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Is Crypto the Money of the Metaverse?

1 min read · 1551 views Bong-Geun Choi Feb 23, 2022

Making purchases and other deals is one proponent of the expanding metaverse. But what will be used as money in the metaverse? It is widely predicted that cryptocurrency, or crypto, may become the official currency of the metaverse.

 

Medium of Exchange

One role of any money or currency is that of a medium of exchange.  A specified amount of currency is given and in return a specified amount of goods or services is received.  Crypto is already playing that role in many virtual worlds within the metaverse.

 

Enabling Metaverse Transactions

Shopping is a large part of a lot of metaverse platforms, from buying designer clothing to purchasing a virtual house or a plot of real estate.  Crypto is often used to facilitate these transactions.  It is also being used for online gaming and gambling.

 

Their Own Countries?

Just as the dollar is the currency of the United States and the Yen for Japan, virtual worlds within the metaverse have adopted their own kinds of cryptocurrency. For example, one of the largest virtual worlds – Decentraland – has the MANA as its official cryptocurrency. Another virtual world – Sandbox – uses the SAND. Ether, another cryptocurrency, is the most commonly used cryptocurrency for digital land purchases. [1] These are in addition to cryptos such as Bitcoin, which is widely used across the metaverse and not specific to one virtual world.

 

Put It on My Visa

Highlighting the growing role and importance of crypto, Visa, Mastercard, and PayPal have started offering crypto payments on their platforms.

 

Link Between Virtual and Physical

Crypto may serve as a bridge between the virtual and physical worlds.  As cryptos trade on exchanges and have prices associated with them, they allow investors to calculate the value of their digital assets in fiat money [2] and their returns over time. 

 

Why Crypto for the Metaverse?

Some characteristics of crypto that make it attractive to use in the metaverse include:

  •  Ability to transfer value online without the need for a middleman like a bank or payment processor
  • Not issued or controlled by any government or central authority
  • Backed by blockchain technology which publishes transactions publicly making it almost impossible to manipulate
  • Security provided by transactions that are verified by huge amounts of computing power 
  • Freedom to transact with people on the other side of the planet as easily as paying with cash at your local grocery store

 

Crypto – Enabling Metaverse Transactions

Cryptocurrencies are vital in facilitating transactions in the metaverse. The growth of crypto has the potential to fuel the growth of the metaverse.


 


[1] Hou, Felicia, How to Shop in the Metaverse: The Cryptocurrencies You’ll Need to Buy and How to Get Them, Fortune, 2/16/22

[2] Fiat money – currency issued by a central government that is not back by gold or any other commodity


 

Bong-Geun Choi

Chief Economist

bchoi@fountinvestment.com

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Risk Disclosure:

 

Investing involves risk, including possible loss of principal. There is no guarantee the Funds will achieve their stated objectives. In addition to the normal risks associated with investing, international investments may involve the risk of capital loss from unfavorable fluctuation in currency values, differences in generally accepted accounting principles, or social, economic, or political instability in other nations. Emerging markets involve heightened risks related to the same factors, as well as increased volatility and lower trading volume. 

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