Crypto in the Metaverse

We’ve heard a lot about Crypto and The Metaverse. Here is how to invest in it safely.

By
&
Tom Blackstone
Gabe TurnerChief Editor
Last Updated on Mar 30, 2022
By Tom Blackstone & Gabe Turner on Mar 30, 2022
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If you’re interested in cryptocurrency, you’ve probably heard of the term “Metaverse.” Media outlets everywhere keep claiming that the Metaverse is going to change the world as we know it and that it’s going to lead to rising crypto prices.

But what is the Metaverse, and does it really have anything to do with cryptocurrency? If it does, what cryptocurrency can you invest in to get exposure to the Metaverse?

In this guide, I’ll answer all of these questions and more. I’ll go over what the Metaverse is and discuss the technology that makes it possible. And I’ll explain which cryptos are poised to take advantage of this revolution.

Let’s begin with the most basic question about the Metaverse: what exactly is the Metaverse, anyway?

What is the Metaverse?

The term, “The Metaverse” was first coined by Neal Stephenson, in his 1992 novel, Snow Crash. Snow Crash depicts a future world where computer processing power and fiber optic systems have gotten so advanced that human beings can now live out most of their lives in a completely immersive virtual world.1

This virtual world is called The Metaverse.

FYI: When Stephenson wrote Snow Crash, virtual reality (VR) technology was still in its infancy, and was mostly used for industrial and military applications.2 The headsets were expensive and had low resolutions.

Over the past 12 years or so, VR headsets have fallen in price and increased in resolution. And there are now multiple models of these sets in production, including:

  • Oculus Quest 2
  • Sony Playstation VR
  • Valve Index VR Kit
  • HTC Vive Pro 2
  • And many others

These models still don’t provide an experience that is indistinguishable from the real world. And they are still too expensive for most consumers. But as the technology improves, we are getting closer each year to the point where something like the Metaverse may come to exist.

In October, 2021, Facebook, Inc. announced that it was going to try to capitalize on this technological development by changing its name to “Meta” and focusing the company’s attention on creating the Metaverse.3

But will the Metaverse be centralized, like Facebook, Twitter, and Google, or will it be decentralized like a blockchain is?

Does the Metaverse Have to be Centralized?

Many critics of Facebook have been alarmed by the “Meta” name-change announcement. For example, NordVPN has argued that Facebook’s version of the Metaverse may become a privacy nightmare.4 And Vice News has argued that Facebook may manipulate users in harmful ways using Metaverse data.5

From the perspective of these critics, the Metaverse will be bad for human beings if it is centralized, since this will put a giant corporation in charge of everyone’s virtual lives. And if we are spending most of our lives in this virtual world, this means that nearly our entire lives will be controlled (or at least heavily monitored) by this corporation.

In response to this criticism, some companies and investors are trying to create a completely different version of the Metaverse; one that is owned and controlled by no one. In other words, they’re trying to create a decentralized or crypto Metaverse.

The Crypto Metaverse

The Crypto Metaverse is a concept that has been gaining steam among investors since 2017. It began with the announcement of Decentraland in August of that year. It has since grown to encompass other decentralized metaverses like The Sandbox and Somnium Space.

In the Crypto Metaverse, land in a VR world is stored as tokens on a public blockchain. Each token contains information about the spatial coordinates of the land, the owner of the land, and some basic info about the content that exists on it.

The token also contains information about where to find the land’s content, while the actual content is stored off chain, in a peer-to-peer file sharing network like Bittorrent or Kademlia DHT.

Did You Know: In a decentralized metaverse, you still need a central server in order to communicate with other users. But each virtual landowner can provide their own server, so this should prevent the Metaverse from becoming dominated by one company.

In theory, this is how the Crypto Metaverse operates — in a completely decentralized way.

In the next section, I’ll list some current attempts at crypto metaverses.

Some Current Crypto Metaverses

Here are some examples of crypto metaverses that exist right now.

