MetaFi - The next step in Metaverse Finance

What is MetaFi?

MetaFi - The next step in Metaverse Finance

Binance, the largest cryptocurrency exchange, came up with the term MetaFi earlier in 2022 and defined it as a "new paradigm shift that intends to standardize blockchain technology for traditional Web 2.0 large-scale applications, including games, social media, and the metaverse." Binance also believes that MetaFi will establish a unifying standard that will aid in interoperability.

MetaFi is a concept that brings comprehensive and complex DeFi Infra to all types of projects such as metaverse, GameFi, SocialFi, Web3, and NFTs under one umbrella. This is made feasible by the metadata that defines asset ownership. MetaFi's concept is to integrate a wide range of blockchain functions into a single Meta ecosystem that is interoperable thanks to set metadata standards utilized across various platforms and blockchains. MetaFi may feature a combination of fungible and non-fungible currencies, as well as community governance mechanisms such as Decentralized Autonomous Organizations (DAOs). MetaFi's mission is to create and develop a new ecosystem based on defined metadata characteristics and digital assets that will enable mass adoption of Web3 and blockchain technology and give new use cases for consumers and participants.

The integration of these many crypto primitives enables a full-fledged parallel economy that uses blockchain to serve users all over the world. MetaFi, a combination of meta and DeFi, attempts to develop metadata and other network technologies, such as NFT and gaming metadata standards.

Although many of these applications will be developed for use in the metaverse, the word Meta can be taken in this context as "all-encompassing" or "a means to a goal."

The structure of MetaFi

The structure of MetaFi

Let’s take a look at the important components which define its structure to understand MetaFi in detail. The following are the key components of the confluence of DeFi and the metaverse.

Foundations: The foundations, or building blocks, are the most important aspect of any MetaFi protocol. The essential frameworks, which would serve as layer zero, one, and two solutions, are included in the foundations. The core frameworks aid in the development of applications by using shared application logic and security.

DeFi: MetaFi's most significant foundation, DeFi, covers the modest financial applications that are available on the fundamental frameworks or protocols. Consider the money legos that operate as unstoppable applications that enable complicated financial dynamics through the use of smart contracts.

Verse: The final component in the MetaFi crypto ecosystem's structure are verses. Verses are essentially a collection of domains or parallel verses that comprise the entire metaverse. The many virtual worlds will be linked to the underlying layers of verses based on compatibility and cost-effective value transmission.

How MetaFi works

How MetaFi works

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 people to incorporate unencrypted data.

The purpose of MetaFi is to integrate a wide range of blockchain functionalities into an unified Meta environment that will be compatible due to metadata standards utilized by numerous platforms and blockchains. MetaFi can employ a mix of non-fungible and fungible currencies, as well as community governance techniques such as Decentralized Autonomous Organizations (DAOs). The combination of these several crypto primitives results in the creation of a full-fledged parallel economy that leverages blockchain to service individuals all around the world.

MetaFi, as a result, aspires for widespread adoption of Web3 and blockchain technology by establishing and supporting a new ecosystem based on defined metadata parameters based on digital assets. This, in turn, will broaden the applications of Web3 and blockchain.

Hence, the term "meta" might be interpreted as "all-encompassing," and is an acronym for metadata rather than the metaverse, despite the fact that many of these applications will be built for metaverse use.

If metadata standards that can be used on any blockchain are developed, assets will be machine-readable and sortable. If all blockchains adhere to a single metadata standard, each blockchain will display its metadata in a consistent manner. In such a circumstance, an NFT marketplace, for example, may start recognizing and sorting NFTs from many blockchains.

Having identical Metadata standards can lead to projects that are stable and interoperable. Community governance, such as Decentralized Autonomous Organizations, is also included in MetaFi (DAOs). By combining all of these components, it is possible to create a totally working parallel ecosystem that uses blockchain to service people all over the world.

MetaFi use cases

MetaFi is the most recent decentralized finance platform for the metaverse, which may cause some consternation. However, as previously stated, many MetaFi programs may be fully functional for usage in the Metaverse. As a result, the benefits that MetaFi may provide are nearly limitless.

MetaFi use cases

Virtual worlds

Virtual worlds are digital areas with the purpose of presenting social, work, business, or gaming experiences. It may or may not be able to replicate the original environment and its mechanics. When they represent the real world, they frequently incorporate an element of scarce land denoted as NFTs. So people can freely purchase, trade, and build. Sandbox and Decentraland are two famous instances of popular initiatives.

Furthermore, the presence of play, constructing, or meeting with friends and coworkers can be found in the virtual environment. The acquisition of blockchain in virtual worlds has advanced somewhat since the beginning of 2021. It is back when only a few dozen individuals participated each day. Thus, virtual worlds have a wide range of execution options, such as wearable NFTs, consumables, and simple NFT implementations in virtual reality.

Marketplace

There are 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 type 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.

Yield Farming NFTs

The concept behind yield farming is that people can utilize their idle NFTs to gain money by using them as collateral or renting them out for a profit. This is a popular gaming tactic in which people rent pricey or valuable NFT in-game items to players who otherwise couldn't buy them. Yield farming NFTs are thus a good fit for MetaFi.

Fan Token

These tokens can be fungible or non-fungible and 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 clubs to allow fans access to unique benefits. They are offered on various exchanges, including Chiliz, Binance, and Coinbase. In this context, MetaFi can be an excellent tool for streamlining the process of minting and exchanging tokens.

Is MetaFi a Viable Concept?

May MetaFi topple DeFi?

