The metaverse and DeFi are destined for different paths. Here’s why.


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Facebook stunned the world last October when it rebranded itself as “Meta.” With the name change, the social media giant that has helped shape the internet for the past two decades appears to have made the decision to ride the hype of the metaverse boom that nearly hijacked the latest crypto bull run. change.

And Meta wasn’t the only one. Microsoft announced that it would adapt its signature software products into its own enterprise version of the Metaverse soon after, as hundreds of crypto projects latched onto the new buzzword, adding related words such as NFT, AR and VR to their messaging. By the end of 2021, real estate sales in the metaverse exceeded $500 million. For entrepreneurs less familiar with the concept: yes, that means people have spent millions of real US dollars on clubs, nightlife venues and stadiums that only exist virtually.

Another lesser known fact? Most companies creating products centered around the Metaverse – a more immersive internet involving virtual and augmented reality – use blockchain as a major component. Metaverse developers integrate key crypto industry features, such as NFTs (non-fungible tokens) and utility tokens, to power their ecosystems.

Related: The New Wave of Web 3.0 Metaverse Innovations

To some extent, the intertwining of crypto and metaverse makes perfect sense. If you’re creating a virtual space where people can experience real-world events with other real people, like live music performances and even marriage proposals, you’ll need a native digital currency to power the ‘Mondial economy. On the other hand, the association and reliance on crypto has made these startups vulnerable to dramatic volatility in the crypto industry.

As such, they were equally affected by the crash that sent the crypto industry into a bear market in May, catalyzed by the collapse of Terra (LUNA) from $120 to 2 cents – a correction of 99.9% – which sent shockwaves through the market. . The Metaverse sub-sector of the broader crypto industry was likely hit harder than the DeFi (decentralized finance) industry, of which LUNA seemed almost an integral part.

Just as the value of real, tangible properties skyrocketed nearly 19% over the past year, the average price per parcel of virtual land across the top six Ethereum Metaverse projects fell 85% in August. The agreed reason for the price drop could be waning interest. Still, there’s a macro-level trend to consider: Very soon, it’s reasonable to predict that land prices in the metaverse won’t recover for months, if not years. Not until the next bullfight gets talked about again.

The Metaverse and DeFi can be seen as two very different ideas from Bitcoin, the very first cryptocurrency and the application of blockchain technology. Yet everyone will fare very differently in this bear market. Unlike NFTs that were the backbone of the Metaverse blockchain industry, much of which turned out to be scams, institutional demand for DeFi exposure remains strong.

Related: How NFTs Could Change Real Estate

In June, JP Morgan Chase’s blockchain unit announced plans to bring trillions of dollars of tokenized assets into DeFi, also launching “Project Guardian,” which tests institutionally compatible DeFi through liquidity pools, constituting tokenized deposits and bonds. A month prior, Wall Street giant Jane Street struck a loan deal with BlockTower Capital to borrow $25 million, with plans to increase it to $50 million.

But why are institutions keeping an interest in DeFi while Metaverse and NFTs projects are tanking? Surely there are plenty of scams in DeFi too.

It all comes down to real-world usability. While partying in a virtual world with an NFT avatar might sound like fun, people have proven to prefer the real, tangible world over all Metaverse experiences. The demand is not there yet, which could be because Metaverse projects need to build a better bridge between the real and virtual worlds. Until people prefer to hang out in Decentraland, they’ll head to New York and party in Brooklyn — especially now that pandemic-era restrictions are gone.

Conversely, DeFi platforms provide ways for investors to spend the returns they earn through betting on physical assets. goods. Take EQIFi, a regulated DeFi platform backed by EQIBank. The platform offers users various financial services including yield aggregator, loans and deposits. In early August, EQIFi partnered with crypto-to-retail bridge, which will allow holders of its EQX token to spend tokens they staked on real-world goods at top retailers like Amazon and Walmart. .

Related: 4 Ways DeFi Can Generate Passive Income

In that sense, DeFi is starting to find ways to deliver on Bitcoin’s original promise of letting the little guy make money through decentralized protocols. He also goes on to let him spend that money in places that matter.

As DeFi continues to open access to and scale traditional investment vehicles, cross-chain launchpads such as Synapse Network, which launches companies with customizable offerings ranging from anti-bot solutions to tokenomic models , will help them to evolve. In turn, the rate at which DeFi as an industry is maturing and changing everything we know about finance will accelerate.

That’s not to say that the Metaverse won’t rise again or that blockchain won’t play a significant role. With major players like Meta and Microsoft actively realizing their visions, it’s almost inevitable that smaller innovators will re-enter the game. The Metaverse as a use case for blockchain and NFTs is much younger than financial applications. more traditional. In the Bitcoin family, as in most families, the eldest leads the way for other siblings.

Related: Blockchain Is Everywhere: Here’s How to Understand It


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