MetaFi – The Game Changer In Digital World

Metaverse is playing a leading role in making a crucial movement in the world of virtual space, which has been driven by games and entertainment for a long time.

With the fusion of virtual space and blockchain, the Metaverse has already become the core basis for developing and disseminating various types of events and communities by enabling NFT sales and monetization through NFT games, as well as the construction and transaction of land, cities, galleries, and houses in virtual space.

In addition, a new concept called MetaFi was born to bring about more practical, profitable, and impactful innovations in the digital world. The point is the fusion of Metaverse and Finance.

What is MetaFi?

“MetaFi” comes from “Metadata” and “DeFi”, which means trying to tune up blockchain-tradeable content and products developed using all kinds of digital data as productive and profitable entities using (blockchain-based) Decentralized finance (DeFi).

In the world of digital communication, after Web1.0 of the Internet Genesis and Web2.0, which enables interactive communication widely centered on SNS, the world has entered the phase of Web3.0, which is a decentralized service based on blockchain technology. As we all know, the development and spread of blockchain cannot be talked about without crypto assets.

As represented by Bitcoin, the functions of crypto assets were originally only remittance and settlement, and the meaning of their existence was mostly created by the speculators who expected the price would increase. Ethereum made a big splash. With the advent of Ethereum, which enables application development incorporating smart contracts, the landscape of the blockchain economic zone will change completely toward the transition to Web3.0.

Based on the Ethereum blockchain, NFTs have made it possible to grant unique ownership to digital data with irreplaceable tokens. The game that utilizes the NFT has created an epoch-making Game Fi in which profits can be earned by playing and selling characters. In addition, Social Fi, where rewards are generated by the number of followers on SNS and the influence of remarks, Metaverse, which tries to copy all economic activities from real to virtual through avatars in virtual space, and shifts to an innovative approach while arranging. These seemingly separated projects will be connected with Ethereum’s DeFi (decentralized finance) as the key.

DeFi is a next-generation financial platform that does not go through traditional centralized entities such as banks and securities. By providing this DeFi infrastructure, the above-mentioned services and products originating from the Paradigm blockchain can be grown into low-cost, usability-rich, and profitable products, and seamlessly linked and integrated. The concept of MetaFi is to open up a new paradigm.

MetaFi – Some Essential Keywords

MetaFi is just a concept, and there is nothing clear yet. However, let’s introduce the keywords to make it easier to imagine and deepen the understanding of the world that will be created in the future.

Decentralized

The idea of “Decentralized” is indispensable for understanding MetaFi. This term is often used as an acronym for Ethereum-based systems and platforms, such as “DeFi (Decentralized Finance)” and “DAO (Decentralized Autonomous Organization)”, which will be described later.

When it comes to traditional organizations, it was common that there was a centralized manager, such as the government for a country, CEOs and officers for a company, and financial institutions such as banks and securities for a financial system. However, blockchain is characterized by a “decentralized” mechanism in which there is no centralized client-server, servers are distributed to multiple nodes by P2P, and all data is managed by each terminal.

All transactions are recorded on the blockchain and cannot be hacked as they cannot be modified or deleted without the approval of all nodes. Decentralization using blockchain, which has the advantage of robustness, enables individuals to manage and utilize their own information in the absence of an administrator. In that case, since there is no intermediary, there is an advantage that the procedure can be simplified and the fee can be reduced. This is the world of Web3.0.

With the concept of “Decentralization” in mind, it will be easier to get an image of MetaFi if you read the explanations about the following keywords.

DAO (Decentralized Organization)

The idea of decentralization has already become widespread in the Metaverse. A good example is the VR (Virtual Reality) space platform called Decentraland. Decentraland is a Metaverse/ NFT fusion type DAO that operates on the Ethereum blockchain. DAO stands for “Decentralized Autonomous Organization”. There is no specific administrator, and all transactions are automatically operated by Ethereum’s smart contracts.

At Decentraland, once you register, you can use a special ERC-20 token called MANA to have an avatar and purchase Land. Utilizing this, you will be able to carry out various social and economic activities in virtual space. Land can be bought and sold, and there are cases where the price is over 100 million JPY.

It is also possible to build a museum or gallery in Decentraland, where NFT art can be exhibited and sold at auction. There is also an example of holding a virtual live at a live venue and selling the artist’s costumes and goods as NFTs.

