27 Jul 2022
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How do non-fungible tokens create tangible value in the metaverse?

Authors
Maximilian Schmidt

Metaverse Lead Switzerland

From the Swiss Mountains to the Metaverse. Passionate about Emerging Technologies, especially Crypto and Blockchain related topics.

Benjamin Banusch

Disruptive Technologies Lead Switzerland

Experienced Technology Strategy Advisor, supporting organizations to face the opportunities and implications of emerging technologies such as DLT/Crypto Assets and Quantum Computing.

27 Jul 2022

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Non-fungible tokens are a key enabler of the metaverse, enabling ownership and value to be encoded and transferred.

In brief
  • The metaverse reflects a shift from the internet of things to the internet of value
  • Non-fungible tokens (NFTs) have shaken up the way value is transferred
  • NFTs continue to play a key role in the metaverse as a building block for community

Over the past decade or so, the internet of things (IoT) has revolutionized our physical word by connecting real-world subjects and objects like people, animals, plants, smart devices, food and materials. Now, the internet of value (IoV) is emerging as a crucial enabler of the metaverse, allowing the instant transfer or confirmation of digital assets between peers without the need for third-party intermediaries. This article – part of our metaverse series – examines the role of non-fungible tokens (NFTs). 

In the internet of value, non-fungible tokens (NFTs) are a powerful enabler, but what are they exactly and how do they work? In simple terms, NFTs are a unit of data stored on a blockchain that certifies the uniqueness and ownership of digital assets. In other words, NFTs are a kind of digital “certificate of authenticity” for unique digital items that are secured and verified by blockchain technology. NFTs are one-of-a-kind, indivisible, and immutable. They can also be tied to physical items such as art, cars or clothes, which creates a link between the virtual and physical world. NFTs facilitate the ownership of digital assets, which is in turn enabled by decentralized cryptocurrencies (fungible tokens) as a means to pay and trade in virtual worlds. 

NFTs allow users to claim full, undisputed ownership of in-game assets, potentially even across the boundaries of different platforms or games.
Maximilian Schmidt
Manager Digital Strategy & Emerging Technologies

Until recently, users did not have a way to truly own their digital items. Instead, these assets were technically “licensed” for use to the user. In games, as an example, items have no value or existence outside of that particular game. A mount obtained in World of Warcraft cannot be used in another game such as Minecraft. If there isn’t an official in-game trading system, and sometimes even if there is, secondary unofficial marketplaces pop up where players can trade or sell items. This is often done in violation of the game’s terms and conditions, and users put themselves at risk of being scammed or banned. Enter NFTs, which disrupt this system by allowing users to claim full, undisputed ownership of in-game assets, even across the boundaries of different platforms or games. This aligns closely with the metaverse ideal of identity and ownership, sowing the seeds for the foundation and evolution of the metaverse. 

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NFTs can serve the purpose of giving exclusive access to worlds or virtual events. They can also be used to manage ownership of items or rights and even enable digital voting rights. NFTs can also serve a useful role in airdropping branded merchandise to drive customer engagement. For example, in order to join Decentraland’s Casino users need to own special and exclusive wearables. Brands can thus create experiences and exclusivity and engage with their members through the use of NFTs.

  • Why the NFT community agrees on the value of Discord

    Discord is a free proprietary instant messaging software, which has a strong background in the gaming community, with over 150 million active users per month. The company employs roughly 1,200 employees and was valued at over USD 15bn in 2021.

    Thanks to its ease of use, understanding and exchange with its members, Discord has become the go-to platform for NFT projects and their communities. The platform is used to engage with and inform its members about a project’s roadmap, updates etc. In order to be close to users and to adopt their codes, it is crucial to understand and adopt the language of the target audience. Integrating Discord means placing yourself as a pioneer in web communication in the metaverse and NFT space.

    Adidas, Gucci and Bape are some of the more prominent first movers who decided to integrate Discord into their communication channels and NFT ambitions. These three companies now boast over 47k, 68k and 205k members, respectively. The brands communicate with their members on Discord and build exclusive communities which can only be entered by owning the brand’s NFTs.

    Discord thus enables brands to build on one of the central aspects of Web 3.0 and the metaverse: community.

The excitement around NFTs is understandable, but to truly create value, the metaverse needs to build more trust to enable the social components so important in our real-world economy. In our next metaverse article, we shine the spotlight on soulbound tokens (SBTs) and explore how they could revolutionize the way communities verify and attest information linked to a specific member.

  • Reference

    Our research for this article was inspired by articles and websites including:

    1. Weyl, Eric Glen and Ohlhaver, Puja and Buterin, Vitalik, Decentralized Society: Finding Web3's Soul (10 May 2022)
    2. Difference between.net:Difference Between Internet of Things and Internet of Value
    3. Thomson Reuters: The Metaverse is coming: Is the legal market prepared?

Summary

The advent of the metaverse is blurring the boundaries between the physical and virtual world as Web 2.0 evolves to Web 3.0 and beyond. Non-fungible tokens are an important building block of ownership in the metaverse.

Acknowledgement

We thank Florian Gronde for his valuable contribution to this article.

About this article

Authors
Maximilian Schmidt

Metaverse Lead Switzerland

From the Swiss Mountains to the Metaverse. Passionate about Emerging Technologies, especially Crypto and Blockchain related topics.

Benjamin Banusch

Disruptive Technologies Lead Switzerland

Experienced Technology Strategy Advisor, supporting organizations to face the opportunities and implications of emerging technologies such as DLT/Crypto Assets and Quantum Computing.