- October 27, 2022
- Posted by: Admin
- Category: Technology
MetaFi is the result of the collision between decentralized finance and metadata. Furthermore, Binance coined the name MetaFi earlier in 2022. MetaFi’s goal is to standardize blockchain technology for traditional Web2 applications, gaming, social media platforms, and metaverses. Furthermore, MetaFi’s mission is to improve interoperability between different digital platforms in real time. In addition, MetaFi is a truly decentralized and financially independent environment.
Binance, a cryptocurrency exchange, originally announced the MetaFi concept in early 2022. “MetaFi is a new paradigm shift that intends to standardize blockchain technology for typical Web2 large-scale applications, including games, social media, and the metaverse,” they write. This would result in the creation of a unifying standard that would aid in the improvement of interoperability.
It is a concept that brings all blockchain-related projects, such as Metaverse, GameFi, SocialFi, Web3, and NFTs, under one roof by providing powerful and complicated DeFi Infra. MetaFi enables this through the metadata that defines asset ownership.
How DeFi and Metadata Converge: An Overview of MetaFi
Table of Contents
MetaFi is still a rather new and futuristic technology, as was indicated in the introduction. It attempts to integrate many Web3 features to create a new framework for transnational interactions and commerce. MetaFi enables trading on the blockchain, as well as on its exchanges, games, activities, and social media platforms thanks to its convergence with decentralized finance. Every asset bought, sold, or exchanged in the metaverse is additionally safeguarded using blockchain technology thanks to the combination of metadata and DeFi. Additionally, all of its details and features are included in it. Assets can be lent and borrowed.
What is DeFi?
DeFi, or Decentralized Finance, is a new financial technology that eliminates the need for third-party control over financial services and products, such as banks. It overcomes the problems of traditional finance by promoting financial liberty to users, removing intermediary costs, and allowing for speedier transactions in seconds.
Decentralized finance (DeFi) sprang to prominence with the advent of Ethereum and its self-executing smart contracts. Facilitating peer-to-peer transactions and exchanges allows people to:
Assets can be lent and borrowed.
Trade cryptocurrencies
Risk protection insurance
Earn high rates of return.
DeFi’s Place in Metaverse
The metaverse has boundless possibilities. Bloomberg believes that investment opportunities in the metaverse will be worth more than $800 billion by 2024! Other analysts, like Citigroup, predict a potential worth of $8 to $13 trillion by the end of 2030.
Citi has also stated that MetaFi will not only be the convergence of metadata and decentralized finance (DeFi), but will also unite all types of finance – DeFi, CeFi, and TradFi – into one platform. Given that most of the globe has already made the move to digital settings, we are already engaging in an early version of the metaverse.
With DeFi in the metaverse, the investment prospects are limitless. DeFi in the metaverse could rebuild traditional commerce such that players can trade and transact without regard for distance or time. DeFi’s market worth has already topped $100 billion, with the potential to increase enormously. Defix is a cryptography index on Nasdaq that tracks the market value of DeFi devices (DEFX).
Working of MetaFi
MetaFi takes advantage of the availability of metadata about assets on blockchains to improve interoperability. The metadata of an NFT, for example, will almost certainly include a link to the linked work. It is also possible to add metadata to a Bitcoin(BTC) transaction, allowing you to incorporate unencrypted data.
With the use of metadata standards adopted by numerous platforms and blockchains, MetaFi aims to combine a variety of blockchain services into a unified Meta ecosystem. With the help of community governance tools like Decentralized Autonomous Organizations, MetaFi can combine non-fungible and fungible currencies (DAOs). A full-fledged parallel economy using blockchain to provide services to people all over the world is created by the integration of these various crypto primitives.
Thus, MetaFi seeks to facilitate the widespread use of Web3 and blockchain technology by establishing and promoting a new ecosystem based on predefined metadata characteristics based on digital assets. The use cases for Web3 and blockchain will thereafter be expanded as a result.
As a result, even though many of these applications will be created for use in the metaverse, the word “meta” can be regarded as “all-encompassing” and is actually an acronym for metadata.
