Sales of non-fungible tokens (NFTs) increased significantly in 2021 and 2022, fueled primarily by the digital art industry. However, NFTs may see their use case crystalized as a medium of exchange inside the metaverse, especially as NFTs could be applied to anything within this digital ecosystem–from avatars to digital clothes to online real estate.
NFT in the metaverse context
According to venture capitalist Matthew Ball, the metaverse is essentially a shared digital space that bridges the physical world (through the use of virtual reality headsets) and with a digital world driven by online transactions and experiences. The metaverse's potential depends on its developers decentralizing their systems so that they can become a seamless digital world where users can jump between different platforms. Once users can transfer data or assets across a standardized digital ecosystem, the metaverse may be able to grow exponentially.
NFTs' potential contribution to the metaverse could be significant. NFTs are unique tokens that represent a digital asset. Using the Ethereum blockchain, an NFT contains digital identification data that authenticates a person's ownership of a particular digital art, avatar, or asset. When released in an equally limitless sphere such as the metaverse, NFTs can command high prices while giving developers and creators absolute freedom to customize digital assets.
While the technology that supports the metaverse is nascent (2022), an increasing number of industries are supporting the adoption of NFTs, including the digital art industry. For example, in February 2021, a digital artist named Beeple made history when auction house Christie's sold his collage of 5,000 digital art pieces for $65.3 million USD, the most expensive NFT sale in history up to that point.
However, NFTs' influence in the metaverse may go beyond digital art. Musicians, such as The Weeknd, have begun selling their music as NFTs, while early metaverse gaming companies like Fortnite regularly hold digital concerts with top artists, like Travis Scott and Marshmello. In November 2020, a digital car was sold for $110,000. Digital media firms like Xplorer Studio, which launched a collection of 10,000 NFT astronauts, grant owners of these astronauts digital tickets to access an online suite of tools that they can use to customize their online identities. Critically, virtual real estate in the metaverse is being bought and sold using NFTs—a significant step towards creating legitimate value within the metaverse.
Implications of NFT use in the metaverse
The wider implications of NFTs becoming increasingly used in the metaverse may include:
- Users selling digital assets in a metaverse marketplace, mimicking the retail industry offline, including trading clothes, accessories, and art collections.
- More retail companies selling digital versions of their physical products as NFTs in the metaverse.
- Financial and legal services companies establishing operations in the metaverse to provide services that facilitate NFT transactions.
- Users purchasing digital land and building digital homes within the metaverse, complete with furniture and appliances.
- More people experimenting with metaverse communities to share experiences such as shopping, ordering food, and attending concerts.
Questions to comment on
- What digital items do you think may become increasingly valuable within the metaverse if converted into an NFT?
- Would you be willing to purchase NFTs for use in the metaverse?