Cryptocurrency and NFTs, or Non-fungible tokens provide a commerce layer to the Metaverse. Cryptocurrencies like Bitcoin and Ethereum provide the conduit to transact within a digital universe.
To explain what cryptocurrency is, we need to first differentiate it from digital currency. The majority of people are familiar with and use digital currency every day through Paypal, Venmo, online banking, and other forms of digital money transfers.
Digital currency is simply real money being transferred in digital form.
Cryptocurrency (or “Crypto), however, doesn’t have a tangible, “real” counterpart, like hundred dollar bills or quarters. Instead of digitally representing dollars or coins you have stashed in the bank, Cryptocurrency are digital tokens that hold monetary value in it of themselves.
These digital tokens are not digital representations of tangible money, but they are exchangeable for cash and other cryptocurrency. This “exchangeability” makes them “fungible” (which, as we’ll soon explain, makes them different from NFTs). There are some cryptocurrencies that are tied to credit cards or other physical outlets, but the vast majority are entirely intangible.
The simplest way to think of crypto is to think of them like stocks. People trade and sell crypto in much the same way, and you’re investing mainly in what you think the value could become.
Like each stock in a company, each type of crypto token holds the same value. For instance, Bitcoin is one of the most well-known types of crypto. One Bitcoin token is worth the same as the next Bitcoin token, which rises and falls with the market. Therefore, one Bitcoin is exchangeable with the next.
Unlike stocks, however, you’re not investing in a business, like a Fortune 500 company, when you invest in cryptocurrency. Instead, you are investing in the type of cryptocurrency, like Bitcoin, Litecoin, or Ethereum. Each type of cryptocurrency offer different things or “benefits”.
First, it’s important to not think of cryptocurrency as “fake”. Cryptocurrency does hold real monetary value. You may be picturing digital tokens floating around the digital space of the interweb, but the value doesn’t lie in it living in a cool virtual world.
The value of cryptocurrency lies in decentralization. Decentralization transfers control and decision-making away from a centralized entity (like an individual, bank, or other organization) and transfers it to a distributed network. That means you don’t have to trust a CEO or bank or other organization to handle your money.
Decentralization is achieved using blockchain.
If you’re not a coder or computer scientist, aspects of blockchain can be very hard to understand. But, in layman’s terms, blockchain is a public ledger that records things in such a way that is difficult or impossible to corrupt or cheat the system.
You can think of blockchain as the Fort Knox of the digital realm.
Essentially, blockchain is meant to be a safer channel to handle your money. The benefits of decentralization and blockchain are:
However, cryptocurrencies have been and still are highly volatile. So, even though the systems are designed to be safer, investing in cryptocurrency is still highly risky.
Now that you have a basic understanding of cryptocurrency, let’s compare it to NFTs, which are quickly rising in popularity.
NFTs are Non-Fungible Tokens that are entirely unique digital assets.
Remember how we said one Bitcoin is exchangeable for the next because each Bitcoin token is identical? Well, the opposite is true here. Non-Fungible Tokens are one-of-a-kind and are thus non-exchangeable.
Earlier, we compared cryptocurrencies to stocks. With NFTs, it’s easiest to think of them as collector’s items that hold value because of their uniqueness. Their uniqueness is possible to protect and maintain using blockchain.
As “collector items”, most NFTs are (unsurprisingly) digital art pieces. Again, each piece of digital art piece is one-of-a-kind, so it’s equivalent to owning the “original” in the tangible art world.
However, NFTs are not limited to art. Other popular types of NFTs include:
Essentially, NFTs are virtual versions of things we like to collect in the real world. In many ways, that concept is much easier to understand than cryptocurrency because it adds a layer of individual appeal.
Like art in the real world, NFTs can be a good investment but can also make us feel something. So, you’re not just investing in a token, but possibly also something that you like. But, just like collectibles in the real world, what will become valuable is highly speculative.
Most people are familiar with using real money to purchase digital assets. If you’ve ever paid for an extra life in Candy Crush or bought a new skin for your Mario, you’ve spent money in the metaverse.
While we’re all familiar with using digital currency in online platforms and games, how is crypto used in the metaverse? More so, which crypto will be used in the metaverse?
As crypto stabilizes and becomes more accepted, it will gain more and more footing in the metaverse. The metaverse is, after all, an interconnected digital realm so it’s only natural for cryptocurrency to be a big part of it.
There are several cryptocurrencies that are big players in the metaverse today, which include but aren’t limited to:
Some of the above specialize in virtual real estate or gaming or shopping and even memes. There’s a whole range of possibilities that will likely grow as the metaverse expands.
Currently, each metaverse platform usually has its own crypto tokens that users can buy and use online. But, remember from our Home Page, the future of the metaverse is interconnecting the various self-contained metaverse platforms. So, ideally, future crypto will be able to be used across multiple platforms.
What cryptos will be leading the way in that future? It’s too soon to tell.