FINANCES IN THE METAVERSE

The metaverse aims to blur the boundaries between reality and virtual space. Imagine yourself watching a television show for example. A few minutes in, you will find yourself completely immersed in the show from a third-person perspective. Virtual reality is somewhat similar, except, you get to interact with other users or members too. The concept of the metaverse augmented reality and virtual reality is widely used in the gaming industry. However, we are currently in the initial stages of development of this new technology. In a world of infinite possibilities and imagination flowing like colours on a canvas, you can now build "castles in the air" and probably get paid for it! But how?

Source: PwC Africa

The metaverse uses cryptocurrency and NFTs (Non-Fungible Tokens) to make trades in the virtual world. Each world can either use its crypto or be backed by another cryptocurrency and users would have to complete specific tasks to earn a coin or a token of that currency. For example, in bitcoin, we have to solve a complex mathematical problem to earn a bitcoin. This process is known as mining. Transactions can be made directly from peer-to-peer via cryptocurrencies or trading NFTs without the help of a third party like a bank. But does that mean that banking will cease to exist in the metaverse?

The banking sector safeguards assets and provides loans to businesses and individuals. Let’s take a look at the real estate sector in the metaverse. Multiple games use the concept of the metaverse. An example would be Decentraland, where users buy properties, build on them and trade them as an NFT for a specific price of the used cryptocurrency. If we consider a group of builders in the metaverse actively creating buildings or monuments and selling them for a price higher than the cost, the first thing they would need to do is acquire the land. The quickest and the most prevailing way to do that would be taking a loan. That's where banks in the metaverse can step in.

As mentioned above, the possibilities are unlimited! How about selling off a property in the metaverse or mortgaging it in exchange for a non-crypto currency used in the real world? Multiple crypto-based debit cards exist, where transactions are made using cryptocurrency to merchants who don't accept cryptocurrencies yet. Could this be implemented as a universal card to pay in any currency used in any metaverse you step into? Although the current technology isn't there yet, many banks such as JP Morgan, HSBC, and Bank of America have already stepped into the metaverse to provide agents to service customers in this virtual world.

You could even think of insurance companies who could be helping out users in case of stolen assets or accidents in a world having no limits. With the existence of banks and other such institutions, there would have to be some regulatory body present in the future of the metaverse. Although the technology has a long way to go before governments can step in, taxes and other regulations could enter the metaverse. Certain NFTs classified as collectables could be taxed under the bracket of luxury items. However, creating an ecosystem for the same would be challenging.

Data security and privacy are one of the biggest concerns of the incessantly growing metaverse. It will require much more data from users to make it more realistic, making it essential to create a security model much more advanced than the current.

Another important concern of the unbounded metaverse is the creation of law and jurisdiction for the safety and security of virtual assets, users, and online transactions. The metaverse will also have to invent an entirely new verification system for transactions and a way to access digital wallets that convince the user of their trustworthiness. The virtual world is vast and can be exploited by multiple industries ranging from finance to digital fashion. The only limit is your imagination!