Decentralized finance professionals are monitoring the development of the Metaverse, a virtual world where people will be able to play, interact, and transact.
The decentralized finance sector has benefited from the development of its applications, exchanges, user privacy features and security standards, all of which are expected to improve further with the Metaverse and Defi. However, its financial sector also harbors what is perhaps one of the most exciting opportunities for blockchain technology: decentralizing its financial transactions.
The digital protocols inherent in blockchain technology could allow DeFi to play a much more pervasive role in the metaverse.
The Metaverse will be a virtual world in which users can create, share, interact and make purchases. It will be like today’s social media platforms, but it will probably be much more engaging.
The idea of a decentralized and self-sufficient virtual world is not new. The first reference to this idea dates back to Neal Stephenson’s 1992 science fiction novel Snow Crash. In his novel, Stephenson imagines a virtual world called “Metaverse” that uses technology to bridge the gap between the real and virtual worlds.
Facebook (now “Meta”) used the same term Stephenson coined to name its virtual world. While the “Meta” corporation will likely retain some control, it’s also likely that the Metaverse will follow in the footsteps of social media and be populated primarily with user-generated content.
Economists and investors see the financial potential of this virtual reality platform model. Those operating within the metaverse will eventually, if not immediately, need banks, financial institutions, and financial products to transact and exchange value, just as they do today through social media.
The Metaverse could also serve as a conduit for companies to showcase their brands and sell their products, including financial products. According to a study, 35% of young people between the ages of 18 and 34 already use social networks to investigate possible investments.
However, finance can look somewhat different in the metaverse than in real life. It’s still too early to tell how this will evolve, but it’s possible that at least some of the financial transactions will be purely digital, like a new virtual world, the Metaverse could host any number of digital-only products and services. It is also possible that traditional banks and financial institutions are lagging behind.
Traditional banks are already relatively slow to adopt new technologies. According to American Banker, “In the years to come, American banks are likely to become less relevant to the daily lives of their customers, less central to the economy and less profitable. The main culprit will be the rapid evolution of technology.
As such, decentralized financial protocols could be the first to address the need for financial products and transactions in the Metaverse.
A decentralized financial system would be an invaluable tool for the metaverse. The transactions would allow users to make cross-border payments with minimal fees, and loans could help fund new and innovative projects in the virtual world.
Its protocols already work in the digital space, so translating them for the Metaverse would be a relatively straightforward process.
However, major banks and financial organizations will also be keeping tabs on the Metaverse, and it has some work to do before it can match some of its centralized counterparts. Annualized protocol revenue across all its protocols is estimated at $5 billion, compared to $2.3 trillion for the global retail banking industry.
That said, it has grown rapidly in just a few years, and regulation and the current stabilization of the markets will increase adoption in the years to come. Depending on how decentralized the Metaverse is and how much freedom users have, it could skyrocket into the virtual space and leave traditional banks far behind.
It also depends on when the metaverse “actually happens”.”Technically, it is already here because the underlying software that governs will be published in 2022.However, the metaverse may not reach one billion users before the end of 2031.
Regardless, it could play a massive role in the importance of Metaverse’s financial system.
EQIFi, protocol for loans, loans, and pooled investments for ETH, has already launched the first branch in the Metaverse. Users can now make decentralized loans and trade transactions with other users on the EQIFi platform.
Are you preparing for the metaverse? Sign up for today to join the world’s first seamless bridge to DeFi.
Interesting read on Stocks – The 7 Best Metaverse Stocks to Buy | Stock Market News | US News
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