in. Or, buying virtual property (with smart contracts) in an artificially limited virtual town created by Sims or similar. This is how games may converge with VR, but also work, media consumption, and just about every aspect of our lives today.
If you’re wondering where NFTs all fit into this, you may be surprised that we have already explained it without mentioning the term ‘NFT’. Non-fungible Tokens are minted through smart contracts and represent ownership of an asset, be it digital or physical. So, through all of the smart contract examples above like buying a house, NFTs are used because they’re unique tokens that cannot be altered and are a way to trade possession of something.
This highlights that the digital art NFT craze is just one, very small use case for NFTs. Whilst digital art may be interesting for some investors, it’s the idea that NFT marketplaces can be attached to social media platforms (Twitter has already announced one) to allow buying and selling NFTs.
Taking just the Twitter example, there will be an integration called NFT Tweet Tiles, which displays artwork of an NFT directly within Tweets. A dedicated button will lead to the marketplace listing (four marketplaces will be partnered).
Again, if you need reminding of what problems this can solve in the real world outside of digital art, the example of investing is a good one. Purchasing vintage alcohol is an increasingly common way to make an investment that doesn’t succumb to the systemic risk of the stock market. But, there have been accounts of fake bottles being sold under the claim that they’re very rare and vintage, as shown in the 2016 documentary Sour Grapes.
To get around this issue, some distilleries are selling the NFTs that represent their collectable bottles directly - thus cutting out the middleman. This reduces the risk of fraud, as the NFT is created at source by a credible distillery, and its reliable record-keeping can keep the transparency and ownership airtight forever, or until it’s transferred/sold. This may also become a way to efficiently trade physical assets when investing, as ownership can be transferred safely without using an extortionate broker. It’s instantaneously transacted, and you can see how many previous owners it’s had.
The Metaverse beckons for such auctions within virtual spaces, allowing users around the world to view NFTs of assets and investments that can be efficiently, safely, and cheaply traded… If anything, this puts more physicality back into people’s lives, as they previously cannot walk and view a property on the other side of the world or see digital art up close in an immersive way.
Services like OpenSea are showing that NFTs can be created and sold without knowing how to program. In 2021, Kings of Leon became the first band to sell their new album as an NFT. And why not? It’s a piece of art and it’s mostly consumed digitally - long gone are the days of letting HMV take a huge cut. But moreover, we may see bands like Kings of Leon sell tickets to their shows through NFTs too, as they are ideal to represent a valid ticket with a QR code + seat number without the notoriously expensive Ticketmaster processing and posting fees.
Because the trio of Blockchain, smart contracts, and NFTs seemingly have an answer to almost every aspect of our current economy and lives, the next industrial revolution seems to be just around the corner.