What is all the hype about crypto, NFTs and the Metaverse?
With the increasing popularity of cryptocurrencies, interest in so-called NFTs is also increasing. But what are the non-fungible tokens and what is behind the concept of the metaverse? An overview of the hype topics. By Luca Bissmaier
Bitcoin in particular has attracted a lot of attention on the financial markets in recent years. In 2009 – the year it was invented – a unit of the oldest cryptocurrency cost just 0.08 cents. At its record high at the end of last year, an investor had to pay around 60,000 euros for a bitcoin.
A so-called cryptocurrency is a digital currency. Just like money, they can be traded and exchanged. The Bitcoin system is based on the so-called blockchain technology and is decentralized. The coin can be sent directly between owners and does not pass through any financial institution. Next to Bitcoin, Ethereum is the biggest name in the crypto universe. Together, the two cyber currencies make up more than half of the entire crypto market.
According to Statista data, most Internet currency owners are younger than 35 and see an investment as a growth investment, as an experiment, for diversification, or are simply afraid of not being involved.. For example, Elon Musk, the boss of the car manufacturer Tesla, tweeted that he wanted to accept the meme currency Dogecoin for merchandise items. Tesla is also invested in Bitcoin itself, as is the financial service provider Block (formerly Square).
Compared to other asset classes such as gold or stocks, the crypto market is still quite small. The prices of the coins are therefore highly volatile, which limits their practical use. In addition, some countries are negative about internet currencies and regulate the market. For example, China has banned bitcoin mining, i.e. creating new coins. The Russian central bank recently also commented on a possible cryptocurrency ban.
What are NFTs?
A lesser-known market is non-fungible tokens (NFT for short). Just like cryptocurrencies, they are based on blockchain technology but serve a different purpose. An NFT is something digitally unique. The world’s first SMS was recently sold as an NFT. In contrast to cryptocurrencies, digital goods cannot be exchanged for one another. Because they differ in price due to their demand and rarity.
The market for NFTs is growing in popularity. The Reuters news agency wrote that the market for non-fungible tokens reached $25 billion in 2021. While the trend started in the gaming and art sectors, the share for collectibles rose sharply. Companies are also reacting to the new hype. Last year, for example, the beverage manufacturer Coca-Cola auctioned off a series of NFTs. The auctioned collectibles include a jacket that can be worn in the virtual metaverse.
When investing in NFTs, the risk of high volatility, i.e. price fluctuations, should be considered. Depending on the demand, the price can skyrocket or end in a loss. Anyone who is aware of this and wants to invest in NFTs can do so on a corresponding marketplace such as Binance. Most NFTs are based on the Ethereum blockchain. Therefore, the cryptocurrency ether is the preferred means of payment. A virtual reality environment that uses NFTs and blockchain technology is the so-called Metaverse.
What is the metaverse?
When it comes to the Metaverse, most people probably think of Facebook . Because last year, Facebook boss Mark Zuckerberg announced that the US group would be renamed “Meta“. But the Metaverse is more than a product of the social media company. It is a concept about a virtual parallel world. A new way of living or working together in this digital universe could emerge there. Mass events such as concerts are also conceivable. A decentralized virtual world based on the Ethereum platform is, for example, Decentraland.
Large companies are also increasingly relying on the metaverse trend. For example, the technology group Samsung opened its New York flagship store in the Metaverse via Decentraland. In the digital environments like Decentraland or Sandbox it is possible to buy virtual real estate. The digital investment house Republic Realm bought a property in the virtual world of Sandbox worth more than four million dollars. It remains to be seen whether the Metaverse will prevail and whether masses of people will move through the digital world in the future.