Panel discussion about “Goodbye DeFi, hello MetaFi” at the Global Blockchain Congress

Panel discussion about “Goodbye DeFi, hello MetaFi” at the Global Blockchain Congress

In a panel discussion on the topic: "Goodbye DeFi, hello MetaFi" at the 10th Global Blockchain Congress, panelists heatedly debated whether DeFi will be replaced by MetaFi. Mrs Riley Tran, Country Director - Vietnam, Near Protocol & Co-Founder, GFS Ventures, said in the panel discussion: “Will DeFi die? Of course not. If DeFi dies, it means that the cryptocurrency will die. DeFi will help to leverage the capital to make the ecosystem, the finance increase better.” Through the discussion, all the panelists were of the same opinion that DeFi would not collapse. The arrival of MetaFi will be a breath of fresh air, making ecosystems in general and the financial sector, in particular, grow more and more developed.

The metaverse and DeFi are not interchangeable because they are two new revolutionary technology concepts with great potential. Many people seeking knowledge about the future prospects of a MetaFi protocol may ask about the practicality of such ideas. In today's world, there are numerous social media and gaming platforms that control billions of dollars in value.

“DeFi is definitely not dead at all, it is the backbone of digital assets. MetaFi could not exist without the DeFi.”
Johnny McCamley
Founder and CEO of CryptoClear

The whole digital economy is currently worth over $11.5 billion. On the other side, there is a burgeoning subgroup of the digital economy known as the digital creator economy. There are currently over 50 million content developers in the digital realm. However, they must contend with the constraints of web 2.0 digital platforms and endure economic losses at the expense of sovereignty over their creations.

Web 3.0, on the other hand, is entirely another world. In a paradigm centered on users and their autonomy, people can discover DeFi, decentralized apps, bitcoin, and NFTs. In the long run, the metaverse will adopt web 3.0 technology and related principles to empower users. As a result, it is entirely fair to believe that DeFi applications for the metaverse can be a truly advantageous proposal.

MetaFi challenges

Is MetaFi a Viable Concept?

Building a consistent system capable of serving a large digital ecosystem is a significant problem for developers for various reasons:

Software and Hardware

Higher capabilities will be required for the future generation of the internet to enable 3D virtual worlds driven by VR, AR, and AI. The same is true for blockchain scalability and network security. For the time being, technologies such as 5G and cloud computing are still far from being implemented and embraced on a global basis. Many are also not ready for commercial use.

Interoperability of Blockchains

Additional issues occur as a result of MetaFi's use of the blockchain. The capacity of a Dapp to access and exchange information across different platforms and blockchain networks is referred to as operability.

Different blockchains build frameworks that operate inside their own ecosystems but are unable to "communicate" with other platforms, not to mention additional concerns like excessive transaction costs and scalability issues.

As a result, there is a need to investigate advancements in foundation technologies such as layer 1 blockchains in order to make blockchain-based applications more accessible across the board. The reuse will, hopefully, consist of a large number of interoperable projects built with multi-chain capability and bridges to permit massive amounts of asset and data transfers.

Uncertain Tokenomics

The ongoing crypto craze, including in DeFi, has highlighted the need for long-term tokenomics that, in the words of Binance, "can provide users with more stable and reliable incentives that make sense on an ongoing basis and allow long-term growth while discouraging big sell-offs driven by volatile drops in APY or incentive rewards."

Governance and Legal Issues

For the MetaFi crypto applications, NFT factorization is different. For the MetaFi crypto applications, NFT factorization is different. If one divides an NFT into 100 parts and distributes them to different persons, it is not always clear who can do what, when, and how those rights are handled. Thus, MetaFi must prioritize the legal and governance aspects of the project, which should ideally provide token holders with usability features such as voting rights and earning income. To protect all participants, this space must be clear and transparent.

Factors influencing MetaFi adoption

Factors influencing MetaFi adoption

Given the major developments backing it, the adoption of MetaFi & DeFi for the metaverse seems to be not far off. Here are the four important trends that will fuel the emergence of metaverse and DeFi convergence:

The complexity of DeFi stacks used to keep crypto engineers away. New NFT platforms, on the other hand, have enabled producers and communities to negotiate economic terms for creative exchange with users. Simultaneously, with individualized social tokens, NFTs provide eternal remuneration for creators.
MetaFi technologies can also improve prospects for capturing digital asset value and flow in open free marketplaces. Furthermore, it allows for real-time price discovery, paving the path for the identification of hidden value.
Mature governance models, like DAO, may also play an important role in the adoption of MetaFi crypto with improved governance. DeFi has been successful in offering community-based insurance opportunities to all users, particularly when combined with DAOs.
Most importantly, the evolution of play-to-earn games and new ways to monetize data may eventually bring Gen Z closer to MetaFi DeFi applications.

The future of MetaFi

The future of MetaFi

Although MetaFi's future is undetermined, a few use cases have begun to develop. MetaFi will rely heavily on a decentralized identity management system to provide users with simple access to their digital assets and identities.

“We have to look at MetaFi as a potential evolution of decentralized finance. Blockchain industry is the reason why our industry came about transparency, interoperability, and user custodial services. When it comes to financial aspects, MetaFi is gonna perpetuate that further.”
Kavi Salani
Senior Vice President, Marketing & Communications, Matrixport

Naming services are a method for dealing with long and intricate addresses. These services will help to reduce human errors. Customers will be able to send tokens to a basic address rather than a long Ethereum address.

There are also plans to connect the actual and virtual worlds so that individuals can meet, exchange ideas, build, and grow.

Bottom lines

MetaFi is an intriguing new concept in crypto, with nearly limitless applications. This concept is sure to generate even more MetaFi applications and more creativity in the crypto realm, whether in the metaverse, gaming, or other sectors, even if we are still a long way from seeing it completely implemented and widely used.

Disclaimer:
This article is intended for and only to be used for reference purposes only. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

Experts' opinion: Goodbye DeFi, hello MetaFi