Decentraland


Decentraland was the first crypto metaverse ever conceived. In its original whitepaper, all of the basic features of a decentralized metaverse were explained.6

In order to get funding to build the Metaverse, Decentraland offered its cryptocurrency, MANA, for sale in August, 2017. Over $24 million was raised, with each MANA token selling for $0.024 per coin. This cryptocurrency is now worth more than $2 per coin.

Decentraland was publicly released in February, 2020. The world itself runs on a central server that the developer provides. But all of the land and most of the objects in the world are blockchain tokens.

Even though it uses a central server, Decentraland doesn’t use a username/password login, so you’ll need a crypto wallet to sign in.

FYI: Wondering which metaverse coins are safe and which are scams? Read our helpful resource on How to Determine if a Coin is Safe.

Somnium Space

somnium space

In 2018, Somnium Space was announced as an alternative decentralized metaverse. At the time, Decentraland had not been publicly released. So Somnium Space generated a lot of buzz as the only crypto metaverse that was publicly available.

Somnium Space offered its first batch of land for sale in late 2018. These plots of land now sell for $9,000 or more on average7, with some of them selling for as much as $100,000.8

Like Decentraland, Somnium Space runs on a central server. But the land and NFTs exist on a blockchain, and the developer hopes that landowners will host their own metaverse servers eventually.

The Sandbox

the sandboxThe Sandbox was announced in July, 2019. It proposed to create a virtual world along similar lines as Decentraland and Somnium Space, with blockchain tokens representing virtual land. The Sandbox doesn’t currently use VR headset technology, but it may in the future.

The Sandbox uses a currency called SAND as its medium of exchange within the Metaverse. It was sold to investors in an ICO for $0.008333 per token. SAND is now worth over $3 per coin.

All of the land and collectibles in The Sandbox are on the blockchain. Only the hosting service itself is centralized. The Sandbox is currently being tested in an alpha stage.

Now that I’ve gone over what the crypto Metaverse is, let’s consider how an investor may be able to get in on the action.

FYI: So far, there are no police or laws in The Sandbox. But there are still laws in the physical world, so you may want to read about Crypto Regulations in the U.S.

How to Invest in the Crypto Metaverse

Here are some crypto assets that may go up in value as more people join the Metaverse.

Metaverse cryptocurrencies

The simplest way to gain exposure to the Metaverse as an investor is to own Metaverse coins such as MANA, CUBES, and SAND.

You can buy Metaverse coins from most crypto exchanges. For tips on choosing the right exchange for you, read our guide on how to choose a legitimate exchange. You can also check out our Coinbase review and Binance.US review.

MANA

As mentioned, MANA is the native coin of the Decentraland metaverse. You can use MANA to purchase clothes or wearables for your avatar, hire other Decentraland users to work for you (doing coding, marketing, or other freelance work), or even play casino games within the Metaverse.

MANA currently has a fixed supply. So if demand for goods and services within Decentraland grows, this may lead to a rise in the price of MANA.

CUBES

CUBES is the cryptocurrency used within Somnium Space. You can use it to buy goods or services within the virtual world.

40% of the total supply of CUBES was sold in the ICO. The remaining 60% has been reserved for a Creator Fund that will be used to provide capital for businesses operating in Somnium Space.

If these businesses successfully attract new users to the Metaverse, the demand for the coin may increase faster than the coin is paid out to developers. This may result in an increase of the price of CUBES.

SAND

SAND is the native coin of The Sandbox. It can be used to buy goods or services within The Sandbox or staked to earn a share of revenue from the The Sandbox economy.

SAND has a maximum supply of 3 billion tokens. 700 million of these are currently circulating, or about 23% of the total.

49% (1.48 billion) of the total SAND supply is reserved for the Sandbox & Company treasury and The Sandbox Foundation. Essentially, these are organizations that promote The Sandbox metaverse by attracting content that features notable intellectual properties. For example, these organizations have already struck deals with the owners of ATARI, The Smurfs, and Shaun the Sheep; and these IPs are featured in The Sandbox alpha.

