As we gradually evolve into the Web 3.0 era, metaverse interactions - be it social or business - are slowly growing too. Soon transacting in the metaverse will be as commonplace as scrolling social media or browsing the web.
As Web 2.0 instigated the advent of faster payment services like Square and PayPal, Web 3.0 is expected to follow suit. So how do payments work in the metaverse, exactly? And what does this mean for the future of the payment sector?
Understanding Metaverse Economies
While we’re in the early days of metaverse development, there are several platforms providing a foundation of what we can come to expect from this new blockchain virtual world experience.
As it presently stands, these platforms all operate using closed economies, meaning that they have their own native currencies and provide exchanges through their own marketplaces. Similar to how countries operate using their own fiat currencies and regulations.
While these currencies are not supported for cross-platform transactions, it’s expected that with time the tedious task of withdrawing one platform’s currency, exchanging it for another on a third-party exchange, and then purchasing another coin to enter a new metaverse economy will be eradicated. After all, aren’t those the core concepts that lead to Bitcoin’s advent in 2009?
A Common Denominator: NFTs
Another important element of these blockchain economies, and a key component of the Web 3.0 movement, is the ownership of digital goods. Providing ownership of everything from content to in-metaverse objects to real, physical objects, NFTs are becoming widely used.
These non-fungible tokens (NFTs) are a type of digital asset that harness the power of smart contract technology. Unlike other cryptocurrencies, like Bitcoin and Ethereum, NFTs are unique in that they are designed to only ever represent a single object. While they can be traded, they can never represent anything else.
In order for these NFTs to be operational within the metaverse, the platform needs to provide a payment system where these NFTs can be traded. Platforms like Decentraland and The Sandbox have created in-app marketplaces to serve this very purpose. But that requires another form of payment solution.
The Current Payment Systems In The Metaverse
While still in its early phase, metaverse platforms have designed various payment options that support the current popular options, crypto and fiat currencies.
The currency option also utilizing blockchain technology to function is the obvious choice when it comes to making payments within the metaverse. The near-instant, cost-effective, cross-border payment system trumps fiat currencies any day, not to mention the added security bonuses.
Users can easily obtain a currency that the metaverse platform supports, and then link their wallet to the platform to easily transfer the funds. The cryptocurrency can then be used on the platform or traded in the marketplace.
In-game transactions are a mutli-million dollar industry, with some platforms like Fortnite making billions each year from these sales. Fortnite, while known as a video game, has been dubbed the “real metaverse” and “the primary hangout space on the internet”. According to Alex Perry of Mashable, “Fortnite isn’t really a video game. It’s a crackin’ virtual hangout space with a video game happening around it.” According to court documents, Fortnite brought in $9 billion over 2018 and 2019.
These payments are managed in one of two ways: either through centralized payment processors like PayPal and credit card companies like Visa and Mastercard, or through the platform's native currency (which uses the same platforms mentioned above, only once the payment is settled the user will use the platform’s token to transact). FIFA coins are an example of this, used in the EA Sports Soccer games.
While they both utilize the same first step, the second option allows the game’s manufacturers to avoid fiat price volatility and keep their in-game prices stable.
Buy Now, Pay Later Payments
The biggest trend in the payments sector in 2022, buy now pay later (BNPL) payments allow users to spread the initial cost over several payments. While traditionally used for the purchase of physical goods, cryptocurrencies could make this trend extend to the metaverse.
Decentraland is pioneering this financing option in the metaverse, having recently partnered with a big crypto exchange. Through the exchange’s BNPL Pay service, users can buy virtual land and other in-game assets and pay them off over several payments. This in turn injects money into the platform’s economy, with payment options available of up to $15,000.
Payments are functional within the metaverse space, there is plenty of room for innovation. While currently fiat payments dominate the space, it is likely that with the growing adoption of cryptocurrencies, and the rise of more efficient crypto payment options, that crypto will take the lead as, afterall, it does provide many more benefits and added security.
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