If metadata standards are developed that can be applied to any blockchain, assets will be machine-readable and sortable. Each blockchain will present its metadata similarly if there is a common metadata standard across all blockchains. In such a scenario, an NFT marketplace, for instance, would start to recognize and categorize NFTs from several blockchains. Projects can become stable and interoperable if their metadata standards are consistent. Community governance is included in MetaFi as well, including Decentralized Autonomous Organizations (DAOs). By combining all of these elements, it is possible to create a blockchain-based parallel ecosystem that is fully operational and serves users all over the world.
What Is the Metaverse’s Role in MetaFi?
Consider work meetings, social gatherings, gaming, worldwide conferences, and other activities that are solely conducted through the internet. That is exactly what the metaverse is. It’s the third generation of the internet (Web3), in which individuals can interact in a 3D virtual area. To put it another way, the metaverse is a hybrid of the physical and digital worlds. It is also accessible via PC, phones, game consoles, and VR headsets. The metaverse is an all-encompassing ecosystem with cutting-edge technologies. It also allows people to immerse themselves in the Web3 environment.
. It also allows people to immerse themselves in the Web3 space. Even if it extends outside the virtual world, the metaverse still has a lot of room to grow.
You can own land, avatars, NFTs, games, films, and other things within the metaverse. That’s also where DeFi comes in. You’ll be able to trade things with other users in the metaverse. As a result, this decentralized trading concept is referred to as MetaFi. Furthermore, the concept of “decentralized” commerce implies the absence of a centralized controlling authority. Your assets in the metaverse are represented as NFTs, and their individual characteristics constitute the metadata. The information reveals the rarity and particular attributes of your asset, and transactions are done using cryptocurrency.
What is the Metaverse?
Metaverse is a virtual environment powered by technologies such as Virtual Reality (VR), Augmented Reality (AR), Blockchain, Artificial Intelligence, the Internet of Things, 3D reconstruction, and others that provide its users with a photo-realistic vivid experience. In a metaverse, users can play games, set up a workspace, connect socially, organize meetings and conferences, shop around, and do much more.
A blockchain-based metaverse provides an open and decentralized environment that may be used to create a transparent, tamper-proof, and secure infrastructure. Furthermore, blockchain aids in the regulation of the digital collectability of assets, governance, digital evidence of ownership, transferring value via crypto, and other functions.
The term “metaverse” was coined by author Neal Stephenson in his science-fiction novel Snow Crash, published in 1992. According to his concept, the metaverse is a virtual environment that can be accessed by highly customized goggles or headsets, allowing users to interact with one another via their Avatars. Anything is possible in virtual reality, which can be tailored based on individual preferences, according to the novel.
Existing metaverse platforms such as Decentraland, Axie Infinity, and others demonstrate that numerous descriptions of the metaverse depicted by Stephenson in his novel have already become a reality. With large corporations and individuals investing in or developing metaverse projects, the metaverse is emerging as a futuristic concept with enormous potential to transform numerous industries.
What is Decentralized Finance?
Decentralized finance is an expanding ecosystem of financial applications based on blockchain technology that enables digital transactions between many parties using smart contracts that specify contract parameters and verify their implementation. This unique financial system allows lending, sending, and investing in cryptocurrencies, a type of virtual currency that uses powerful cryptography to protect transactions.
Transactions take place without the involvement of a central authority, such as banks or other traditional financial organizations, which is why it is referred to as decentralized finance.
Finance in the Metaverse
Given the metaverse’s vast potential, investment prospects have been valued in trillions of dollars. Bloomberg Intelligence estimates that the metaverse could become an $800 billion market as early as 2024, while Citi, one of the world’s largest financial services providers, estimates that the total addressable market for the metaverse economy could grow to between $8 trillion and $13 trillion by 2030.
According to Citi, “metaverse finance (MetaFi) will probably be a blend of decentralized finance (Defi), centralized finance (CeFi), and traditional finance (TradFi), with new products specially created to fit the specific needs of the new ecosystem built on defined metadata characteristics. Financial services can be crucial to the evolution, from initial capital formation to facilitating trade inside the Metaverse.
