What is MetaFi?
MetaFi comes from Metaverse and Decentralized Finance. New technologies will converge and act as a catalyst which speeds up the world’s paradigm shifts.
DeFi will unlock value in Metaverse and it will be a reciprocal connection in which both technologies will progress faster and bring more users in. The term MetaFi refers to the Decentraliszed Finance tools in the Metaverse.
Any kind of product, protocol or service that helps the financial interaction between NFTs and fungible tokens can be considered MetaFi.
Metaverse Framework
Metaverse can be the interface layer which exists between the digital world and the real world. It is an interconnected set of experiences which looks more like science fiction movies but it is starting to be considered the new reality of the future.
In order to interact with Metaverse we can use many different hardware and softwares. Virtual Reality, Augmented reality and extended reality infrastructure are used to create a cool experience. Although it is accessible with computers and mobile phones as well. The more futuristic the infrastructure is, the better quality the experience has.
When it comes to Metaverse, many people consider it a virtual reality game. But we shouldn’t forget that there is a real parallel economic system inside Metaverse which makes it a virtual world in which you can do so much more than just playing games.
Metaverse consists of two main layers. The one on the surface would be the interface layer which is accessible via AR, VR and XR tools. The other layer which is hidden from the eyes of the users is the financial compute layer. This inner layer is where the computations are executed and programs are written by developers.
Metaverse is a democratic and transparent system in which everyone can participate, buy and sell virtual lands or play games and earn incentives. Ethereum is an example of a protocol in the financial compute layer. It provides smart contracts and a ledger to save all the transactions that happen inside Metaverse. All the technologies in this inner layer are considered to be related to web 3.0. NFTs and P2E games are the seeds of this virtual economic system.
The Main components of Metaverse:
The foundation:?this level consists of Layer 0, Layer 1 and Layer 2 Blockchains such as Polygon, Ethereum, etc.
For example, Ethereum provides smart contracts which is like smart money; Money that can be programmed. All the smart contracts on Ethereum are able to interact with each other if they are programmed to do so. Since other applications in Metaverse will be built upon these protocols; this uniformity will create a great chance for interoperability among applications.
They have a shared application logic which makes communication among them possible by cross-chain bridges. If an application doesn’t iterate with the others; it will be isolated and the value inside it will be trapped and wasted.
DeFi:?the layer above the foundation is where the financial transactions take place. It’s like Money legos which function through smart contracts. Examples would be Uniswap or Chainlink.
Virtual worlds or Verses: the surface layer will be what the retail users interact with via VR, AR, XR or computer infrastructure. These verses are connected to the foundation and the DeFi layer based on their compatibilities.
Any digital space in which we can socialize, play games and do economic activities can be considered a virtual world. The things you can do in these verses are limitless. You can buy lands as NFTs; keep them for a while and then sell them and gain profit. Decentraland is an example of a Metaverse. There will be in-game currencies that the users can earn by completing specific tasks or they can join in governing the virtual world by voting in the DAOs.
MetaFi would consists of the last 2 layers of DeFi and Verses. The different components of MetaFi such as NFTs, avatars and Access Tokens will work hand in hand and will have overlaps in many cases. For example the NFTs in Axie Infinity which bear yields can be transferred to other kinds of NFT use-cases. Many DeFi protocols are launching their own NFTs as well to join the gaming industry and to have a place inside Metaverse.
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How can we accelerate the MetaFi progress?
DeFi has a lot of complexities and it used to be excluded to developers and tech-savvys in the past. Hopefully, with the development of NFT platforms and market places; creators and artists can set economic terms for exchanging what they have created. Communities and fans can share the benefits of their favorite projects as well. Since DAOs play an important role in the governance of the communities which are related to MetaFi; the more improvement we see in DAOs, the better management we will have in the MetaFi industry.
Using MetaFi technologies we can capture value in digital assets. We can bring monetization into games and when the game players can earn money by playing games, they will be willing to stay on the platform more than before. The more a technology gets used, the faster it will develop and grow.
If we can easily insert and plug NFTs into DeFi protocols, we will be on the right path to fully unlock the DeFi value in the Metaverse and to accelerate the MetaFi growth.
Advantages of MetaFi
As DeFi and Metaverse push each other to grow in a reciprocal manner, the ultimate outcome would be sovereignty of wealth and promoting generational wealth transfer.
Inclusion is one of the advantages of Web 3.0 as well as MetaFi. When DeFi intertwines Metaverse, the digital creators whose art is not valued by the traditional systems will get incentivized.
For example, if we have a high value NFT which is so expensive to be owned by one game player; using MetaFi it will be possible to use a fraction of that NFT as collateral in a DeFi lending platform.
Limitations of MetaFi
A lot of research and experiments are needed to push MetaFi to the fullest potential. There are still some complications and problems which need to be fixed by the pioneers in the industry. One of the problems is NFT appraisals. It is hard to estimate the real value of an NFT and if we fractionalize a high value NFT; the governance and legal terms will be an issue. Especially if that specific NFT is yield bearing or owns voting rights.
The Blockchain industry which created the foundation of MetaFi is not matured yet as well. Some blockchains are not 100% interoperable which might cause isolation of value.
About Crypto Diva
I’m already in the Future… Meet me there! Blockchain Technology is my passion and I have dedicated my career and research path to DeFi. My ultimate goal is to encourage more female professionals in the DeFi industry.
As the Marketing Manager of?Paycer Protocol, I’ve got the privilege of being in close contact with CeDeFi experts who are creating the foundations the future financial world. I love to make the impossible possible and i’m willing to go the extra mile for that. Be my companion in my DeFi journey and I’ll show you everything.
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Source:?Burke, Jamie. “MetaFi: DeFi for the Metaverse.” Outlier Ventures,?https://outlierventures.io/research/metafi-defi-for-the-metaverse/.?Accessed 1 June 2022.
Robloxing ??? | XR geek | Immersive Media ??
2 年I appreciate the way you've explained MetaFi, Mahsa. I think at this point, the Open metaverse is just a theory and we're very far from having completely interoperable Metaverses. Every virtual world has its own asset class which are built on specific underlying technologies(Unity/UnReal). If a digital asset(excluding NFTs) is built using Unity, How can it be operated in a metaverse which is built using UnReal? There's a requirement of certain Industry standards which must be followed by tech companies to make a completely open Metaverse. MetaFi would be partially implemented if there's no open Metaverse.