The Metaverse refers to a virtual space or a collective virtual shared space, created by the convergence of various virtual reality (VR), augmented reality (AR), and blockchain technologies. It’s envisioned as an immersive, interconnected digital world where users can interact with each other and digital assets in real time.
The Metaverse is the next big thing in the blockchain and tech innovations sectors. Individual and institutional investors are venturing into exploring its benefits. Microsoft, Google, and Meta are only some of the most well-known brands trying to immerse into the Metaverse. News headlines are talking about the ways in which the Metaverse changes the digital and real worlds daily, and many of them are approaching the connection between cryptocurrencies and the Metaverse.
A world where people engage with the Metaverse is going to be extremely digitized and could spring another tech revolution. So many cannot help but wonder if there is a vital connection between digital currencies and the Metaverse. Should they head to exchange platforms like Binance and explore the various ways in which they can buy Bitcoin and other cryptocurrencies? This article has you covered when it comes to the relationship between the Metaverse and cryptocurrencies, and especially the connection or lack of it to Bitcoin.
What should you know about the connection between the Metaverse and digital currencies?
The relationship between the Metaverse and digital currencies is based on the idea that users should be able to monetize their digital assets. Suppose they play a game in the Metaverse; they should be able to monetize their in-game assets, avatars, and even tools. The monetization is possible through the use of digital currencies or non-fungible tokens.
Metaverse users can buy cryptocurrencies through exchange platforms or earn them. However, buying is the easiest option because they can transfer real money into their digital wallets and use the funds to engage in virtual activities.
Some crypto specialists state that the Metaverse needs cryptocurrencies to survive, but at the moment, this is mandatory. However, if the sectors evolve, things might change, and both commodity classes might increase in value.
What is the Metaverse?
We talked about the connection between the Metaverse and cryptocurrencies, but let’s dive deeper into what the concept implies. People use the term Metaverse to refer to the virtual universes created with the help of blockchain. The Metaverse is a virtual reality developed with the help of the internet and populated by avatars that represent the users. The avatars allow them to interact with each other and with digital assets.
Because the Metaverse is built on blockchain technology, it’s totally transparent and secure. Hope is that the Metaverse will be able to integrate the real world in the future. To provide people with the level of immersion it promises, it should be more than a virtual world; it should become a new way of life.
Now, why did we say that there isn’t really a connection between the Metaverse and Bitcoin?
Isn’t Bitcoin the largest cryptocurrency by market cap? Shouldn’t it be one of the main digital currencies used to take advantage of the Metaverse?
Bitcoin has become a store of value over the years, and it competes with commodities like gold for this status. But the truth is that beyond being a store of value and digital currency, it lacks other use cases and therefore doesn’t have the necessary qualifications to join the Metaverse.
Let’s review the reasons why Bitcoin finds it difficult to join the Metaverse.
Bitcoin is based on an algorithm that consumes more energy than many countries
Research shows that the average Bitcoin transaction uses 2,264-kilowatt hours (kWh) worth of electricity because it’s built on the proof-of-work consensus, which is known for consuming high amounts of power. The algorithm requires tremendous computing power to verify a block and add it to the chain.
To help you understand why Bitcoin is labelled as a major power consumer, we’ll tell you that the average American household needs around 893 kWh monthly to function correctly.
And the more the network grows, the higher its energy consumption goes.
Bitcoin is the oldest but less useful digital currency
We mentioned earlier that Bitcoin was created as an alternative currency that was supposed to replace intermediaries in online transactions. And it serves its purpose flawlessly, but it stops there. The ecosystem has been waiting to receive updates recently to keep up with the sector’s needs. Other blockchains are more practical, efficient, and faster. Ethereum, the second largest cryptocurrency by market cap, is one of the leading cryptocurrencies for Metaverse transactions due to its several utility cases (NFTs, DeFi, smart contracts).
Regulators don’t really like Bitcoin
Regulators get a headache whenever they think about Bitcoin because it’s quite difficult to tax it. Specialists believe that after Bitcoin was made an official currency in El Salvador, private enterprises and even the government could face some legal liability. And the tech giants supporting the Metaverse don’t want to expose themselves to such a burden.
Bitcoin’s volatility could deter users from trading in the Metaverse
Many institutional investors refuse to accept Bitcoin because it’s one of the most volatile assets on the market. Its price fluctuates wildly, and they fear accepting it as a payment method because it could lose its value quickly. And it seems that the Metaverse also dislikes wild volatility because it makes it difficult to manage transactions. The Metaverse users prefer stablecoins because they are pegged to other assets and tend to maintain their value.
Bitcoin isn’t among the top cryptocurrencies used in the Metaverse.
Metaverse users have already established the top cryptocurrencies they prefer for trading in the virtual world. Most are energy efficient, more stable, and imply lower transaction costs. Ethereum, Solana, and Cardano are only some of the several cryptocurrencies used for funding activities in the Metaverse.
And while things might change at any moment, many wonder if Bitcoin will be able to keep up with the trend.
Let’s not forget that Bitcoin is the oldest cryptocurrency in the sector, which has survived several bear markets and performed better than many other digital assets. It could receive an upgrade at any time to become more energy efficient and become a viable solution for Metaverse trading. And even if it’s not the cryptocurrency of choice for Metaverse users, they can always sell Bitcoins and buy the NFTs that enable them to immerse into the new virtual world.