The remaining 28% of SAND is held by the team and advisors.

The total supply of SAND is set to be released over the next five years. This means that there will be about a 4x increase in supply over the next five years. However, the fact that SAND can be staked may serve to discourage selling of this new supply.

If demand for goods and services within The Sandbox rises faster than this new supply is sold, it could lead to an increase in the price of SAND.

Pro Tip: In order to stake SAND, you first have to transfer it to the Polygon network. The Sandbox official docs give a detailed explanation of how to do this.9

Land

Another way to gain exposure to the Metaverse is by buying virtual land.

Land that is the closest to popular attractions tends to be the most valuable. So if you can figure out which land will feature compelling content in the future, you may be able to flip plots near it for a profit.

Trying to flip land is a risky strategy though. It’s easy to end up paying too much for it. So another option is to partner with a content creator. In this case, you can let the content creator pay you a share of his or her profits in exchange for use of your land.

Yet another option is to just buy some land and sit on it. If more users enter the Metaverse over time, the land may go up in value.

All three of the metaverses have land available on the secondary market. The best place to look for it is OpenSea.io.

Metaverse NFTs

All three of the metaverses mentioned have non-fungible tokens (NFTs) that may go up in value over time. For example, each virtual world has a wide assortment of clothing and other wearables for avatars. On Somnium Space, the avatars themselves are also tokens.

Did You Know: “NFT” stands for “non-fungible token.” If a single smart contract produces more than one type of token, each of the tokens it produces is considered an NFT. This is because the tokens are not interchangeable or “fungible.”

If you can figure out which NFTs are likely to be fashionable in the future, you may be able to sell them for a higher price than you bought them for. And if the number of Metaverse users increases, this may make flipping the tokens for a profit even easier.

Besides, even if you don’t turn a profit from this, at least you’ll look cool as you stroll through the Metaverse. Of course, this is all highly speculative and a risky investment.

Digital art NFTs

Digital art NFTs like Bored Ape Yacht Club and Crypto Punks have become all the rage lately. Some people are selling these JPEGs for millions of dollars.10

Critics say that this digital art craze is just a fad and that investors shouldn’t be spending this much money on them. But what if, in the future, you’ll be able to hang your NFTs on the wall of your Metaverse home? If so, investors might not be so crazy after all.

So one way to profit from the rise of the Metaverse may be to collect these digital art NFTs. In this case, you may want to try to find ones that are new and inexpensive, but that are somehow unusual or interesting.

These are the ways you can invest in the Metaverse. But beware of scammers and thieves in the Metaverse. The next section will go over some common Metaverse scams and how you can avoid them.

What to Watch Out For

With the Metaverse becoming more prominent, it has provided lots of new investment opportunities. On the other hand, it has also attracted scammers who seek to defraud investors looking for these opportunities.

In fact, these scams have become so prominent that the Chinese Banking and Insurance Regulatory Commission has had to issue a notice warning investors about them.11

Here are a few red flags to watch out for when trying to avoid Metaverse scams.

  • Promises of a high return. Some scammers claim to be creating video games or A.I. software that will offer huge returns in the Metaverse. But once investors deposit their money to get in on the action, the “developers” disappear, and no product is ever made. These fake projects often promise unrealistic rates of return.
     
    By contrast, most legitimate Metaverse projects take months or years to profit from, and legitimate developers generally won’t make promises about rates of return. So if it sounds too good to be true, it probably is.
  • Confusing game mechanics. Many scams claim to be Play to Earn Metaverse games, or games that you can earn money playing within the Metaverse. This sounds great. But you may need to buy an NFT in order to start playing, and it may not be clear how you actually earn crypto from playing. The developer of the game may also be able to run off with the money, without paying out rewards to players.
     
    Legitimate Play to Earn games have clear rules that determine how much crypto a player earns, and the players’ deposits go into publicly available smart contracts that can be read in a block explorer.
     
