After Meta (previously Facebook) announced the creation of the “Metaverse,” businesses in almost every industry worked to understand what it could mean for them and how they could get in the door. Facebook has long been a powerhouse for targeted advertising and brand selling, and financial institutions invest heavily to maintain a presence there.
While the Metaverse environment is still very much in its infancy, it will inevitably gain popularity. When it does, finance will be a significant part of its operations and how it generates value, both for individuals and organizations.
Here’s what you need to know about the Metaverse and the future of finance.
What is the Metaverse?
In concept, the Metaverse is a fictional, virtual world like those fantasized about in science-fiction novels.
In practice, the Metaverse will likely be a network of three-dimensional, virtual environments focused on social connection, much like the social media applications used today. Users will potentially engage with the Metaverse using virtual reality headsets, augmented reality applications, and personal devices like computers and mobile phones.
Businesses will likely be able to use the Metaverse for advertising their products. However, there is some speculation that transactions within the Metaverse could go beyond traditional commerce. As a fully realized and immersive world, any user could establish a business in the Metaverse, and it could usher in a new age of entirely digital products.
The Role of Finance in the Metaverse
Just like in the real world, anyone who operates within the Metaverse could engage in financial transactions. Users will likely be able to buy avatars, virtual accessories, or even entire environments created by companies or other individuals. Furthermore, users may wish to engage in peer-to-peer transactions that fall outside the scope of the traditional consumer-to-business paradigm.
All these transactions will require some type of financial infrastructure. Undoubtedly, most traditional banks are already contemplating how they can tap into this space. But traditional financial institutions may not be the primary players in the Metaverse.
Traditional Finance May Get Left Behind
Traditional financial institutions are already relatively slow to adopt new technologies. Most are still hovering on the periphery of the decentralized finance sector, either experimenting with small investments or awaiting regulations to pass.
When the Metaverse launches, digital banks will be in the perfect position to begin facilitating transactions in the environment. DeFi protocols will also quickly adapt and position themselves as major players.
This is because DeFi already lives in virtual space and operates outside traditional financial infrastructures. Although the company “Meta” may control the levers that run the Metaverses, it will also provide an open economy that can easily be backed by the blockchain.
Brad Yasar, CEO of EQIFi, commented “DeFi will be an integral part of the economies that will fuel metaverses. EQIFI will pioneer bringing the services people need while enjoying the metaverse. Without a banking and defi partner, metaverses need to provide those services themselves. I expect all metaverses to acquire ecosystem partners that will offer services in the metaverse to full and support their growth.”
NFTs May Be a Significant Part of the Metaverse
Non-fungible tokens (NFTs) could serve as a bridge between users and the Metaverse, as they will enable users to facilitate identity during community and social experiences. NFTs could also help identify ownership of digital products that exist only in the virtual world.
While many NFT offerings currently on the market seem to be more gimmicky than offering any real value, we are starting to see this change. One excellent example of this is the EQIFi NFT card. EQIFi, the first DeFi protocol powered by a licensed and regulated bank, has partnered with PolkaCity to create an NFT card that users will use in the Metaverse. This NFT also allows users to apply for a free bank account with EQIBank, which provides “real world” value.
The Metaverse is coming, and DeFi will play a significant role in its success.