Money in the Metaverse

Over the past year, DeFi and NFTs have been making the case for the potential of blockchain technology. Many of them used the Ethereum blockchain, known for its smart contracts, which are an essential part of the decentralised ecosystem. Indeed, as Edward Oosterbaan writes in Coindesk Insights, “scalability products that can increase performance in response to changes in processing demands are starting to unlock the vast potential Ethereum holds,” adding that Vitalik Buterin, a co-founder of Ethereum, has his eyes firmly set on decentralising social media, gaming and anything else that comes along.

Ethereum is the main place where crypto lending and trading takes place, for example, you’ll find Uniswap and Aave there, and the emergence of second-layer platforms that are built on top of Ethereum, such as Arbitrum and Optimism, “will drag down transaction fees and open Ethereum to decentralized social media platforms like Reddit.”

Ethereum’s native token ETH

The interesting part of this is that in all the use cases mentioned, users will need to own Ethereum’s native token ETH. Indeed, ETH is the key to unlocking this particular blockchain space, whether you want to launch new apps, use existing ones, or send tokens to different wallets. Furthermore, ETH “has become a unit of account and the most common pairing on decentralised exchanges (DEX).”

Oosterbaan believes “the definition of money will become much broader than its fiat limitation today,” especially if alternative base layer protocols, such as Solana and Avalanche, are successful. He says, “We are already seeing protocols raising capital, and investors measuring their portfolios against ETH instead of dollars, or even stablecoins, and that it could “potentially become a currency of the metaverse.”

Oosterbaan reflects that digital assets are a much better investment than fiat currencies at the moment, but more importantly, he points out, “the larger the Ethereum ecosystem grows, the better the currency ETH becomes.”

Currently there are more speculators in crypto than actual blockchain users, but that is changing thanks to Ethereum’s potential for use with DeFi, NFTs, validation, social media and more. Coinbase has already reported that it has seen a major shift, as more people make use of blockchain technology by taking their tokens off exchanges. This is a sign that people increasingly want to interact with applications on the Ethereum blockchain. It has also benefited the cheaper blockchain alternatives, such as Polygon.

Ultimately, as we move towards Web 3.0, the definition of money will become more fluid as the digital economy grows, and as Oosterbaan says, “This fits perfectly with the narrative of the metaverse, where the line between the digital world and real life becomes thinner and thinner.”

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