How do non-fungible tokens create tangible value in the metaverse?

Non-fungible tokens are a key enabler of the metaverse, enabling ownership and value to be encoded and transferred.

Over the past decade or so, the internet of things (IoT) has revolutionized our physical word by connecting real-world subjects and objects like people, animals, plants, smart devices, food and materials. Now, the internet of value (IoV) is emerging as a crucial enabler of the metaverse, allowing the instant transfer or confirmation of digital assets between peers without the need for third-party intermediaries. This article – part of our metaverse series – examines the role of non-fungible tokens (NFTs). 

Until recently, users did not have a way to truly own their digital items. Instead, these assets were technically “licensed” for use to the user. In games, as an example, items have no value or existence outside of that particular game. A mount obtained in World of Warcraft cannot be used in another game such as Minecraft. If there isn’t an official in-game trading system, and sometimes even if there is, secondary unofficial marketplaces pop up where players can trade or sell items. This is often done in violation of the game’s terms and conditions, and users put themselves at risk of being scammed or banned. Enter NFTs, which disrupt this system by allowing users to claim full, undisputed ownership of in-game assets, even across the boundaries of different platforms or games. This aligns closely with the metaverse ideal of identity and ownership, sowing the seeds for the foundation and evolution of the metaverse. 

NFTs can serve the purpose of giving exclusive access to worlds or virtual events. They can also be used to manage ownership of items or rights and even enable digital voting rights. NFTs can also serve a useful role in airdropping branded merchandise to drive customer engagement. For example, in order to join Decentraland’s Casino users need to own special and exclusive wearables. Brands can thus create experiences and exclusivity and engage with their members through the use of NFTs.

The excitement around NFTs is understandable, but to truly create value, the metaverse needs to build more trust to enable the social components so important in our real-world economy. In our next metaverse article, we shine the spotlight on soulbound tokens (SBTs) and explore how they could revolutionize the way communities verify and attest information linked to a specific member.