Applications for NFT in metaverse worlds are growing. Let's look at how developers can use NFTs to enhance metaverse experiences.
After reading this, you'll understand:
NFTs are used to verify ownership of virtual assets, which are key parts of metaverses.
If metaverse game developers wanted to create a one-of-a-kind asset, they can do so by tokenizing it as an NFT.
NFTs create a common framework for metaverse platforms to represent and transfer ownership of unique assets.
Non-fungible tokens (NFTs) and the metaverse are often mentioned in the same context. Still, these concepts aren't synonymous. Many web3 metaverse projects use NFTs, but popular web2 metaverses, such as Horizon Worlds, don't use them at all.
In this article, we'll look at how NFTs differ from the metaverse and how developers can use an NFT in metaverse applications.
NFTs are physical and digital assets that have been tokenized using blockchain technology. These tokens are non-fungible, meaning they are unique and irreplaceable. For example, one fungible HBAR token is the same as every other HBAR token, but each Warsome Wizard NFT is completely unique.
NFTs can be used to represent digital art, trading cards, in-game items, and nearly anything else. NFT technology can even be used to tokenize insurance policies or real estate.
In most cases, when an image or digital file is tokenized, the file isn't actually stored on the blockchain. NFT marketplaces use the InterPlanetary File System (IPFS) protocol to store the file, and a link to that file is minted on the blockchain. NFT galleries and wallets use this link to read and display the file after connecting to your crypto wallet.
IPFS storage has benefits and downsides. It's much cheaper than minting a file on the blockchain. According to one study, it cost as much as $20,000 to store 500 KB of data on the Ethereum blockchain in February 2022. These high costs are the primary reason most NFT projects store files off-chain. But the prices haven't stopped popular projects like CryptoPunks from moving their files to the blockchain.
The biggest downside to IPFS storage is that the links can break. The files would disappear if an IPFS site shut down its servers.
On the other hand, the metaverse is a virtual world where users can interact with each other, play games, build virtual structures and more. Many metaverse platforms use virtual reality (VR) and augmented reality (AR) to make their worlds more immersive. Although some metaverse projects use NFTs, many don't. These virtual worlds require vast amounts of data storage for the in-game items, user-generated content, and the world itself. So, even when they use NFTs, it's unlikely that these metaverse NFTs would be stored on-chain. Nonetheless, there are countless benefits to using them in the metaverse.
In many ways, NFTs are essential to the success of the metaverse. Without them, there is no ownership aspect, and monetization opportunities shrink dramatically. In this section, we'll learn more about the benefits of using NFTs in the metaverse.
NFTs are used to verify ownership of virtual assets. In-game items, such as outfits and digital real estate, can have a limited number of owners. Those owners can then sell their digital items to each other within these virtual spaces.
In traditional video games, certain virtual objects are assigned rarities. Still, they are usually infinitely replicable, meaning that, over time, they become less rare. NFTs have identification codes and metadata that make them unique. If game developers wanted to create a one-of-a-kind armor set, they could do so by tokenizing it as an NFT.
NFTs create a common framework for metaverse platforms to represent and transfer ownership of unique assets. Metaverse interoperability would allow users to transfer their in-game items from one digital world to another. For example, imagine you could create a house in Minecraft and then send it to yourself in Roblox.
NFTs make it easier for game developers and users to monetize their in-game assets. For example, users can buy virtual land and then sell it after it appreciates. Additionally, developers can assign royalties to assets that users earn or buy in their metaverse. If someone buys a cheap plot of land and it increases in value after virtual casinos and shopping malls are built around it, the developers can earn additional money when that user sells.
NFTs can be used to authenticate digital assets. This authentication enhances security by ensuring that the asset is genuine.
In this section, we'll dive into how NFTs are used or expected to be used in metaverse applications.
NFT marketplaces can be integrated into a metaverse platform, letting users walk into a virtual store and shop like they would in the real world. Many fashion brands have already signaled interest in selling NFTs and creating metaverse wearables. In the near future, we'll likely see brands like Gucci and Louis Vuitton setting up virtual marketplaces in the metaverse.
NFT collections can be displayed in virtual art galleries. These digital galleries are an excellent way for artists and collectors to showcase their most prized assets.
Web2 metaverse environments don't enable users to rent their virtual gear, partially because they don't really own it. However, metaverse NFTs can be rented to other users and enforced by smart contracts, ensuring the renter doesn't keep the virtual asset.
NFTs can be used to represent unique avatars in immersive virtual worlds. These virtual platforms can even let users customize their avatars and then sell them on the secondary market. NFTs can also be used to unlock social features and abilities for metaverse avatars.
NFTs are set to revolutionize the metaverse in countless ways. They can represent ownership of digital assets, enabling users to sell, rent, or lend their favorite in-game items. Additionally, they enhance metaverse security, as they can be used to authenticate the legitimacy of each virtual asset. Still, both NFTs and the metaverse have several problems that must be addressed before they can revolutionize the way people think about gaming.
Hedera is committed to providing artists, gamers, and developers with an easy-to-use web3 platform for NFTs and the metaverse. In April 2022, Alex Russman, HBAR Foundation Director of NFTs and Virtual Worlds, announced Hedera's Metaverse Fund Strategy. According to Russman, "The THF Metaverse Fund was launched to bring consumers into the Hedera ecosystem at scale and accelerate the development of applications in high-growth target areas."