What is the role of NFT Tokens in the Metaverse?

Since the development of blockchain technology, IT infrastructure providers set on a race to build novel services and products based on it. Many terms have entered the digital atmosphere with blockchain, the most common being cryptocurrency.

Now that you have a trusted network along with the means for monetary transactions, you can definitely explore the metaverse. It is the ultimate platform where all businesses and end-users meet to exchange content for entertainment, work, and education.

You can not imagine a metaverse or cryptocurrency ecosystem without ERC-20 tokens or NFTs. So, what role do these elements play in blockchain or its applications like metaverse? This article will help you understand their roles in simple language.

What Is an Ecosystem?

Blockchain apps or systems can only unleash the power of blockchain when you set them free through automation. Apart from automation, cross-enterprise workflows are vital in delivering the efficiency and productivity you are looking for. So, put this way, the blockchain ecosystem is an entity where many components and participants interact. They interact with themselves in a preset rule to facilitate transactions.

These components can also interact with surrounding blockchain apps or systems through interchangeable crypto tokens. You can also say that the blockchain ecosystem is a set of rules that form a governing structure. This governing structure can facilitate a single or multiple types of transactions. What is more important is the set of rules that makes the governing structure functional.

This set of rules define actions within the blockchain network such as:

  1. What should be the appropriate behavior of participants?
  2. How should the ecosystem consider data ownership?
  3. What should be the funding options?
  4. How can a user enter or exit the blockchain ecosystem?
  5. What should be the information exchange criteria among apps, systems, or individuals?
  6. What should be the funding regulations?

Depending on the collaboration models, blockchain ecosystems are of the following three types:

1. One-Leader Ecosystem: 

It is primarily a single-party owned blockchain that can interact with other public or private blockchains securely.

2. Consortia Ecosystems: 

You will also come across people who call it a joint venture ecosystem. This ecosystem is significant for a blockchain-based financial system where multiple stakeholders like end-users, banks, financial services providers, governments, and regulatory authorities.

3. Regulatory Ecosystem: 

You need a regulatory ecosystem when there are shared projects on a blockchain that require compliance and regulation. The Recycling Association in Britain and Marine Transport International showcases such ecosystems.

What Is a Metaverse? 

Metaverse is a digital universe where you can move around with your friend to visit a building or buy digital goods. You and your friend can also consume online content while moving around in a virtual universe. Metaverse will streamline the online content market as well as build a robust economy for developers and creators.

Metaverse will also facilitate monetary transactions in the form of crypto coins. So, you can purchase virtual lands, in-game content like a designer dress for your game character, boosters to pass certain game levels, attend online events, or exchange collectibles. Since metaverse will be a huge digital platform, there needs to be a system on which everyone can trust.

There are real metaverses in play like Cryptovoxels, The Sandbox, and Decentraland. These metaverses are essentially blockchain-based game apps. Mostly all of the developers would create a vast map of lands with digital footprints. Then, you can invest in those lands in the form of crypto coins. High net worth or institutional investors create huge shopping malls or arenas in those virtual worlds.

What Are ERC-20 Tokens and Their Roles in Ecosystem and Metaverse?

If you want your crypto token to function optimally on the Ethereum blockchain, you need to follow certain fungible token standards. So, what is a fungible token? These are tokens that allow exchange or interchangeability. ERC-20 is one such fungible token in the Ethereum blockchain.

ERC 20 is the essential token standard for the interchangeable token economy on the Ethereum blockchain. Entrepreneurs and developers use the standard specifications of ERC 20 to create crypto tokens for their DApps that need to function appropriately under the Ethereum blockchain. ERC-20 is one of the foundational icons of the blockchain as more than 1000 crypto assets or coins follow the specifications of ERC-20.

Interoperability is the key to success for the blockchain ecosystem. Therefore, the ERC-20 token standard is an essential component for any blockchain ecosystem, including metaverse. It is also the same for the metaverse. Hence, for cross-system functionalities, you need a fungible token system. What could be the best token standard than ERC-20 on the Ethereum blockchain?

ERC-20 token sounds like more of a computer program code rather than a people-friendly term. Therefore, in several platforms of Dappros and on the Ethora blockchain app, ERC-20 is known as Coins. It’s more user-friendly and also acclaimed by users and entrepreneurs.

Metaverse or blockchain ecosystems are decentralized entities. These are not single-organization owned platforms. So, to facilitate trust and accountability among the users and developers, coins are vital media.

What Are NFTs and Their Roles in Ecosystem and Metaverse?

NFTs and artworks sell for millions of dollars. However, there is a scientific theory behind NFTs. So, next time you hear that NFTs are simply a bubble, that may not be accurate. NFTs are a standard for non-fungible tokens. These are tokens that have unique values. Therefore, you can not exchange one NFT for another. It is just like a limited edition baseball card that has no equivalence with any other commodity on earth.

In the blockchain ecosystem or metaverse, NFTs are highly important elements. NFTs help the developers go ahead with costly development projects. Users who invest in NFT, enjoy a return on investments (ROI) once the project completes successfully or utilize the NFTs to purchase content or services from the development project.

NFTs gain their value from the theory of scarcity. When there is an increasing demand for certain NFT but the supply is truly limited, the price of the NFTs goes high. On the Ethora project of Dappros or on any other Dappros platform, NFTs are called items. Users and business entrepreneurs easily understand items unanimously.

