What Are Metaverse Coins and Why Are They So Hype?
The metaverse has become one of the most important themes in 2021. The number of companies investing in the industry has risen while some, like Facebook and Square, have changed their names to reflect the industry. As shown below, the number of Google searches on metaverse rose sharply in 2021.
In this article, we will look at what the metaverse is and why cryptocurrencies tied to the industry are surging.
What is the metaverse?
The internet has gone through significant changes in the past few decades. In the early days of the internet, speeds were slow, and the devices that existed then were relatively slow as well. Therefore, most internet platforms were based on text.
As speeds increased, web developers moved to images. Think of platforms like Facebook and Instagram. In the years that came, the market share of video on the internet jumped sharply. Today, a company like TikTok that focuses on video has become one of the most popular platforms.
The metaverse is the next iteration of the internet. Besides, computers now have the fastest processing power, and internet speeds have jumped sharply because of fiber and 5G.
The industry hopes that people can now move their lives digital and interact with other people in this universe. For example, instead of using virtual meetings on Zoom, they can meet in a virtual conference hall. Such a meeting will ensure that people can interact as they would in real life.
There are benefits to this. For example, instead of companies paying thousands of dollars for staff to travel to a centralized meeting, they could hold their meeting in a virtual environment and save money.
There are more areas of the metaverse that are in use today. For example, it is possible for musicians to conduct concerts for thousands of people in the metaverse.
Metaverse in blockchain
An important concept that has made the metaverse popular is the concept of blockchain. While Bitcoin is the best-known blockchain project, the industry has seen significant growth in the past few years.
The feature of the blockchain industry is known as a smart contract. A smart contract is a piece of contract that is executed using blockchain. It is the technology that helps to ensure that technologies like decentralized finance (DeFi) and non-fungible token (NFT) exist.
The metaverse has been used intensely in the blockchain industry, and analysts expect that it will play an important role in the future. Today, metaverse blockchain projects like Decentraland and The Sandbox help people to create their virtual ecosystems. Others like Axie Infinity and Gala help people to play games and earn money. Let us look at some of these projects.
Decentraland is one of the biggest metaverse projects in the world. MANA, its token, has risen by more than 24,000% from 2018. In 2021 alone, the coin jumped by more than 4,000%, pushing the market capitalization to over $4 billion. This makes it the 40th biggest cryptocurrency in the world.
Decentraland is a blockchain project that enables people to build their virtual universe. For example, you can go to Decentaland and buy a plot of virtual land. You can then build your own plot in this virtual land. In addition, like in a physical property, you can decide to sell the development to other people. These transactions are enabled by non-fungible tokens (NFTs) and handled using MANA.
The demand for land in Decentraland has been growing at a fast pace. Indeed, in 2021, it was revealed that a parcel of land in Decentraland had sold for more than $2.4 million. A closer look at the marketplace shows that some of its products are going for thousands of dollars.
The Sandbox is a fast-growing metaverse project that is backed by Japan’s Softbank Group. The company invested $93 million in the project. SAND, its native token, has seen its price surge by more than 10,000% this year. Its total market capitalization has jumped to over $4.6 billion.
Sandbox is similar to Decentraland. In its virtual universe, people can buy and build their properties. Most importantly, people can build and play virtual games. All transactions on this network are funded by the SAND token.
Like Decentraland, the number of transactions in this network is rising. For example, it was reported that a parcel of land in this network was sold for $4.3 million. This is significantly more expensive than what a piece of land sells in the most expensive addresses around the world.
Is metaverse a scam?
The biggest concern that people have is whether metaverse will continue growing in the coming years or whether the industry is a scam. Besides, people who buy these virtual properties will have nothing to do with it. For example, in a real piece of land, one can build property and live on it or sell it.
In the virtual world, the only way to exit such an investment is to sell to another willing buyer. During the current hype period, there is a likelihood that finding a buyer will be relatively easy. However, in the future, it is uncertain whether these assets will find buyers.
This means that it is easy to see why some analysts believe that the metaverse industry championed by the likes of Decentraland and The Sandbox is correct. Historically, we tend to see a major crash in fast-growing industries. The most important was the dot com bubble that caused a dramatic collapse of many tech companies.
There are other risks for metaverse coins. The most important is interest rates. The reality is that all metaverse coins did well when interest rates were low. With the Fed pivoting to tightening, there is a likelihood that the prices could see some disruptions in the future.
Metaverse coins like SAND, AXS, and MANA have been hype in 2021 as the industry takes shape. While these coins could continue doing good in 2022, there are risks involved in the industry as interest rates rise. In this article, we have explained why their prices have done well this year and the risks involved.
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