Published
Sep 24, 2021

The NFT-Enabled Metaverse

In Neal Stephenson’s watershed 1992 science fiction novel Snow Crash, he describes a virtual universe accessible only via terminals and virtual reality (VR) goggles. Within this universe, individuals have the liberty to customize their appearance to their liking and live a life completely detached from the mundanity and bleakness of the real-world. Through the novel, Stephenson popularized two terms that have transcended the realms of sci-fi and fantasy and become entrenched in the modern lexicon: the Metaverse, referring to the virtual universe, and avatars, being an individual’s representation in virtual space. While both concepts seemed wildly far-flung at the time of publication – and Stephenson himself has openly admitted he was “just making shit up” – the idea of a Metaverse similar to that described in the novel does not appear as unattainable as it once did. With continuing interest in video games and disruptive technologies such as VR and augmented reality (AR), the world-eating potential of the Metaverse is fast-approaching.

In this article, we’ll attempt to answer the following questions:

  1. What is the Metaverse and why does it matter; and,
  2. What role will NFTs have in shaping the Metaverse?

On the Metaverse

For the layperson, the mere conception of a Metaverse seems esoteric and difficult to grasp. In fact, many of the precise features that the Metaverse is to offer are still hotly-debated among technologists at the forefront of its development. Several definitions exist for the Metaverse, one of the best-articulated being that proposed by the Acceleration Studies Foundation:

“The convergence of 1) virtually-enhanced physical reality, and 2) physically-persistent virtual reality. It is a fusion of both, while allowing users to experience it as either”. 

The Metaverse can also more simply be distilled as: 

“A shared virtual social space with 3D capacity … A virtually-enabled physical world … An electronic representation of a real-world environment, populated by real people and constructed programs”.

If the above definitions have done little to clarify the abstraction of the Metaverse, it may prove helpful to compare it to another technology, one which also seemed ill-defined at its infancy but now serves as the nucleus of modern society: the Internet. The parallels that can be drawn between the Metaverse and the Internet are many; so much so, in fact, that the two technologies are sometimes mistakenly conflated as being one and the same. In truth, many a renowned futurist has framed the Metaverse not as a simple proxy for the Internet, but rather as its logical progression. Just as in natural evolution where ancestors and their descendants share common features, the Internet and the Metaverse will be rooted in many of the same fundamental ideals. 

For instance, the Metaverse will be comparably decentralized, meaning there will be no controlling party and by extension no single point of failure. Additionally, the Metaverse will facilitate commerce by enabling the interchange of goods & services for currency. While the Metaverse’s economy will be self-contained and disparate from that of the real-world, it will still thrive on the same network effects that have propelled Internet-based retail to trillion-dollar heights. It is also critical to note that the actual contents and experiences of the Metaverse will be entirely crowdsourced, with independent creators and commercial enterprises breathing life into the ecosystem in the same way they have the Internet. 

That said, the Metaverse will boast several features other that make it markedly different from the Internet. Importantly, the Metaverse will have the property of persistence. In essence, this means that experiences in the Metaverse will not be bounded in time by defined start and end points, but rather will persist as they might in the real-world. This enduring nature of the Metaverse is part-and-parcel with another of its primary attributes, that being synchronicity. Where the Internet is largely centered around asynchronous interactions with webpages, experiences in the Metaverse are to be offered in a live format and consumed in real-time. Further to this, the Metaverse will also be distinguished for its ability to accommodate limitless concurrent users without system failure, allowing it to rival the bustling real-world megacities of past and present. Finally, the Metaverse will have interoperability between different virtual worlds, enabling users to carry forward their data, assets, and identity in a way that login systems across modern Internet websites do not allow.

From the perspective of market size, the entrepreneurs working to manifest the reality of the Metaverse stand to realize substantial returns. In its Big Ideas 2021 presentation, renowned innovation fund ARK Invest listed Virtual Worlds among the technological disruptors it sees as having the greatest market potential. ARK defines Virtual Worlds as being comprised of video games, VR, and AR. Overall, ARK’s findings show that revenue from Virtual Worlds will grow at a 17% 5-year CAGR to arrive at USD$390B by 2025. This respectable growth rate is driven by an increasing emphasis on monetizing virtual goods in video games – with a quarter of all 2020 gaming revenues coming from in-game purchases – a 16% 5-year CAGR in the global gaming market (forecasted revenue of USD$365B in 2025), and a scorching 59% 5-year CAGR in the AR & VR markets (forecasted revenue of USD$28B in 2025).

While all of these fantastical visions and bullish sentiments on the Metaverse are intriguing in their own right, they also naturally beg the question, What’s the point? Cynicism may arise from the fact that the shift to the Internet fundamentally reshaped life by digitizing activities that were once physical (e.g., communication, shopping, etc.); on the other hand, a shift to the Metaverse seems, at least at first glance, to take activities that are already digital and not alter them in any material fashion. However, the Metaverse promises to greatly enhance current Internet-based experiences. For instance, in the case of communication, the Metaverse can enable friends on opposite sides of the world to meet and enjoy a virtual outing in spite of the physical separation between them. Additionally, where online shopping currently consists of perusing lists and browsing images, shopping in the Metaverse can allow one to virtually sample clothes before making any purchases. While the possibilities are limitless, it must be conceded that the true value-add of the Metaverse will ultimately depend on the level of immersion individuals can achieve. 


