NFTs and the Metaverse
As if the real-world property market right now wasn’t competitive enough, Prof. Kanhere predicts that the next boom will be in virtual property in the Metaverse. Bursting into public conscience recently due to Facebook’s rebranding as Meta Platforms, the Metaverse is a network of three-dimensional worlds where users come to socialize, collaborate, and interact – and can be accessed through virtual reality.
But why would anyone want to buy virtual land with real money? “Buying and selling virtual land is possible through blockchain because you can pretty much tokenize anything in the Metaverse and sell it on the NFT market,” Prof. Kanhere says.
“Just like property in the real world, the virtual property is about three things: location, location, location. Areas in the metaverse where people congregate will have a lot more value for advertisers and retailers to get access to the virtual crowd,” he says.
Like property, Prof. Kanhere notes there’s also going to be a surge in NFT avatars. Fueled by people’s obsession with collectables and individuality, NFT avatars are pivotal in building a sense of community in a metaverse. “NFT avatars are typically images of a character, used as the digital profile picture in the meta-verse.
The vast majority of NFT avatars are individually unique and algorithmically generated from an array of traits, for example, clothing, accessories or hairstyles,” he says. “Avatars as NFTs have become increasingly popular in drawing people in because it creates a persona for you within a virtual community.”
Some NFT avatars give their holders access to special virtual places. “And often these spaces or communities are highly attractive because they provide a sense of belonging and community for users – and they’re willing to pay top dollar to join,” says Prof. Kanhere.
“For example, you create an avatar to get access to a special music community in the Metaverse and collaborate with other musicians from around the world in that space. So yes, there are cases where real people are paying thousands of dollars to buy virtual properties and avatars.”
Bitcoin’s environmental footprint
The hype of blockchain and NFTs may be getting bigger, but so is its growing environmental footprint. For cryptocurrencies such as Bitcoin, it’s estimated the total energy needed to run the network is greater than the electricity consumption of entire countries such as Portugal and Singapore.
Prof. Kanhere predicts one of the next big things will be to make blockchain more environmentally friendly. “Blockchain uses a lot of energy because it runs on a decentralized network to guarantee the fidelity and security of data,” he says.
“And unlike a centralized network, where all the information is stored in one place, a decentralized network relies on all the nodes in the network to agree with each other on what the source of truth is – and this requires executing complex algorithms which use a lot of energy.”
He says while the incentive may not be as compelling as making money trading Bitcoins, more work needs to be done to ‘greenify’ blockchain to align with global climate change goals.
“Cryptocurrencies, such as Ethereum, have managed to change their algorithm which reduces the energy consumption. It’s a good step in the right direction but we’re going to need to make bigger moves if we want to get serious about reducing its carbon footprint.”
This article first appeared on the UNSW website.