People can debate all they want about the Metaverse, whether it’s one virtual world or multiple worlds, whether it intrinsically has value, or is destined to destroy us. They can have all the opinions they want about cryptocurrency as well, whether it’s a terrible investment or an incredible opportunity, it’s the future, or it’s just a fad. Regardless of how our culture feels about either product (because virtual or not, they’re still products), both are creeping into our lives (albeit more slowly than proponents had hoped), and there’s a strong likelihood that one or both will gain widespread adoption.
Currently, crypto is a reality, even if it’s only considered legal tender in two countries, and most consider it to be an investment rather than a form of currency. On the other hand, in terms of both its definition and the companies building it, the Metaverse is technically still a vision. There are platforms–Dectraland, Sandbox, Roblox–that offer elements, but a single virtual world in which people live, work, and play in parallel to the physical world is still a long way off.
While some experts believe the Metaverse will need crypto to survive, what seems more plausible, at least in today’s reality, is that crypto is going to have to wait for the Metaverse before it thrives as a currency.
This may change. Players and proponents in the crypto space have high hopes for its increasing value, both in the physical and virtual worlds. Granted, 76% of financial institutions say they expect to use crypto within the next three years given that it has the appropriate regulatory framework. Putting that into place is a daunting task, yet one necessary for mainstream adoption. Read about a common attack on cryptocurrency exchanges – cryptojacking
Here’s the current situation:
- In 2021, 21% of the global population said they owned cryptocurrency.
- Coinmarketcap lists 9931 cryptocurrencies currently being traded on 293 exchanges.
- 50,000 people are actively engaged in Web 3.0 virtual worlds.
- There are approximately 19 active unconnected Metaverse projects.
- Each Metaverse runs on its own cryptocurrency.
While these statistics make it clear crypto and the Metaverse have a mutually-beneficial relationship, they’re not codependent on one another. Consider that consumers who shop in the current developing elements of the Metaverse can use a regular credit card to purchase any virtual product. In the physical world, however, at least right now, they can’t use crypto to buy every physical product.
The Metaverse is ground zero for crypto, it’s where people are going to become comfortable using it. As more people start to explore the Metaverse, they’ll naturally want to use the currency of choice in each virtual environment, similar to choosing to convert your home currency to foreign currency when visiting another country, even though it’s just as easy to use a credit card. And, as they start putting crypto in their “wallets” and using it to pay for virtual purchases, the chance it will seep into commerce in the physical world increases.
The biggest roadblock to adoption is the sheer number of cryptocurrencies in the market. Ultimately, this will cause the most friction. Consumers can’t be expected to keep hundreds of currencies on hand, even in a digital wallet, and retailers can’t be expected to accept every currency out there. The perceived advantage of adopting crypto will be lost very quickly if interacting with it becomes too cumbersome. Imagine every brand having a different currency. So when you shop at the likes of Walmart, Kroger, Whole Foods, Target, etc., shopping turns into a difficult, confusing task. This is not an experience consumers will buy into.
Another issue is that only a handful of cryptocurrencies in the market actually have value. Just because you create something and assign a value to it doesn’t give it value. Utility is what gives something value, and some type of standard has to be established. Similar to the way the European Union adopted a single currency, the crypto market needs to weed out currencies with no value–ideally to one–but realistically, less than five. However, without a governing body, this won’t happen quickly.
So, in our current reality, the Metaverse is an emerging communication and commerce channel, crypto is an investment to most, a payment method for some. The sophistication and maturity of both, is low while consumer skepticism is high. The continued market volatility of crypto serves as a constant reminder of how many people, and how much money, was lost in the past year.
This hesitation, along with the tumultuous state of the economy, is having a latency effect which impacts consumer desire to experiment with either of the two products. If you’re just looking at adoption from a basic human psyche standpoint, consumers are more worried about inflation and how much they’re paying at the gas pump than in buying a fancy virtual Adidas sweater they can only wear in the Metaverse.
Some experts will continue to argue crypto will never become mainstream, however given the current pace of change in our world, it’s evident something is happening. Consider the many economic forecasts from countries around the globe predicting cashless societies by 2030 at the latest–and it becomes even more clear that we are moving in that direction. After all, what cashless really means is that all currencies will be digital, and crypto is a digital currency.
In the U.S., widespread crypto adoption will most likely come down to basic consumerism, not whether Mark Zuckerberg’s vision of the Metaverse comes to fruition and the masses immerse themselves in it. As history has repeatedly shown us, when American consumers decide they want something, they’ll pretty much do anything to get their hands on it. So, whether they find a must-have product in the Metaverse or in the physical world that can only be purchased with cryptocurrency, they won’t flinch converting their hard-earned cash into whatever kind of money is needed to own it.
Michael Scholz is the vice president, Product & Customer Marketing at commercetools.