NFTs and Manifesting the Metaverse

Non-fungible tokens, or NFTs for short, are just the latest craze in a crypto-economy that has been fueled by speculative manias. In short, NFTs are comparable to popular cryptocurrencies such as bitcoin and ether insofar as their ownership rights reside on a blockchain. Where they differ from traditional cryptocurrencies, however, is in the fact that they are non-fungible, which is to say that no two NFTs are created equal and thus they are not directly interchangeable. The upshot is that NFTs can be leveraged to digitize the rights to unique assets, be they physical or digital. Given their data are stored on immutable, decentralized blockchains, NFTs are provably scarce and cannot be counterfeited. 


The role that NFTs will play in shaping the Metaverse and making it a practicable reality cannot be overstated. Arguably the most significant hurdle to early forms of digital cash was the double-spend problem, wherein users could fraudulently copy the virtual files representing digital cash they already have and essentially act as their own money-printers. With their creation of the Bitcoin blockchain, Satoshi Nakamoto’s most enduring contribution was the proof-of-work system which rendered moot this double-spend problem. By the same token, one challenge faced by the Metaverse is that digital assets may be easily reproduced ad infinitum. The result would be a perpetual oversupply of all goods and thus an unworkable economy. However, the advent of NFTs has made it such that unique ownership rights can be assigned to readily identifiable actors in the Metaverse, thereby making it possible to identify bootleg goods and deny their owners access to the market.

Besides protecting the Metaverse from the disastrous outcomes of counterfeit assets and facilitating a reliable economy, NFTs offer other advantages which allow them to mirror real-world asset ownership. For instance, through the use of smart contracts, participants of the Metaverse can program unique digital rights management into their NFTs. Effectively, this enables issuers of NFTs to dictate how the assets can be used in secondary markets even after they no longer hold the ownership rights to them. Additionally, given their inherently digital nature, several Metaverse participants can claim a share of an NFT through a fractional ownership system, something that may not be feasible with purely physical assets. Finally, referring back to the matter of counterfeit goods, the existence of NFTs on a blockchain vastly streamlines the process of ownership authentication and empowers all members of the Metaverse to verify ownership without need for special access privileges.

Examples of NFT usage in virtual worlds that may represent precursors to the Metaverse abound. Some notable projects currently leveraging the disruptive capabilities of NFTs to power their virtual worlds include Decentraland, The Sandbox, and Somnium Space. Each of these projects revolves around a persistent area wherein users may buy and sell land among other digital assets, customize their properties, and open them for public exhibition. With each of these virtual worlds, the blockchain underlying the NFTs is analogous to a real-world land registry, while the NFTs themselves represent the property deeds. Where the real-world equivalents might be fraudulently altered or mistakenly destroyed, the fundamental properties of NFTs ensure that the land rights are always attributable to their true owner. Of course, ownership of real estate and the ability to transact goods and services are just two aspects of what will define the Metaverse. Arguably more central to making virtual space a viable alternative to the real-world is the social interaction element. Proto-metaverses are already being developed to feature synchronous events, corporate branding, and a self-sustaining creator economy. Chief among these modern-day primitive Metaverses is the world of Fortnite. Originally gaining traction for its take on the popular battle royale format, the video game has since evolved to offer users live concerts in addition to exclusive first-access to film trailers and albums, all entirely within the game world. With the introduction of Fortnite Creative, players are now able to design and monetize their own content, a noteworthy milestone in the development of the economic and social infrastructure underpinning the virtual world. Ultimately, it is clear through Fortnite’s remarkable expansion that the concept of a second life to be experienced in virtual space is, at least to some degree, already a reality for many.

Despite the ongoing development and rising popularity of such virtual worlds, be they built on a blockchain or powered by a traditional game engine, much still needs to occur in the way of technical advancement to realize the full promise of the Metaverse. For one, more robust concurrency infrastructure must be developed to allow for virtual events to be experienced both synchronously and at-scale. Additionally, to allow for frictionless interoperability between different environments in the Metaverse, a comprehensive suite of standards & protocols must be created and subscribed to by developers. Finally, from a more human perspective, the overall user experience must be refined to at least reach parity with the sleekness users have come to expect from contemporary Internet applications.

Closing Remarks

To realize the earliest conceptions of the Internet and develop it to its present stage, several technologies had to converge in perfect harmony. In much the same way, the ultimate success of the Metaverse will hinge on a similar alignment, from the networking layer to the hardware layer to the payment layer, and to every other layer in between. With its lofty goals to succeed where the Internet falls short, the road to manifesting the Metaverse will be long and arduous. However, one may take some solace in knowing there is significant buy-in to the concept from today’s tech industry titans, who are working to develop the many technology layers. Also, with the NFT ecosystem already flourishing and ready to assume a central role in the Metaverse economy, it would appear we have a strong handle on the all-too-often insidious layer of human behaviour.

References

Acceleration Studies Foundation. (2016, April 21). Metaverse Roadmap. Retrieved from Metaverse Roadmap.

ARK Investment Management LLC. (2021, January 26). Big Ideas 2021. Retrieved from ARK Invest.

Ball, M. (2020, January 13). The Metaverse: What It Is, Where to Find it, Who Will Build It, and Fortnite. Retrieved from MathewBall.

Ball, M. (2021, June 29). A Framework for the Metaverse. Retrieved from MatthewBall.

Radoff, J. (2021, July 14). Movies About the Metaverse. Retrieved from Building the Metaverse.

Radoff, J. (2021, July 2). Television Shows About the Metaverse. Retrieved from Building the Metaverse:

Robinson, J. (2017, June 23). The Sci-Fi Guru Who Predicted Google Earth Explains Silicon Valley's Latest Obsession. Retrieved from Vanity Fair.

Singh, C., Pump, S., & Girasole, G. (2021, April 6). NFTs and the Dawn of the Metaverse. Retrieved from Citi Ventures.


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