Furthermore, by fusing DeFi, it is possible to obtain loans with the above NFT as collateral and increase assets through liquidity mining, staking, buying, and selling, etc. This is an example of “MetaFi”.

Also see: Pros and cons of DAO – Next generation organization

GameFi

NFT games, you can get your own tokens while playing the game, or sell characters and items as NFTs to monetize them, which is called GameFi. Traditional games are only for the player to enjoy, and although they may be charged, it was unthinkable that they would be rewarded for playing. This is only become possible with Ethereum’s smart contracts.

However, to start an NFT game, you first need to purchase a dedicated token. In some cases, this costs nearly 200,000 JPY, and you can’t even play if you don’t have enough money at first. However, even in this case, if you can purchase tokens by financing with DeFi, you can start the game without worrying about the initial cost. In fact, in Southeast Asia, there are many young people who receive scholarships from wealthy people through DeFi in order to earn tuition fees, and even if they make a profit on GameFi, they are evenly split.

This is also an example of MetaFi, and if it is expanded, it may help to close poverty and educational disparities.

By the way, with DEX (Decentralized Exchange) based on Ethereum blockchain, anyone can directly trade crypto assets without identity verification. It is said that there are about 2.5 billion people in the world who cannot have an account due to poverty, etc., but with DEX, there are more opportunities to raise funds for those in such a position. DEX is also a type of DeFi. This is also an example of decentralization using Ethereum, and if the funds raised can be used to sell NFTs or focus on GameFi, it will be a factor leading to MetaFi.

Related article: What is the popular NFT game? You can really make money! ??

SocialFi

An ecosystem that combines social, Web3.0, and Decentral, which is an example of the pattern of tokenizing influential statements and content on SNS and rewarding the caller, is called SocialFi. Currently, in return for using the system for a huge tech like GAFAM, we pay a considerable fee and provide a large amount of personal information. The idea of personal management by decentralizing information using blockchain is to try to break this stronghold.

If the huge administrator’s tag is removed, rights and power will be distributed to individuals. There will be no system usage fees, and individuals will be able to get advertising fees and rewards directly through DeFi without any intermediaries from the company. If that happens, not only will information exploitation be avoided, but a considerable amount of income should be expected. It can be said that this is also the worldview that MetaFi is aiming for.

MetaFi – Precautions

If “MetaFi” becomes widespread, there is no doubt that major crustal movements will occur in the digital world. However, there are some points that you should be aware of.

Risk of Hacking

DeFi smart contracts may have bugs, and there is a risk of being hacked by exploiting their vulnerabilities. Also, in the MetaFi economic zone, crypto assets will be used not a little, so if the crypto asset exchange is hit by a cyber-attack, there is a risk of losing crypto assets.

As for crypto asset transactions, the current situation is that the legislation has not caught up, so it is undeniable that even if any trouble occurs, it may be at your own risk.

Enormous Influence of Crypto Assets

MetaFi is based on the crypto assets, mainly of Ethereum. If Ethereum-related crypto assets crash, MetaFi will be greatly affected.

In 2021, the NFT and DeFi markets received a lot of attention due to the NFT bubble. In particular, it is impressive that NFT-related tokens and Metaverse-related stocks showed a clear surge immediately after Facebook changed the company name to Meta in the autumn of the same year and announced a full-scale shift change from social to Metaverse, first Ethereum being.

However, there are many unstable factors that disturb the market, such as the end of the monetary easing policy due to the US interest rate hike and the invasion of Ukraine by Russia. In fact, in 2022, both Bitcoin and Ethereum had a phase of lowering by more than 40% compared to the highest price marked in the previous year.

If Ethereum falls, the asset value of many NFTs will also fall, so the aftermath will undoubtedly rush to the Metaverse and GameFi. As a result, the negative loop that the price of Ethereum will drop further will need to be vigilant.

Summary

Ethereum is now an integral part of the growth of the crypto asset market. MetaFi is very noteworthy as a concept that can be expected to further draw out its potential and bring about innovation.

If the decentralized financial system can be used as a lever to enable decentralized and flexible actions in the fields of social, games, entertainment, and art, the worldview of MetaFi will surely expand. It may also contribute to the elimination of poverty and the development of sustainability, such as equal opportunity in education.

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