    So if you can’t figure out how the game works, or if the “developer” won’t give you the game’s contract addresses, there’s significant risk that the game is a scam. In this case, you may want to just play something else.
  • Land hype (land pump and dumps). A common Metaverse scam is to hype up real estate while simultaneously getting insiders to buy the land on public marketplaces like OpenSea. This can make it look like the price of the land is going up, when in fact the scammers are just creating fake transactions by swapping the land between each other.
     
    If you see a lot of hype surrounding some plots of land, ask yourself if there is any real reason for the land to be going up in value. Is there actually a new piece of content that will be launched nearby, and is this verifiable?
     
    If not, you may be dealing with a Metaverse land pump and dump, so you may want to stay away from this particular virtual real estate.
  • Fake Metaverse cryptocurrencies. Some scammers have been adding the term “Metaverse” to fake cryptocurrencies with misleading names, making them appear to be associated with popular companies or intellectual properties.
     
    For example, a coin called “Animoca Brands Metaverse” showed up on Uniswap recently.12Animoca brands is the parent company of the developer of The Sandbox. But this coin had nothing to do with the company’s games, and was not authorized by Animoca brands at all.
     
    If you see a Metaverse coin associated with a popular brand, you may want to check the brand’s official website before investing, as these coins are often scams not authorized by the brand itself.

Pro Tip: For more info on how to avoid crypto scams and theft, be sure to visit our crypto protection guide.

Wrapping Up

The idea of “the Metaverse” has been endlessly hyped in the media as of late. But underneath the fanfare, there is a real technological revolution occurring.

VR headsets have come a long way in the 30 years since Snow Crash was first published, and blockchain technology is now allowing us to have real ownership of land in the Metaverse.

It will still be a few years before headsets get advanced enough to make the Metaverse feel like the real world. But we’re definitely headed to that point.

So if you want to get ahead of the curve and invest in this emerging crypto Metaverse, these are some ways that you can do it.

Citations
  1. MIT Technology Review.(2022).The metaverse is a new word for an old idea. technologyreview.com/2022/02/08/1044732/metaverse-history-snow-crash/

  2. WayBack Machine. (2022). Virtual Reality: History. web.archive.org/web/20150821054144/http://archive.ncsa.illinois.edu/Cyberia/VETopLevels/VR.History.html

  3. CNBC. (2021). Facebook changes company name to Meta. cnbc.com/2021/10/28/facebook-changes-company-name-to-meta.html

  4. NordVPN. (2022). Facebook’s Metaverse: a new privacy nightmare?. nordvpn.com/blog/facebook-metaverse/

  5. Youtube. (2021). Why You Should Be Worried About Facebook's Metaverse | System Error. youtube.com/watch?v=bolyiGMcjBs

  6. Decentraland. (2022). Whitepaper. docs.decentraland.org/decentraland/whitepaper/

  7. Somnium Space Market Place. (2022). somniumspacemarketplace.com/

  8. DappRadar. (2021). $1.5 Million in NFT Land Sales for Somnium Space. dappradar.com/blog/1-5-million-in-nft-land-sales-for-somnium-space

  9. The Sandbox. (2022). Stake mSAND (Polygon). sandboxgame.gitbook.io/the-sandbox/staking/stake-msand

  10. Hypebeast. (2021). Rare Bored Ape Yacht Club NFT Sells for Record $3.4 Million USD. hypebeast.com/2021/10/bored-ape-yacht-club-nft-3-4-million-record-sothebys-metaverse

  11. CBIRC. (2022). Risk reminder on preventing illegal fundraising in the name of “Metaverse”. cbirc.gov.cn/cn/view/pages/ItemDetail.html?docId=1038723&itemId=915

  12. Gadgets360. (2022). Fraudulent Metaverse Token on Uniswap Shows Up as Animoca Brands. gadgets360.com/cryptocurrency/news/fake-animoca-brands-metaverse-token-uniswap-2775247