Future-gazing: a virtual economic system in the metaverse

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    Hopeful talk about the impending metaverse revolution may have died down so far in 2023. metametaverse chief Vishal Shah Admits ‘the hype is over’ – despite the fact that AI has come to dominate the tech debate around the Web3, this in no way suggests that the future will not be dominated by the Metaverse. .

    franklin templetonof Raphael Lennox She believes the metaverse market will be worth US$5 billion by 2030. She told Forbes: In the first half of 2022, more than US$120 billion was invested in the Metaverse, double her amount in 2021, from start-ups to tech giants, venture capital and private equity. “

    Talk of the expansion of the Metaverse runs alongside discussions about the greater role of cryptocurrencies, which have been touted as the primary means of digital payments in the Metaverse.

    However, cryptocurrencies have seen more competition in recent months, with many centralized banking institutions experimenting with the introduction of central bank digital currencies (CBDCs). Could CBDCs rival cryptocurrencies as the primary means of payment in the Metaverse in the future? What is the purchasing power of cryptocurrencies in the Metaverse?

    Metaverse Purchasing Power of Cryptocurrencies

    for MonabateCTO of Matt Peck“Cryptocurrencies will definitely become the preferred payment method as the metaverse grows.

    “In a fully virtual environment where all commodities on offer are non-physical and transfer of ownership is instant, anything you want to buy will technically become a non-fungible token.”

    paysafeSenior Vice President, Wallet as a Service and Crypto/Web3, Elbruz Yilmazextends this, looking at the compatibility between the decentralized nature of cryptocurrencies and the metaverse principles of user autonomy and ownership.

    “The programmable features of certain cryptocurrencies enable the creation of smart contracts and decentralized applications within the metaverse,” he explains. “For example, users can use cryptocurrencies such as Ethereum to buy and sell digital assets such as virtual real estate and rare virtual items, or rent virtual services from a freelancer to design custom his avatar or digital artwork. Masu.

    “Cryptocurrencies also serve as a unified currency for cross-platform transactions, enhancing interoperability.”

    Despite the perks of cryptocurrencies as a viable option for completing digital payments in the metaverse, Publicis SapientSenior Director of Financial Services at Zach Michelsonnot very convincing.

    While acknowledging that cryptocurrency use may grow in tandem with the Metaverse, “the cumbersome process of setting up a cryptocurrency wallet, the lack of comfort and ease of management, and the negatives in the cryptocurrency world.” The headlines, as well as the volatility of the coin itself, all contribute to an increase in the metaverse, making cryptocurrencies a less-than-ideal choice for the average user. “

    He added, “With regulatory uncertainty clouding the picture and environmental concerns on many people’s minds, I’m not going to bet my last bitcoin on the cryptocurrency that dominates the metaverse. For those who are not cryptocurrency enthusiasts, the ease, familiarity and stability of paying with money (what cryptocurrency enthusiasts call “fiat currency”) is more attractive than cryptocurrencies in the first place. I guess.

    “As consumer interest in Metaverse transactions continues to grow, banks and other financial institutions will tap into this opportunity to provide easy and secure payment solutions, transforming real-world trust into the virtual realm.”

    Is CBDC a viable digital payment option for the Metaverse?

    Perhaps banks and central financial institutions have already embarked on this and are experimenting with CBDCs as a more reliable form of digital payment to rival cryptocurrencies.

    Transaction 365 CCO Scott Major “While the Metaverse has made some progress in developing CBDCs, the preferred payment method remains uncertain due to regulation and conflicting views of central banks and decentralized tokens,” it said.

    Yilmaz agrees, saying that the success of a CBDC in the Metaverse depends on both technical design and integration with virtual platforms, and that interoperability between different Metaverse platforms is also important for CBDC deployments. I’m here.

    Michelson said there was “limited evidence for serious debate on retail CBDCs” and was skeptical of central bank interest in offering retail CBDCs, suggesting CBDCs may never end as a payment option in the metaverse. There is also

    He added, “Large central banks like the U.S. Federal Reserve and the European Central Bank (ECB) have yet to decide whether a CBDC is necessary or worthwhile, and it’s a big deal to consider anyway. Central banks are currently only involved in wholesale payments between financial institutions.

    “The obvious question is whether these payments should be offered on the blockchain (which is what ‘CBDC’ means), especially as on-chain transactions continue to grow at large financial institutions.

    “But that has nothing to do with reinventing the entire purpose and operating model of central banks to become consumer-facing financial institutions. I think it will be necessary to
    Therefore, while the scope of future CBDCs remains unclear, Yilmaz disagrees with Michelson’s assessment, stating that “CBDCs can be combined with cryptocurrencies and stablecoins, depending on their respective strengths and stablecoins. , could play a bigger role as a payment method in the Metaverse.” market dynamics. “

    Payments in the Metaverse: Risks

    Undoubtedly, there are further unknowns, such as the future risks associated with completing Metaverse transactions and the security of digital accounts within the Metaverse, due to the lack of clarity on preferred payment methods within the Metaverse.

    For Yilmaz, risks are “security vulnerabilities, lack of regulation, scalability challenges, privacy concerns, fraud and fraud, cross-platform interoperability, cryptocurrency volatility, accessibility and inclusiveness, centralized Lack of permissions, and user education.”

    an extensive list with a vast amount of problems to solve, DXC technologySenior Vice President of Security, Mark Hughes, add to them. For him, the security of payments in the metaverse is a matter of veracity, “especially in an open metaverse environment where it is difficult to verify the identities of people you interact with.”

    He further adds: “If the person you think you’re talking to in the metaverse is a digital avatar whose ‘identity’ may or may not resemble your physical being, then that person is who you say you are.” How do we know? Such verification is very important when it comes to exchanging sensitive information or making payments. “

    With regulations and identity processes yet to take shape, Michelson feels the potential of the Metaverse will be thrilling for users and cybercriminals alike. “Fraud and theft are major concerns, especially given the immaturity of security practices,” Michelson explains.

    “Balancing innovation while ensuring security will continue to be a trade-off. Add to this the significant issue of data privacy. Because it is generated in large numbers, you are walking a tightrope between ethics and privacy.

    “Given the emphasis many companies in the Metaverse place on anonymity, maintaining user trust through protection of privacy is critical to a company’s reputation in the Metaverse.”

    How big will the Metaverse virtual economy system get?

    Uncovered problems with the implementation of the payment infrastructure in the Metaverse raise the question of how big the virtual economy system can get.

    “There’s a lot of momentum going on, with big tech companies like Meta, Microsoft, and NVIDIA all betting big on the metaverse,” Michelson said, adding that the digital industry is “thinking about the problems to be solved. We should not get carried away,” he warns. ”.

    “Firstly, not everyone is universally excited about the concept. As many as 60% admit that they haven’t heard much about the Metaverse. It doesn’t exactly scream “widespread adoption”, does it?

    “Technical hurdles must also be cleared. Developing a standard payment infrastructure, ensuring regulatory compliance, and enhancing security measures are just a few of the challenges ahead. Given the potential for misuse of user information, the situation quickly becomes uncertain for large-scale deployments.”

    Transact365’s Major agreed that the virtual economy system is uncertain, but said, “The introduction of mainstream virtual reality (VR) platforms like Apple Vision Pro could significantly expand the virtual economy system. Yes.

    Monavate’s Peck agrees that with more innovation and architecture, “the economic system within the metaverse could enable mainstream ways for people to make payments.”

    He concludes: “The possibilities are huge and global, but the metaverse is not what people think about right now. So until it’s in place, it can’t be used in the right way.”


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