Utility and Liability
It cannot be denied that the sale of non-fungible tokens (NFTs) has seen a decline in recent months, with various factors contributing to this trend. Among the reasons for the downward trend are fraudulent activities, hacks, and speculations, all of which have led to uncertainties regarding the actual worth of NFTs. However, it is important to keep in mind that the NFT market is still relatively new and, as such, it is experiencing some growing pains as commercialized technology. According to experts, there is hope for a resurgence of NFTs, thanks to the emergence of secure marketplaces and platforms, regulatory actions being taken, and new use cases being introduced. This blockchain-based innovation is poised to become a crucial part of the unfolding Metaverse, but companies must also exercise caution and avoid liability when selling valuable NFTs. To learn more about the future of NFTs and the Metaverse, read on for an enlightening article.
What Is the Metaverse
Before I attempt to define the Metaverse, I should first note that the Metaverse is not fully here yet. Talking about the Metaverse now is like talking about the internet in the 1970s. We have some of the building blocks in place, but we still do not yet know what form or path the Metaverse will take.
Many attribute the term “Metaverse” to Neal Stephenson’s 1992 dystopian sci-fi novel Snow Crash, in which people connected to the “Metaverse”—a massive virtual urban world—via terminals using VR (or virtual reality) headsets. In June 2021, venture capitalist Matthew Ball, published a 9-part essay called The Metaverse Primer, in which he offered his “best swing” at a definition of the Metaverse: “The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments” (emphasis original). 1 In other words, the Metaverse is “a quasi-successor state to the mobile internet,” 2 —a new way of experiencing the internet, one that is not just mobile and dynamic like the current internet, but interconnected, immersive, and in 3D. Mark Zuckerberg, who renamed Facebook’s parent company “Meta” in October 2021, has called it an “embodied internet.” 3
In the fully formed Metaverse as envisioned by Ball, Zuckerberg, and others, users will have avatars, or virtual identities, as well as virtual belongings, and they will be able to take both their avatars and their belongings from one virtual world or platform to another.
What Is a “Non-Fungible Token” or NFT?
NFTs, or non-fungible tokens, are a unique form of asset ownership verification that is recorded on a decentralized database known as a blockchain. This type of database is designed to reduce the risk of transaction disputes and counterfeiting without relying on centralized oversight. Two popular examples of blockchains are Bitcoin and Ethereum. While NFTs can be used to verify ownership of both physical and digital assets, they are typically associated with digital assets such as virtual artwork or video clips. Despite recent market fluctuations, numerous retailers have already invested in NFTs, including Ticketmaster, Formula 1, the Gap, Under Armour, and Adidas, with many others excited about the market’s potential.
Beyond simply selling NFTs, companies can use them as promotional tools or limited-edition collector’s items. By using smart contracts, blockchain-based software programs that execute actions automatically, NFTs can become revenue-generating devices in perpetuity. For example, imagine receiving an Air Jordan NFT as a gift from Nike when you purchase a pair of sneakers. In this scenario, the NFT gifting is recorded on the blockchain, and the smart contract allows you to transfer the NFT to someone else while also ensuring that Nike receives a royalty anytime the NFT is transferred. Additionally, if Nike creates a limited number of Air Jordan NFTs, the tokens could become even more valuable over time, making them the gift that truly keeps on giving.
NFTs in the Metaverse
The connection between NFTs and the Metaverse goes beyond just a simple acquisition or investment. Let’s take the example of Air Jordan NFTs, which could be linked to virtual images of sneakers as well as digital wearables like virtual shoes that can be stored in your crypto wallet. This means that in the Metaverse where different virtual worlds are interconnected and linked to users’ crypto wallets, your avatar could wear the digital Air Jordans while exploring different virtual realms. Moreover, the NFT acts as proof of ownership and grants you the right to wear the virtual shoes.
What’s exciting about NFTs is that they can be used for more than just investing purposes. Besides providing an opportunity for users to acquire rare digital art, NFTs can be a vehicle for creative self-expression and identity construction in the virtual realm. Owning an NFT-backed virtual item, like a Gucci purse or a Ferrari, can establish a unique sense of ownership and belonging in the Metaverse community. Overall, NFTs can help bring new digital experiences to the users of the Metaverse and augment their creative and social pursuits.