With time, there have been a lot of improvements and changes in modern technologies. It has led to the arrival of various new and innovative concepts, one of them is MetaFi. It is an amalgamation of two major words- Metadata and DeFi. In simple terms, we can say for now that Metadata is a dataset used to get information about other data. To understand it better, when we take photos on our phone, it contains information like dates, their resolutions, etc. On the other hand, DeFi is a cutting-edge financial technology that alleviates third-party requirements such as banks for using any financial service or product.
Going further, the MetaFi was firstly presented at the starting of 2022 by the cryptocurrency exchange, Binance. Here, we are presenting a complete guide to MetaFi and as per this, the MetaFi has considered a new paradigm shift with the purpose of regulating Blockchain technology for standard Web2 large-scale apps such as social media, games, and the Metaverse. Get to know more about this below:
Introduction to MetaFi – When DeFi Meets Metaverse
Let’s start a guide to MetaFi with its introduction. MetaFi can be described as an original NFT-based DeFi platform strengthening the lending and value evaluations at scale. This concept is able to provide a refined and advanced DeFi infrastructure. It applies to all diverse projects comprising GameFi, Metaverse, Web3, SocialFi, and NFTs while bringing them all together. It is viable only because Metadata describes the assets’ ownership.
However, the purpose behind MetaFi is to bring multiple Blockchain functionality into a single Meta ecosystem with the help of defined Metadata standards used for different Blockchains & platforms. With the support of community governance like DAOs (Decentralized Autonomous Organizations), MetaFi is capable of having both fungible and non-fungible tokens. Hence, in short, the main aim of MetaFi is to create and encourage a whole new ecosystem developed on standardized Metadata parameters. The development is based on digital assets that allow bulk adoption in Web3 & Blockchain technology. Alongside, the combination of these distinct crypto primitives encourages a full-flown analogous ecosystem. It is able to serve worldwide users with the help of Blockchain. This leads to new doors of opportunities for users and players.
How Does MetaFi Work?
Now you must have known about what is MetaFi, so it’s time to move on to how it works. MetaFi gets benefits from the Metadata availability for Blockchain assets providing improved interoperability. For instance, the metadata of NFT will include a link to a similar picture. The metadata can also be linked with the BTC (Bitcoin) transaction while allowing users to enter the data as plaintext.
In MetaFi, assets will be sortable and machine-readable, and usable on every Blockchain with the help of metadata standards. To display the similar metadata of every Blockchain, they all must have an integrated metadata standard. Now here, for example, an NFT marketplace could begin to sort out and identifies the NFTs from different Blockchains. Also, having related metadata standards by the Blockchains will lead to interoperable, secure, and robust projects.
What is Metaverse?
Metaverse is an important aspect of the Web3, the next iteration of the internet where people can do different activities like attending meetings, working, socializing, etc. across a digital space or shared virtual 3D world known as highly interactive and immersive.
Metaverse was first introduced in the 1992 novel ‘Snow Crash’ by Neal Stephenson, but in past few years, it has materialized and all credit goes to technological advancements such as Augmented reality, Virtual reality, and Artificial Intelligence. To put the Metaverse in easy words, it is a perfect blend of the physical and digital world in an immersive and enduring way. Metaverse can be accessed via different platforms like smartphones, PCs, VR headsets, and game consoles creating an all-embracing ecosystem depending on the modern-edge technology.
Read Also: What is the Metaverse?
What is DeFi?
Decentralized finance acts as an advancing ecosystem of financial apps depending on the Blockchain technology helpful for secure digital transactions between different groups via Smart Contracts. It creates the contract terms and verifies their implementation. The DeFi system facilitates users for lending, transferring, and investing in cryptocurrencies, known as a type of virtual currency, based on advanced cryptocurrency for secure transactions. Here transactions can be done without the help of any other third party or central authority. In the end, we can say that it is compulsory for businesses to obtain DeFi development services while adopting MetaFi solutions as DeFi is a crucial part of this concept.
Important Components Included in MetaFi
Let’s navigate our guide to the well-defined structure of MetaFi. It includes some major components contributing to its amazingly formed system. Following are those key components accountable for the union of Metaverse and DeFi:
It is a vital part of a MetaFi system that is basically known as building blocks. Here the significant framework is counted as layer zero, and one or two solutions are comprised in the foundations. The basic framework applies the shared app logic & security to create a platform that runs successfully.
Another essential aspect involves the newest financial applications running on the basic frameworks or protocols. These can be reflected as money legos performing as irresistible programs including Smart Contracts to allow complex financial dynamics.
Verses are called a group of components in the framework of the MetaFi crypto ecosystem. In this, verses have different foundation layers connected to multiple virtual worlds as per their compatibility and budget-friendly value transfer. The collection of parallel verses or domains is called poems that form the Metaverse as a whole.
Read Also: A Complete Guide to NFT Smart Contract
Diverse Use Cases of MetaFi
You have got all the knowledge about what is MetaFi and how does MetaFi work, it’s the right time to get an understanding of MetaFi use cases. We have penned down some of the specific areas where MetaFi is being used to improve the provided services.
