Investors can diversify the pot into metaverse tokens and their respective layer 1 tokens

Bitcoin and Crypto Market Watch Thursday, December 23, 2021 - 18:51

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Cryptocurrency has become a widely debated topic around the world, thanks to the meteoric rise of Bitcoin, Ethereum, Dogecoin and others. But the crypto world has much more to offer and new developments are sprouting at a rapid rate. And, Metaverse is the new paradigm that has caught everyone’s attention. In this article, we are going to understand the basic definition of metaverse and why multinational corporations are paying close attention to it.

Metaverse Definition

Our current online social experience is limited to the mobile or laptop screen the reader is glued to right now. For example, one doesn't get to see the other person they text on WhatsApp. What Metaverse achieves to do is to bring the other person one is texting to or having a zoom meeting with, virtually next to you. It helps you to do things together you couldn’t in the physical world. To summarise, Metaverse is an online world where people interact with each other using digital avatars.

Metaverse Hype

If there’s one takeaway from the failure of Nokia, it is the ability to adapt. They stuck to their old patterns, focusing on hardware rather than software and look how that has turned out for them. Modern companies seemed to have taken note of it and it shows in the recent interest shown towards the fast-paced cryptocurrency world.

As social experiences (time spent online) are slowly becoming online due to the onset of the pandemic, people are looking at newer and exciting ways to spend time with others who can’t be physically present. And, companies are beginning to notice the potential of Metaverse to become something intangible in people's lives.

Companies go virtual

This month saw two leading sportswear brands jump the gun on the Metaverse. Nike announced its acquisition of digital design studio RTFKT that produces trainer shoes and collectibles that can be worn across different online environments. Unlike the virtual trainers released by Gucci and Buffalo London earlier this year, which are not truly owned by the buyer, each RTFKT product is backed by a non-fungible token (NFTs).

Nike’s arch rival Adidas managed to mint all 30,000 of its NFTs (worth $22 million) dubbed “Into the Metaverse” in a matter of hours. With more awareness created by the possibilities of metaverse, more companies are expected to join the bandwagon as we step into 2022.

NFTs and Metaverse Tokens

There are currently more than 500 NFT projects listed on alone. Evaluating all of them and finding the best project (in terms of return of investment) to invest in will take a humongous amount of effort and time. On top of that, the chances of floor price (average price at which the NFT is sold) of a NFT project going up rapidly like Bored Ape Yacht Club (BAYC) or CryptoPunks are very minimal. Overall, NFTs are more suited for collecting just like art connoisseurs collect physical art according to their taste.

On the other hand, take popular metaverse tokens like Decentraland (MANA), Axie Infinity (AXS), Sandbox (SAND) or even Enjin (ENJ) which are used to build their own metaverses using NFTs. It's relatively simpler to analyse these projects to understand which will have a better future in terms of wider community adoption (a key metric in price growth of a token). If we look at the wider picture and see what these tokens are built on top of, it's Ethereum (ETH) which is again a good investment bet for the long term.

Now, though ETH has the first mover advantage of having the biggest network and support of developers for most of the metaverse projects, there are some inherent limitations like high gas fees, scalability etc. While layer 2 built on top of ETH like Polygon (MATIC) aids in reducing the gas fees but it still has a long way to go in terms of adoption.

That is why it is important to keep a close eye on the developments in other layer 1 blockchains like Solana (SOL), cardano (ADA) too. The reason why investors and developers are interested in these chains to build metaverse is because of the diverse use cases each one brings.

Do we know which will succeed beforehand? No. But we can diversify our investments into some of these layer 1,2 chain tokens and metaverse tokens after thorough research. Also given the current state of blockchain, there exists no one solution for problems like speed, scalability, decentralisation etc. The future is most likely to be multichain.

Disclaimer: This article was authored by Giottus Cryptocurrency Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.

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