A smart contracts metaverse will use the self-executing, DLT contracts to run efficiently, securely, and transparently.
After reading this, you'll understand:
Smart contracts have streamlined supply chain issues in the real world and could have a similar impact in the metaverse.
Smart contract development and deployment can assure accessible fees and stable gas prices.
One key question for metaverse development will be how governments view metaverse smart contracts.
“Metaverse” is quite the buzzword these days. With so much attention pivoting towards metaverse projects, this is a good time to explore how blockchain technology and smart contracts play into metaverse development. In fact, their role is so important that you could call it the "smart contracts metaverse."
First, what is the Metaverse? Different developers have their own definitions of the metaverse and what it aims to accomplish. Hedera defines the metaverse as “an immersive, virtual space that lets humans interact in ways that approximate how they interact in the real world.”
In theory, the metaverse will look like an interconnected web of virtual worlds that users can navigate with ease. This open-source space has the potential to span social media, e-commerce, gaming, education, development, and more.
Tech giants like Microsoft and Meta (previously Facebook) are developing metaverse platforms. These are centralized metaverse projects, sometimes known as “gardens.” The walled-off miniature worlds are managed by a central authority that doesn’t allow users to navigate beyond their program.
Web3 is at the heart of Metaverse research and growth, providing grounds for world development in a decentralized manner. A decentralized metaverse would use blockchain platforms to create digital spaces that are interoperable and open-ended. This blockchain-powered metaverse runs largely off of smart contracts.
Smart contracts are the backbone of distributed ledger technologies (DLTs). They are digital contracts with predetermined rules. Once the two or more parties meet the terms, the contract code automatically sets the defined outcome in motion.
Smart contracts are the means by which digital assets are bought and sold on blockchain systems. Decentralized automated organizations (DAOs) also operate largely through smart contracts. This is because they make sure the parties involved uphold terms to an agreement without a third party to mediate.
Much of the value that smart contracts provide for a blockchain protocol can be applied to a metaverse project. Here's a look at three core features that define and empower smart contracts in the metaverse.
Metaverse development offers a vision of world-wide, real-time human interaction in a virtual world. To make it realistic, all code needs to be scalable and efficient. Exchanges like navigating from one virtual world to another or buying and selling anything depend on a contract of code. With most blockchain platforms now operating through proof-of-stake, smart contract data is stored efficiently in terms of time, cost, and energy use.
One of the great strengths of smart contracts is security. In traditional contracts, either party or the mediator of the agreement can conceivably manipulate the arrangement to their benefit. By logging smart contracts on the blockchain, all data becomes immutable and secure from tampering or manipulation.
Another key feature of smart contracts on DLTs is transparency. Information stored on the blockchain is transparent and validated collectively, improving clarity and reducing risk of unfair influence. This transparency can range from being completely public to being limited between parties or kept contained within a DAO, for example.
The metaverse could be limitless. As such, there are many facets of code that make an expansive virtual reality work. Let’s take a look at some specific areas where different types of smart contracts can make the metaverse function.
Smart contracts are now part of real-world real estate. From contracts of sales to establishing fractional ownership and setting up mortgages, smart contracts streamline standard realty processes. All these utilities are also applicable in the metaverse. By tokenizing digital real estate, ownership can be transferred via smart contract. The terms of ownership, whether complete or fractional, are all defined in the metaverse smart contract.
Smart contracts have streamlined supply chain issues for industries like construction and healthcare in the real world. They can have an even bigger impact on the metaverse. The metaverse is predicted to be the new frontier of e-commerce. It’s where producers can more intimately learn market demands and further fine-tune their marketing strategies to meet consumer preferences.
The potential with augmented reality to allow consumers to test products before purchasing. Imagine viewing a virtual couch in your living room, checking its dimensions and colors before buying. Already, some fast food chains (like Wendy’s “Wendyverse”) are establishing digital storefronts. Using smart contracts, consumers place orders through their metaverse avatar and have their order be delivered in the real world.
Introducing a digital realm introduces a whole new world of assets. Digital assets, NFTs, digital real estate, and digital identity are all areas that will need protection. Because of this, decentralized insurance will be critical for users to trust that their purchases are safe in virtual worlds. Insurance policies will be arranged via smart contracts, where a contract's structure sets the terms to be agreed upon and automatically executed.
As a new frontier, there are lots of hurdles for the metaverse to clear. From headset hardware to tax liabilities, the metaverse has many nuanced yet major challenges to resolve. In some cases, smart contracts can help; in others, weaknesses of smart contracts are the very problem.
There are many legal questions surrounding the metaverse. Here are just a few thorny examples.
Are purchases made and services rendered in the digital world taxable in the real world? Would that tax be paid by the producer or consumer?
How will intellectual property law translate to a metaverse platform?
If legal issues arise within a DAO growing their Web3 platform, who is culpable for group decisions?
We don’t yet know how regulatory oversight will be imposed on digital exchanges. One key question will be how governments view metaverse smart contracts: Are they seen as valid, binding legal contracts?
One key strength of a smart contract’s structure is its rigidity. Once written, the contract cannot be edited by any party. This makes the contract more secure, but also inflexible. Changing agreements would require an entirely new contract to be drafted, coded, and signed.
The cost of deploying smart contracts varies depending on the crypto market, means of payment, and gas fees. Estimates about smart contracts expenses range from $0.01 to $5,000. This depends on the complexity of the contract and what platform the contract is built on. At Hedera, we offer smart contract rental services for a matter of cents. Meanwhile, smart contract development and deployment has assured accessible fees and stable gas prices.
Many developments loom on the horizon for the metaverse. Engineers working with smart contract code, as well as policy makers, will be the pioneers in this fast-forming digital reality. It goes well beyond the gaming metaverse, with potential to expand into almost every industry present today.
Hedera is committed to seeding metaverse research and development. In 2022, we gave out over 70 grants to metaverse-specific projects. Already, 45% of our total grantee projects are live on the Hedera mainnet. If you are looking for a platform to incubate and grow your companies’ Web3 presence, look no further.