Metaverse Virtual World
Basically, the virtual world is a 3D digital space beneficial to accomplishing the purpose of work, social, gameplay, commerce, etc. There is a possibility and non-possibility that it mimics the original world and its aspects. It often comprises an element of scarce land called NFTs displaying the real world. Enterprises obtain NFT development services to facilitate users to buy, trade and create free NFTs. For instance, Decentraland and Sandbox are the two most famous names involved with high-level projects.
This virtual world also provides opportunities to meet, play, socialize, or do other activities for users. There are some market giants like Walmart that have initiated a vision of virtual shopping for their customers. Other businesses are entering the field by selling lands & architectural marvels. Metaverse is also providing a broad range of executions like wearable NFTs, consumables, etc. with the help of NFTs application into virtual reality.
Yield Farming NFTs
Yield generation nowadays is using NFTs as security to apply for loans and then, they put these loaned funds somewhere else at more prices. There are NFTs with specific functionality allowing the owner of NFT staking to earn yields or rent them to any other party who wants to have NFT. For instance, players can rent valuable or expensive NFT in-game items that they can’t afford. In this case, the owner gets to earn a share of the lender or a fixed amount in return for renting their NFTs.
NFT marketplace solutions are known as decentralized digital places that maintain a balance between supply and demand along with enabling the NFTs discoverability, free trading, and NFTs issuing directly. Here, NFTs are considered financial assets and regulate ownership. This platform is suitable for everyone who is looking to buy and sell NFTs like in-game items, virtual wearables, virtual lands, etc. These marketplaces are supported by Blockchain and depending on which Blockchain is being used, the same kind of NFTs could be swapped on the NFT marketplace. MetaFi-based NFT marketplaces are used with the purpose of functionality and platform capability improvement for a better user experience.
People who have used Binance and Coinbase before are already familiar with the term ‘fan tokens’. These are available in both types, fungible and non-fungible while allowing users to access multiple benefits through VIP communities’ membership, access to specific events, voting rights, and so on. Both minting and trading are possible with these tokens on the marketplace.
Why should Businesses go for the Adoption of MetaFi?
When all the businesses are looking for how does Metaverse benefits from MetaFi, let us tell you not only Metaverse but it also benefits DeFi system. All these benefits are the reason why entrepreneurs are finding DeFi and metaverse development services good to go with all together. Below we have defined several driving forces that will lead to the increase in the convergence of Metaverse and DeFi.
- Previously, the intricacy of DeFi stacks was the reason that drove away the crypto developers. These new NFT platforms have facilitated both creators and communities to create their own economic terms for trading with users. Simultaneously, NFT has also allowed for perpetual royalties for creators via customized social tokens.
- Technologies related to MetaFi can also bring better options to get the value and flow of digital artworks in open markets. Alongside, it captures opportunities for current price discovery, hence, making the way for unleashing hidden value.
- There are grown governance models like DAO that play a crucial part in the MetaFi crypto’s adoption with improved governance. DeFi has performed well in presenting chances for community-based insurance to all users, specifically those who are linked to DAOs.
- The development of play-to-earn games and other new monetization ways can also drive the attention of Gen Z for MetaFi DeFi applications for a longer time.
Some of the Must Considerable Limitations of MetaFi
While slowly realizing the potential of MetaFi, there are some limitations as well that need to be overcome in the present situation of MetaFi. Primarily, there are three major challenges associated with MetaFi. Let’s get an overview of them:
1. Legal Issues Attached with Fractionalization
NFT token holders own multiple rights including voting, earning rewards, and others if an NFT is divided into several parts and circulated to different people. Hence, it is translucent to protect all participants. Thus, this domain needs to be more legitimate.
2. Shortage of Required Tools
There are tools needed to create the MetaFi infrastructure like marketplaces, creator tools, financialization primitives, community-leaning business models, and more. To run the decentralized app (dApp) on the above all, the compilation provides both developers and users access to the Blockchain. Then, it becomes essential to identify layer 1, betterment on foundation technologies. It further leads to making the apps on Blockchain protocol more usable with better throughput, low transaction fees, and allowing scaling.
3. Standard Across Blockchains
Furthermore, at the point where MetaFi runs and conducts operations, there occurs the challenge from Blockchain. We all know Ethereum is the most used and chosen Blockchain over others. These Blockchains don’t provide 100% surety about interoperability.
Is There Any Future of MetaFi?
You have gone through all the significant details about the MetaFi concept. This whole idea combines the best of both Metaverse and Defi and this is how the DeFi system has gained more popularity in 2020. MetaFi is also capable of modernizing commerce and trading by comprising it within the Metaverse to enable users to exchange and perform in real-time without geographical boundaries.
Though the MetaFi concept still doesn’t exist for some businesses but if executed properly, it will soon get recognition and bring multiple opportunities for enterprises. While waiting for the opportunities to arise by the MetaFi, businesses can avail the benefits of Metaverse which is linking both real and virtual worlds to enable people to exchange ideas, create some, and evolve along with meeting virtually. To develop Metaverse solutions, you can connect with SemiDot Infotech. We are considered a reliable Metaverse development company that owns a set of expert developers who will assist you throughout the project. Get in touch with us for further details.