One of the great paradoxes of the internet economy today is that while most of its building blocks are derived from the efforts of individuals, the profits are largely seen by intermediary platforms. From open-source code to user-generated content to the labour a gig worker provides, it’s usually the platforms hosting their contributions that see the lion’s share of the reward.
The emergence of Web3 and the metaverse, however, promises to upend that status quo and allow individual users to retain full ownership of their digital assets, without the involvement of a third party. That in turn means users will be able to enjoy all the benefits that ownership confers, from holding items as they grow in value to freely selling your digital possessions. All of that is enabled by blockchain technology.
Blockchain and the Keys to Ownership
A blockchain is essentially an ever-growing ledger recording information and storing it securely, verifying its authenticity with cryptography. It grows via a process known as mining, whereby computers on the network solve increasingly complex mathematical problems in order to securely add new records – meaning that new transactions are verified and recorded without the interference of one central authority. While there’s far more to delve into on the subject, to get involved with digital ownership, that’s about as much as you need to know.
Blockchain has traditionally been most associated in the public consciousness with cryptocurrencies such as Bitcoin, which uses it to maintain a record of every transaction that is both decentralized and secured by cryptography. But that is far from the technology’s only use and with the introduction of new Web 3.0 opportunities underpinned by blockchain currently underway, that perception is shifting.
For instance, it’s blockchain technology that is powering the next stage of the internet and the emergence of new virtual worlds known collectively as the metaverse. Without huge platforms acting as gatekeepers, a new decentralized creator economy is emerging, allowing users to create and own a host of digital items. So what will those ownership opportunities look like?
NFTs (non-fungible tokens) have experienced an explosion of popularity in recent years. Just like cryptocurrency, they are powered by blockchain, from which proof of their ownership is derived. The key difference is in their non-fungibility, however – or to put it more simply, they are non-interchangeable and therefore unique. While cryptocurrency functions as a monetary system, with any individual unit being exchangeable for another, an NFT is a unique asset.
And NFTs really can be anything, from a piece of digital art to a weapon in a videogame, to a trading card. It’s worth pointing out that while NFTs are sometimes believed to be the digital items themselves, that isn’t true. Anyone can copy and paste a jpeg of a piece of digital art, but the NFT itself is simply an entry on the blockchain keeping track of who has ownership of the original.
Depending on your outlook, you might struggle to see where the value is coming from, but it’s helpful to equate an NFT-owner with an art collector. The technology gives ephemeral digital possessions the exclusivity of real-world art objects. The Mona Lisa, for instance, is endlessly reproduced, but it’s the copy in the Louvre that is, by some estimates, worth $50bn.
It’s far from purely digital artists making the most of the technology, with the world of sports just one of the sectors exploring the area. The NBA, for instance, is offering collectable highlights sold as packs much like trading cards and football clubs such as AS Roma are working on metaverse fan experiences that include ownership of digital collectables.
With the metaverse emphasizing decentralization as it does, one exciting possibility is for a user’s digital representation or “avatar” to carry over between different worlds. Indeed, services are already emerging with that exact functionality, and with that comes an opportunity to maintain a digital wardrobe.
Anyone who has played a video game in recent years will be familiar with the digital items that have long been part and parcel of the form, such as cosmetic items that change the appearance of your character. Some developers have opened up creation tools to users, allowing them to create items and sell them in a marketplace – albeit one that isn’t controlled by users.
The next stage is for digital items that aren’t just limited to one game, but instead, stay with your avatar wherever it goes. That future, as it turns out, is already here – with Nike just one of the companies already betting big on the desire for digital accessories.
It stands to reason that if you can own the items decorating your avatar as you explore a digital space, you can own the space itself. As such, a host of companies have recently emerged offering users the opportunity to claim a piece of the metaverse for themselves. Take Somnium Space, which offers users ownership of virtual spaces via the Ethereum blockchain, or Upland, which maps NFT properties in the metaverse to the real world.
The incentives to own digital land are many and are not so different from the incentives for owning physical land. Owning land in any specific digital world means you can benefit when that platform grows, for instance, turning you from a spectator to a participant. At the same time, that land is yours to do whatever you want to attract others and monetize – from building experiences to advertising.
The bottom line is that the metaverse, powered as it is by the creativity of users, will allow users to own anything that can be imagined. For creators, that means accessing the full value of their creations. For buyers, it means a truer form of digital ownership that more closely tracks the real-world definition – instead of being dictated by the terms and conditions of any one digital platform.
To find out more about NFTs, Web3 and the metaverse at large