A Study on NFT & Metaverse

NetMission Ambassador Blog Posts

Written by Sourojit Dutta, Dao Nguyen Tien, Guntur Ramadhan & Phyo Thiri Lwin (Edited by Jenna Fung)

Blockchain is considered one of the core mechanisms for various emerging technologies, including cryptocurrencies, the Internet of Things (IoT), Cyber security, etc. While there is no exact way to predict our future, blockchain is widely believed to be destined to become a highly important technology in the rise of the digital economy. Blockchain is defined as a technology enabling distributed public ledgers that hold immutable data in a secure and encrypted way and ensure that transactions cannot be altered. 

The core mechanism of blockchain operation in a transactional context is a distributed ledger in a P2P system accounting for transactions in chains of blocks to overcome the limitations of conventional financial objects. NFTs and Metaverse catch the newest trend of Blockchain development since the first Bitcoin transaction in 2009. 

Some researchers describe it as being as important as the Internet, due to its potential attendant impacts on business and society (Beck, Müller-Bloch, & King, 2018; Ertz & Boily, 2020). Specifically, NFTs and Metaverse are two exemplary applications of Blockchain.

Non-Fungible Token (NFTs) is a unit of data stored on a digital ledger that can be sold and traded” (Wilson, 2021). The NFT runs on Blockchains, which secure the data integrity as well as cyber security for NFT marketplaces. Moreover, the technology has drawn many artists’ and individuals’ attention and encouraged them to create their own artworks via open online platforms, thus enhancing direct connection to the audiences and eliminating the need for costly agents and cumbersome transactions. The NFT can also allow fractionalization of asset ownership, which gives rise to an expansion of greater liquidity, greater diversification, and more precise market sizing. With the aforementioned advantages, NFTs have been integrated into actions by many pioneers and leading companies. One typical example of an NFT application is Gucci in the fashion industry as the multi-billion dollar brand decided to cooperate with NFT artists to conduct NFT Project Series as well as its future digital products (Bingol, 2021). But everything has two sides to it, even the most exciting and prominent one. 

NFT is no exception. Firstly, it does not guarantee real income potential in which NFT investments are based entirely on price appreciation and mere supply-demand correlation from the market. If the NFT overhype phenomenon died down, the artists and buyers could not redeem the returns associated with their NFT investments into real money whatsoever. Besides, for companies implementing NFT sales, it is vital to convince this older market that NFTs are worth investing in to gain sales from these consumers. The strategic plan of changing end-users habits can be daunting for newcomers wanting to put their first steps in the NFT promising sphere. Likewise, the NFT has its biggest downside from its core basis: Blockchain. The most notable consensus mechanism of Blockchain is Proof-Of-Work (PoW), a procedure that requires a significant amount of computing energy to create blockchain records, thus contributing a major source of carbon emissions to the public environment. The proposed problem can be argued from different perspectives. 

Pondering more on the NFT pros and cons, some emphatically lean more towards the dismal future of NFT where those disadvantages prevail. For the pragmatist, they can envision the scenario in which 90% of the NFTs produced, probably will have little to no value in three to five years. Their argument is backed up by the same situation of the early internet companies in the late 90s’ and the Dot-com bubble crisis. On the other hand, the optimist is confident to say “all consumer products that cannot be eaten will have digital twins in 10 years”. According to them, NFTs product could be beneficial for us in the new scenario of the digital economy with the emergence of Web 3.0, a new platform that embraces digital identity. We all should not only mint our own NFTs but also start using a privacy-focused browser to attain reliable identity privacy. 

Regarding the Metaverse, one of the most significant emerging technologies of today’s era, the Metaverse would usher in online game makers, social networks, and other technology leaders to capture a portion of what is calculated to be a nearly $800 billion market opportunity (Bloomberg Intelligence, 2021).

It is difficult to say what the Metaverse is since it is at its early stages of development, and no one could distinctly predict how far the building blocks of the Metaverse would evolve. But the idea seems to remain the same as that of the novel – A creation of virtual 3D space that will allow users to meet, work, and socialize together through their virtual avatars. Some aspects of the metaverse have already been seen in movies like Ready Player One and Free Guy (Ravenscraft, 2015).

Metaverse will likely have its independent virtual economy that will be enabled by Digital currencies and Non-Fungible tokens (NFTs). Many developers may use crypto and blockchain to solve myriad problems that might trudge inside this virtual economy of Metaverse. For instance, NFTs and crypto can act as digital proof of ownership and transfer of value in the economy of the Metaverse. Of course, NFTs are not beneficial for the environment, but if it could be argued that these tokens might be the digital key to owning a virtual mansion in the Metaverse, then boom we’ve just transformed the hobby of buying memes into a crucial piece of infrastructure for the future of the internet while raising the value of the cryptocurrency that is being held.

Obviously, with any piece of emerging technology, there exist pros and cons. Some of the pros that metaverse carries are the creation of new jobs and significant reduction of global warming, as metaverse will lower the need for human travel. These will undoubtedly reduce accidents and pollution. Another significant change that Metaverse can bring is that it may improve the quality of home-schooling and education by ensuring subjects appear more interesting, enjoyable, and fun.

Now, the cons that Metaverse carries are not insignificant either. It requires advanced digital technologies such as VR headsets, haptics, and blockchains that are not accessible to the global population of the world. On top of that, it also requires high-speed internet which again bears the accessibility problem. As long as the technology and the internet criteria are not met, accessing Metaverse by the majority of the population will be difficult.

Metaverse might also reduce the gap between the real and virtual world and make us lose track of time in the real world. Blurring this gap may lead to addiction to virtual worlds, making people withdraw from real-world experiences. This will result in a drastic psychological effect on people and will make them perceive real-world relationships and experiences differently. There also exists the concern of privacy and security. It should be noted that beneath all the surreal experiences in the metaverse, there exists a certain level of realness in its environment. And if people’s avatars are going to be assaulted or harassed in the virtual world, then the issues are largely symptomatic of the people living in both worlds. In conclusion, these are some of the questions that Metaverse, NFT, and Blockchain should diligently seek answers to in order to thrive in an ever-growing digital economy and emerging technologies as below:

  1. How well will our privacy be respected? 
  2. How do we know that our data in the Metaverse will not be stolen and sold to other companies for intrusive online advertisements amongst other things?
  3. How and what type of guidelines can Metaverse establish that prevent the users from assaulting one another in the virtual world? 
  4. What manner of security should our avatars in the Metaverse be provided?

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