When it comes to the metaverse and decentralized money in virtual worlds, there are certainly plenty of opportunities to be investigated. Decentralized finance is still in its early stages, but its economy has already crossed the $100 billion threshold, indicating that there is growing interest in this area of cryptocurrency. In order to track DeFi, the Nasdaq, the top US stock exchange, also offers a cryptographic index.
Investment prospects in the three-dimensional worlds are the talk of the town, from virtual real estate to fashion and advertising, and they are advancing the discussion about MetaFi, or decentralized finance in the metaverse.
Use Cases for MetaFi
Consider some of the metaFi functions and use cases made possible by the convergence of the metaverse with Defi:
Metaverse (Virtual worlds)
A metaverse is characterized as a 3D digital space for social, work, and business opportunities, in which users can engage in a variety of activities as they would in the real world. Such virtual worlds have numerous implementations, including wearable NFTs, consumables, collectibles, and more, allowing for easy integration of NFTs into virtual reality.
However, interoperability is a significant hurdle in bringing the metaverse to life. Without it, a virtual world powered by a single game, for example, would be unable to link to a social network. Users of one metaverse may find it difficult to move between virtual worlds while using their avatars or digital properties.
MetaFi will provide an architecture with specified metadata standards that will allow virtual worlds to smoothly connect with one another. It also contributes to the improved functionality of digital assets and virtual tokens. As a result, their use cases can extend well beyond their primary platform. Another use case is related to decentralized identity management and reputation management systems, which allow users to easily and securely access their digital identity and assets.
Many firms, like Walmart, McDonald’s, Nike, Coca-Cola, and Gucci (to mention a few on a growing list), are experimenting with a meta environment where they can sell their products.
Market Places
There is currently a plethora of NFT marketplaces available. Rarible, Nifty Gateway, LooksRare, and OpenSea are a few examples. These platforms are decentralized and can provide various types of non-fungible coins depending on the blockchain. NFTs include digital artworks, virtual wearables, domain domains, music, virtual real estate, and much more for cryptocurrency aficionados. NFTs are classified as financial assets and have ownership restrictions.
MetaFi seeks to enable marketplaces to increase their capabilities and functionalities so that they may list every single asset kind that can exist in multiple chains. This will improve the user experience and make trading NFTs much more efficient and simple for buyers, sellers, and creators alike.
NFT Yield Farming
The premise behind yield farming is that you can utilize your idle NFTs to produce money by using them as collateral or renting them out for a profit. This is a popular gaming tactic in which people rent out expensive or valuable NFT in-game products to players who otherwise couldn’t buy them. Yield farming NFTs are thus an appropriate use for MetaFi.
Fan Tokens
These tokens can be both fungible and non-fungible, and they provide their holders with a variety of perks such as VIP memberships, access to special events, voting rights, and much more. Fan tokens are typically issued by sports teams or fan groups to provide fans with access to unique benefits. They are offered on numerous platforms, including Chiliz, Binance, and Coinbase. In this scenario, MetaFi can be a fantastic tool for streamlining the process of minting and trading tokens.
Structure of MetaFi
You can learn more about MetaFi by looking at the following components that make up its structure:
Foundations
The basic frameworks, which would serve as layer zero, one, and two solutions, are housed in the foundations, which are essentially the building blocks and the most significant aspect of any MetaFi system. To build applications that operate on top of the basic frameworks, developers employ shared application logic and security.
DeFi
Financial apps that run on the major frameworks or protocols are included in DeFi. Consider them money legos that operate as unstoppable programs that leverage smart contracts to enable complex financial dynamics.
Verses
The metaverse is made up of parallel verses or domains, which are collectively referred to as verses. Based on compatibility and cost-effective value transmission, the foundational layers of verses will continue to be connected to the many virtual worlds.
Conclusion
The futuristic idea of MetaFi, which is still in its early stages, seeks to unify several Web3 components under one roof. By embedding it into the metaverse, it has the ability to reconstruct trade and commerce by enabling users to trade and transact in real-time without being constrained by location.
Although the idea of MetaFi is still somewhat hazy to many people and the technological advancement of the metaverse is still under review, it is important to note that, if properly implemented, MetaFi will bring a great deal of interoperability to the metaverse while allowing users to fully benefit from DeFi.