In a metaverse ecosystem, NFTs will facilitate the trust-based transactions of unique content. Followings are the fields of creativity where you’ll see more and more inclusion of NFTs:

  1. Real Estate Transactions and Ownership Identification of large projects.
  2. NFTs support memorabilia, hobbies, collectibles, and fun activities.
  3. Music and written content creators can mint NFTs for their best works and sell those to earn a living.    
  4. CryptoKitties meets Pokémon Go in Axie Infinity, which is one of the best examples of NFTs in gaming. 
  5. Visual art has been the primary exploration field for NFTs.

The Token Economy of Metaverse and Ecosystems

Crypto tokens are the native currencies that run the blockchain networks. Therefore, each successful Dapp will need its own tokens. These tokens are also inter-exchangeable if they come from a similar blockchain environment. A token economy of the metaverse or a blockchain ecosystem will function as follows:

  1. A developer of a DApp will min crypto tokens and take part in ICOs. 
  2. These tokens altogether represent a percentage of the total development project.
  3. Investors will buy the tokens and the money will go to the project.
  4. When the project is complete, the developer will launch the app. If the app is a success, the value of the tokens will go up. More people would show up to invest, and initial investors can now exit with ROI. 
  5. Token owners can further trade their tokens in secondary cryptocurrency markets. 
  6. Miners who take part in verifying the decentralized ledger will also earn some amount of token as decided by the developer. 
  7. Developers can also use these tokens to pay for gas fees on the Ethereum blockchain.

Coins and items play an important role in the token economy. Those tokens that are interchangeable on the Ethereum blockchain-based marketplaces follow the token standard of coins or ERC-20. On the other hand, the items (NFTs) are here to represent unique collectibles. 

In any metaverse, those who are developers of DApps will make use of coins to fund their development projects. Similarly, content creators and artists will utilize items to find their creative works in a virtual universe. 

Use Cases of Coins or ERC-20

Coins come with the highest level of trust. You can electronically verify the authenticity of coins without going through back and forth with documentation. You only need to look at the smart contracts. Therefore, coins have huge usability in ecosystems and metaverse and these are:

1. Funding DApps Development Projects: 

Developers come up with a crypto coin to fund their app development project. Before the launch of the app, they offer investors coins at lower prices or base prices. After the launch of the app and if the app is successful, the price of those coins moves upwards. This is how investors benefit by funding an app development project. These tokens are essentially coins or ERC-20 tokens. 

2. Ownership of Costly Metals: 

There are some ERC-20 tokens that represent gold or other costly metals. 

3. Voting Rights: 

Investors get voting rights on the basis of the number of coins they hold. Therefore, developers need to follow certain standard operating procedures (SOPs) while running a project, or the investors would bail out.

4. Ethereum Transaction Fees: 

Developers can pay gas fees or miners’ fees using these coins.

5. Metaverse Coins: 

MANA and SAND are the two coins that represent the Decentraland and Sandbox respectively. If you want to transact in any of this metaverse, you need to use these tokens depending on which platform you’re referring to.

Use Cases of Items or NFTs

Developers, owners, or product designers come up with their own use cases for items. Here are some of the examples: 

1. Collectibles: 

Items are very effective in representing collectibles. For example, autographs, images, baseball cards, etc., belonging to a game, sport, and celebrity.

2. Video Games: 

NFTs open a new window for gamers and game content creators in ecosystems and metaverse. For example, veteran gamers can monetize their skills by offering NFTs for sale which might represent an in-game design for the heroes or their weapons.

3. Certificates: 

Certain blockchain for health care systems also utilizes items to represent patient medical records. Educational institutes can replace paper-based certificates with NFT-based digital credentials.

4. Assets in a Supply Chain: 

Food supply chain stakeholders can benefit from items. Harvesters or farmers can take a photograph of the produce. Later on, an app will convert that image to NFT with metadata like GPS location, weather condition, times, date, etc. This will establish the proof of quality in a supply chain.

Atomic Swap: Connecting Your Ecosystem With Metaverse

In the making of a metaverse, developers need to connect multiple ecosystems with it. It does not require that the ecosystems should be from the same blockchain. Also, as metaverse should be a great inclusive platform, you can not restrict multiple blockchains to interact with each other within a metaverse. So, you need a protocol to allow fair interactions.

Atomic swap helps you facilitate interaction between different blockchains. Essentially, this is a smart contract that accurately exchanges one crypto coin for another. This process does not require any intermediaries or token exchanges. The exchange between Decred and Litecoin was the first-ever atomic swap that took place in the history of cryptocurrencies.

Hash Timelock Contracts (HTLC) protocol is the primary component of atomic swap. Both parties need to acknowledge the transaction funds through a time-bound smart contract or HTLC. HashLock Key and TimeLock Key can only unlock the HTLCs so that parties can record their data.

Ecosystems and Metaverse Made Easy

This article helps end-users, developers, and entrepreneurs to understand how coins (ERC-20 tokens) and items (NFTs) to help facilitate transactions in different ecosystems. These ecosystems later interact with each other through atomic swaps that facilitate cross-blockchain transactions or information exchange. Metaverse is a reality because of coins and items.

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