If a person asks you, why do you need money? Your answer would probably be to buy things, which is exactly what metaverse tokens are. In order to understand what metaverse tokens are, it is also necessary to know what metaverse is. It is an online, 3-D universe that combines multiple virtual spaces where people can come together, buy metaverse tokens, and interact. Tokens in the metaverse are a type of virtual currency that may be used for transactions just like in the real world.
Metaverse, which is a completely virtual economy, also requires a means of exchange, just like any other economy. Fiat currency (paper currency) cannot be exchanged in the virtual world because all transactions and interactions take place through the user’s avatars.
Some metaverse cryptocurrency tokens, which may only be purchased through the in-game shops of each virtual reality, are only usable in the metaverse to which they are linked. However, some tokens are also traded on exchanges. Almost every metaverse has its native tokens to perform tasks, be it paying for anything within the 3D universe, from buying avatar clothing as NFTs to real estate.
How cryptocurrency empowers the metaverse?
Cryptocurrency acts as fuel for the metaverse by providing value to the whole ecosystem. Although both these things are completely different, they do rely on each other to function. Companies like Decentraland and The Sandbox have developed virtual worlds that integrate cryptocurrencies so gamers can create structures like virtual casinos and theme parks, and monetize them.
In Decentraland, the currency used is called MANA, and is available to purchase on exchanges. The motive of introducing the metaverse was to replicate our real life and just like our world needs circulation of money to maintain the economy, the metaverse also requires cryptocurrency to do so.
As the metaverse will continue to grow, utility of cryptocurrency will increase as startups and big companies will start entering this space and the demand for the digital currency will start increasing. Apart from transactions, as tokens are fundamental to a metaverse because they also solve decision-making issues like governance, the importance of cryptocurrency in the space will increase, eventually.
Existing metaverse tokens
With an immense number of crypto projects coming into picture with reports placing the amount of money that blockchain startups raised in the first quarter of 2021 at $2.6 billion globally, metaverse crypto projects are also making their presence in the sector. Some of the existing metaverse tokens include –
Decentraland’s team was able to gain a significant lead in the Metaverse race after its 2018 launch. Simply said, this metaverse crypto project provides gamers from all over the world with a virtual gaming experience and is built on top of the Ethereum blockchain.Users can create and modify their characters, and can talk with one another. It has also emerged as one of the top web 3.0 cryptocurrency currencies to purchase in 2019.
Additionally, Decentraland has its very own cryptocurrency coin—MANA—so far as investments are concerned. Importantly, all transactions within the Decentraland game must be carried out in MANA, giving the token actual utility. In-game objects can also be bought and sold by users to improve their Decentraland experience. When Decentraland first entered the public exchanges in 2018, the metaverse token price was just $0.025, according to market performance. The same Metaverse cryptocurrency coin reached all-time highs of $5.90 in November 2021
Moreover, when the user buys metaverse tokens like MANA and LAND, they gain access to the NFT Land projects as well as the Metaverse NFT projects out there.
Sandbox is a direct competitor of Decentraland. The metaverse crypto project originally released a game in 2012, making this project even older than Decentraland. Since then, though, it has expanded its commercial strategy to concentrate on the Metaverse.
The Sandbox, which is built on top of the Ethereum blockchain, enables users to create, earn, and exchange in-game goods. This offers the possibility to purchase virtual land and construct real properties, much as Decentraland. The property can then be sold on the open market after that. The Sandbox features its own native digital money, called SAND.
SAND was initially published on open exchanges in mid-2020. The metaverse token price was $0.051, according to CoinMarketCap. Like Decentraland, SAND also reached an all-time high in November 2021 when it breached $8.44. This indicates that the Sandbox grew the value of its token by more than 16,000% in just the first year of trading.
The game Axie Infinity promotes itself as being influenced by Pokemon and Tamagotchi and using Non-Fungible Tokens (NFTs) to represent special species, skills, plots of land, and other in-game assets.
By playing Axie Infinity in the Adventure or Arena modes, players can acquire two tokens: Axie Infinity Shards (AXS) and Small Love Potions (SLP). As a governance token, AXS enables token holders to decide how the gaming experience will evolve in the future.
The virtual currency used to breed Axies is called SLP. You would have only had to pay $0.15 per token when AXS first started in early 2020. The same metaverse token price also reached highs of more than $165 in November 2021. This amounts to an increase of around 110,000%.
Concerns of cryptocurrency in metaverse
As metaverse crypto projects are introducing cryptocurrency in their space, this is leading to more crypto generation which raises several concerns. Today, there are more than 18,000 currencies with 6000+ of them involved in metaverse. Likewise, over a million people worldwide are actively mining cryptocurrencies, which is the process of adding and confirming new transactions to the blockchain.
It goes without saying that cryptocurrencies are unstable. Companies that conduct metaverse business and sell NFTs in exchange for cryptocurrencies expose both sellers and purchasers to at least some financial risk.The tax liabilities connected with crypto-based transactions might be challenging to estimate due to the inherent volatility of cryptocurrencies.
Another concern which is relevant is the trust factor. As a lot of metaverse crypto projects are generating their tokens, the investors are often skeptical about it as it has been seen in several reports that many metaverse projects have turned out to be a scam, which eventually negatively affects other projects as well.
Future prospects of metaverse tokens
The future of the metaverse token depends on the future of the metaverse ecosystem. As the whole economy of the virtual world will depend on the demand and supply of the tokens, the presence of these tokens will play a critical role in its survival. With the increasing utility of metaverse tokens, their importance in the ecosystem also seems to increase in the upcoming years.
Looking at the growth of metaverse tokens (registered 400% YoY growth) in the year 2022, it can be safely assumed that the future of these tokens looks bright as more and more metaverse crypto projects like Decentraland and Sandbox will utilize it for their transactional utility.
As online connection has become more commonplace and the demand for metaverse use cases has increased, related development has advanced significantly in the post-pandemic age. Despite the growing popularity of metaverse tokens, users should always conduct their own research before making a purchase or investment in the tokens to avoid any mis-happening.