Digital Economy & the Metaverse.
Metaverses have existed for decades in the form of multiplayer online games. But we may soon enter an age of immersive experience hardly distinguishable from our real-world – fostering new modes of interaction for gamers and non-gamers alike.
Beyond the hype of multi-million dollar digital art sales, the significance of NFTs may lie in enabling the beginnings of something resembling genuine human society, based on free markets (for goods, services, and ideas), independent ownership, and social contracts, to flourish in the metaverse.
Recently, countless examples of communities have sprung up, highlighting the potential of play-to-earn games in building a new economy. Most notably, a video game called ‘Axie Infinity’ shows that this is more than just a pipe dream. The popular play-to-earn environment, which advanced from 4,000 to 2 million daily active users within a few months, has become especially popular in the Philippines and Venezuela. For players in countries like these in the Global South, the income they can earn inside this digital world is far more significant than what their local physical economy can offer.
It is worth noting that play-to-earn games do not inherently and fully eliminate the centralization found in games: they still require the authority of the publisher to define, issue, and constrain the asset that eventually is traded as an NFT. Rather, the greatest promise of play-to-earn games is in their potential to decentralize marketplaces for the creation, ownership, and exchange of digital assets, as well as the potential created when these marketplaces are connected to the traditional economy and fiat currencies—allowing players to transfer their digital time, effort and earnings into disposable income in the physical world.
A key economic concept of Decentraland and other metaverses is the adjacency of land. All metaverse parcels are contiguous to others at a fixed location – within finite geography. This creates scarcity due to the limited amount of property supply. And scarcity enables property value to rising and fall, based on universal laws of supply and demand.
A framework is thus created for, according to the Decentraland manifesto, “a social experience with an economy driven by the existing layers of land ownership and content distribution”.
NFTs enable the property transactions that drive the metaverse. These tokens provide indisputable proof of ownership that is more secure than any land deed.
“For metaverse property rights, you simply cannot fake it because of the way smart contracts are defined, and the NFTs programmed,” Anziani says. “You know you own an asset and can demonstrate ownership fully. Based on the terms and conditions of that virtual environment, you can then assert ownership rights.”