Money in the Metaverse
Table of Contents
What is the Metaverse?
When we talk about the “metaverse,” we’re using a word coined by the novelist Neal Stephenson in his 1992 book Snow Crash. That’s where we first got the term for a “collective virtual shared space,” where physical and virtual reality converge. Nowadays, the metaverse is the hottest buzzword in tech. Google Trend results show stratospheric growth in interest for the term, peaking first with the Roblox IPO in March 2021 and again now due to Facebook’s recent announcements.
Facebook is launching its virtual reality workspace. Microsoft is developing “mixed reality” technology for the US Army. The next generation is already growing up in the metaverse on Roblox, Fortnite, and VRChat. People are connecting meaningfully with their friends on Discord. (Check out the Discord movie with Danny DeVito.) If you missed them, make sure to read our previous articles on how play-to-earn games are creating virtual objects with real-world value.
Neal Stephenson is so good at predicting the future, it makes you wonder if he has a crystal ball. But get this: in 1999, Stephenson published a novel called Cryptonomicon. It’s the story of underground codebreakers who develop “electronic money” and “digital gold currency” to facilitate anonymous Internet banking. Sound familiar?
It should, because that’s essentially the long-term vision for crypto: a digitally-native, seamless currency for integrated transactions across the metaverse.
How does cryptocurrency enable the metaverse?
The metaverse unites physical and digital realities seamlessly. It’s sometimes said that right now, we use the Internet. But soon, we will be in the Internet. As that happens more and more facets of our daily lives will need to be “digitally-native” -- that is, designed for the metaverse, not adapted to it. Payments are a terrific example.
We spend almost $1 trillion online every year. But the processes by which we do that are surprisingly clunky. Entering credit card numbers or account routing information; waiting for processing and clearing periods with traditional banks; constantly transferring money between intermediaries, such as Venmo, PayPal, or a crypto wallet. Check out our post on the difference between DeFi (decentralized finance) and traditional, institutional finance, which is similar to this.
If we’re going to live in an increasingly digitized, networked world and spend more and more time in the metaverse (as the biggest corporations are betting we will), we need revolutions in payment infrastructure that will enable it. Crypto is poised to provide just that.
We can think of crypto as the top of the “metaverse pyramid.” The hardware for metaverses already exists, between the powerful devices we carry around in our pockets (or on our wrists!), AR-enabled computers and phones, and VR headsets. The software is also ubiquitous; we all already live in the metaverse to some degree, integrating the digital world into our physical reality. Both of these categories are innovating rapidly, but the most underdeveloped is tokens, the top of the pyramid.
A number of fascinating attempts at building the crypto metaverse already exist. Unsurprisingly, many of them use existing cryptocurrencies or their own proprietary tokens. Axie Infinity is an extremely popular play-to-earn game with more than 250,000 daily users. Characters are minted as NFTs and players are rewarded in Axie Infinity Shards (AXS), which is also the governance token for Axie Infinity. (Check out this article for more on AXS, SLP, and how Axie Infinity uses those tokens.)
Decentraland, a virtual reality space where users can trade LANDs (virtual property), avatars, and other items as NFTs. Decentraland is one of the richest metaverses out today and is powered by Ethereum. Another cutting-edge example of a crypto-powered metaverse is Upland. In Upland, users can trade virtual versions of actual properties secured by the blockchain. It’s like playing digital Monopoly with the real world! UPX is the native cryptocurrency for Upland. Evolution Land is another metaverse which is interoperable with different blockchains. So far, two continents have been created, one on Ethereum and the other on Tron. Evolution Land also features tradable real estate and gameplay, using the RING cryptocurrency.
These are just the earliest examples of the coming metaverse revolution and crypto is already powering payments in all of them.
Why does Facebook need crypto?
Interestingly, Facebook is developing products precisely at the intersection of crypto and the metaverse. Let’s take a look at both, and then see how they might be integrated in the future:
What is Facebook’s vision of the metaverse?
Mark Zuckerberg has said his vision is to make Facebook a “metaverse company,” not a social media company. Recently, he unveiled Facebook’s first step in that generation: a VR office called Horizon Workrooms. Facebook also has dedicated teams working on VR and AR technology. Facebook was early to the metaverse race, purchasing VR hardware company Oculus in 2014. In this way, Facebook has already tackled the hardware and software layers of the metaverse pyramid; tokens are the only thing that remain.
For now, Facebook has only rolled out its beta version of Horizon Workrooms. While this is a fairly limited use case, it’s clear that the company is thinking in grand terms in the metaverse. A company with nearly $1 trillion in market capitalization calling itself a “metaverse company” is a serious step alone. We wrote about how Facebook might expand into play-to-earn gaming as part of its expansion into the metaverse, but the sky is really the limit. All of the things we do on Facebook platforms -- messaging on Whatsapp, sharing content on Instagram, gaming and joining Groups on Facebook -- might all be happening in a unified metaverse sooner than we think. We already carry the tool to enter this world in our pockets 24/7. From here on out, the experience will only get more immersive.
Is Facebook a payment services company?
With all of those apps and services in its portfolio, Facebook doesn’t seem like a payment services company. We might think of PayPal or Square first as leaders in that industry. That assessment is probably correct -- for now.
Last year, Facebook processed $100 billion in payments. That’s small compared to PayPal’s $936 billion in annual payment volume, but it’s still significant competition. And it’s only the beginning of Facebook’s ambitions in FinTech. David Marcus, who leads financial products at Facebook, wrote a blog post describing their long term vision. Facebook views the payments they handle, as well as the 1.7 billion people around the world who lack bank access, as important terrain to conquer. That’s why they launched Novi, a digital wallet to seamlessly transfer money digitally. Novi integrates with Diem, Facebook’s permissioned blockchain, and other stablecoins. These projects aren’t superficially connected; Marcus describes Diem and Novi as the basis of Facebook’s strategy to become the leading payment processing company.
Facebook is moving aggressively to dominate the metaverse and digital payment processing. That sounds quite similar to the metaverse/crypto projects we mentioned earlier, like Axie Infinity or Decentraland. However, those are small, start-up videogames. Facebook is one of the largest corporations on Earth. The entrance of such a giant not only to those industries, but connecting them, will be a gamechanger. If Facebook’s bets pay off, we may well be living in a Facebook-powered metaverse, exchanging money using Facebook’s digital payment systems. Sounds an awful lot like those Neal Stephenson novels to me…
Underpinning all of that is the Diem Blockchain. Diem is many things for Facebook: its entry into cryptocurrencies, the backbone of its payment infrastructure, and potentially, the technology behind the metaverse. The combination of those functions, plus Facebook’s nearly 3 billion users across its products, means Diem is poised to be one of the most important blockchains and cryptocurrencies ever.
How can you start building for Diem?
Clearly, Diem Blockchain has revolutionary potential. Pontem Network is the premier experimentation platform to start building for Diem. We offer an incentivized testnet to test your applications as well as a package manager. Also, make sure to check out Pontem Blocks, our proprietary low-code development tool for Diem. We also have a ton of great resources on Diem, the metaverse, and crypto basics. Make sure to join us on Telegram, Twitter, Discord, and Medium to stay up to date with the latest developments.