A Metaverse without an economic system can never succeed

Roblox , a game platform that went public in the United States in March this year , proposed eight elements that Metaverse needs to include, one of which is the “economic system.”

When the consumption of virtual products such as game props and electronic art is greatly increased, when transnational consumption becomes more and more common, and when purchases, investments, donations, lending and other activities are infinitely convenient, what kind of currency and economic system will we have?

The first step in the construction of the meta-universe is to enhance people’s experience while fully replicating the real world. However, it is easy to reproduce tangible objects and scenes, but it is difficult to reproduce intangible rules.

How do I pay when I want to buy a game item produced by a British game maker Do you use Swift to transfer money internationally? Obviously, the cumbersome and expensive Swift cannot satisfy the instant and frequent payments in the meta-universe.

This is just the simplest shopping scenario, a slightly more complicated financial behavior, such as lending. When I want to borrow a sum of money in Metaverse, the person who lends me the money may be an American, an Australian or even an Inuit. How do we determine the interest rate for borrowing?

No matter how complicated it is, financing. When I need to raise funds to develop a new game, how do I raise and use the funds? Do I need to submit an application for listing to the relevant state departments, announce that “only RMB and U.S. dollars are accepted” after approval, and publish financial reports publicly every year?

There is the only thing that cannot be escaped except death: paying taxes. Is my income in Meta universe money, cryptocurrency or game tokens? If it is game tokens, can I convert them into money? If it is a cryptocurrency, do I need to pay taxes? How much tax?

In this article, we will analyze several solutions that are currently being tried.

The giant’s ambition-Libra (later renamed Diem)

In June 2019, Facebook (renamed Meta this year) announced the launch of Libra , a digital currency based on blockchain technology . The purpose is to provide financial services for people who have not been connected to traditional financial and banking services.

The scene targeted at the beginning was payment .

Libra’s partner organizations include Uber, an e-commerce platform, and Farfetch, an online luxury website. If Libra anchors the U.S. dollar, then the 2.7 billion users of Facebook’s products can directly exchange U.S. dollars into Libra to purchase products and support cross-border payments.

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Libra partners

Cross-border payments and cross-border transfers are technically dependent on blockchain, so there is only a thin line between the two.

The most commonly used method for international transfers is Swift. Remittances take 3-5 working days to complete, and more than 5% handling fees and service fees are often charged. However, the blockchain system that Libra relies on claims that its capacity is sufficient to support the transaction volume of billions of people around the world, with fast speed and low cost.

If cross-border payments and cross-border transfers are combined, it will challenge the traditional giants in this field in the short term. And there are risks of money laundering, terrorist financing, and leakage of customer privacy.

In the medium term, once Libra gradually establishes trust among users, it may become a cross-sovereign currency. In the 1970s, the U.S. dollar was able to decouple from gold with the credit endorsement of the United States. Will Libra be decoupled from the anchored legal currency by virtue of the credit endorsement of Facebook and Libra itself in the future?

When Libra decouples from legal currency and becomes an independent currency, all countries that use Facebook’s products will face threats to their currency status.

The massive Libra immediately attracted the attention of the regulatory authorities. Maxine Waters, chairman of the US House of Representatives Financial Services Committee, called on Facebook to suspend the development of its new encryption project Libra. She said in an interview that Libra cannot be allowed to compete with the U.S. dollar.

Even if Facebook CEO Zuckerberg and blockchain leader Marcus participated in three hearings, they expressed an attitude of accepting supervision and guaranteed that Libra is only used for payment, and the dollar accounted for at least 50% of the anchored basket of currencies. Proportion… But the Libra project is inevitably shelved, eBay, Visa, MasterCard and Stripe have announced their withdrawal from the Libra project.

This year Zach Burke announced that Facebook will be renamed Meta and transformed into a meta-universe company within five years. It makes people wonder whether Zuckerberg thought about a path to build an economic system for the meta-universe when Libra was proposed two years ago.

The token of the “first block chain”-Robux

Meta Universe has set off countless waves this year, and the root cause is Roblox, which went public in March. Roblox is a large game platform, users can create their own games, or participate in other people’s games.

David Baszucki, the founder and CEO of the company, said in an interview that as early as 17 years ago, when the company was first established, his business plan foresaw the rise of Metaverse, and he has been building his own version of Metaverse. .

Roblox already has a relatively mature economic ecology . The platform token Robux can be purchased directly, or it can be earned by advertising to certain brands or selling in-game props, clothing, and levels. The platform will give 30% of Robux’s income to game creators, who can choose to use it in the game or directly withdraw it. More than 1,000 people earned more than $100,000 in Roblox last year.

So can Robux mode continue to exist in the meta-universe system? At present, the following challenges are still faced:

  • The trustworthiness of “Roblox Bank”

Comparing Roblox game platform to a society, Robux is currency, and recharge and withdrawal transaction records are bank statements, which means that Roblox plays the role of the central bank.

Unfortunately, I did not find any technical content related to Robux circulation on Roblox’s official website. Does Robux use centralized records or blockchain-style distributed records? Can it be tampered with? Is the record kept permanently or is it deleted periodically? How to prevent hackers from intruding and destroying the system?

Although Roblox’s current status and profits are completely unnecessary, and it is bound to cooperate with many security agencies, many complaints on Roblox’s security performance on Twitter still make me unable to easily believe that it can perform well. Responsibilities of the bank.

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From Twitter

  • Robux is limited

Robux’s current role is only to purchase goods, and more complex currency functions such as loans and investments cannot be realized.

After all, Robux is still a kind of game token , and there are more than Q coins but only two functions of earning and withdrawing.

  • Robux issuance

In the real world, the central bank will continuously update its monetary policy based on considerations such as whether the amount of existing currency matches the economic development situation and whether additional currency is needed to boost the economy.

In the Roblox world, what determines the number of Robux?

According to Roblox’s official website, the price of 400 Robux is US$4.99. Can Robux be issued unlimitedly as long as there is continuous demand in the market? And if market demand shrinks, what measures will Roblox take to withdraw?

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Robux price, from Roblox official website

This is not yet considered. As mentioned above, Robux is only a game token, and it is far from being able to bear currency functions.

The darling of decentralization-cryptocurrency

In 2008, a person named Satoshi Nakamoto published an article ” Bitcoin : Peer-to-Peer Electronic Cash Payment System” and launched the Bitcoin blockchain network. In January 2009, the world’s first Bitcoin was born.

This kind of electronic currency, which does not rely on the emergence of any centralized organization, has become the heart of countless cryptography geeks. Bitcoin is fixed at 21 million, and the issuance method has been written into the code, and it has been automatically executed to this day, and no error has occurred.

Later in 2014, Russia established a youth Vitarlik Buterian Ethernet Square block chain network, the issue encrypted tokens Ethernet currency , now become the world’s most widely used encryption, encryption used by the largest number of currencies.

In the Ethereum network, developers have established various games, cryptocurrency trading platforms, lending platforms, and electronic collections. Users can use Ethereum as currency to perform various operations.

In this way, the virtual meta-universe world full of unknowns is innately compatible with the safe and stable Bitcoin and the diversified and mature Ether. So, will cryptocurrency be the economic system of the meta universe?

Incorporating Bitcoin and Ethereum into the metaverse means that the crypto market should be included together, so there are still a few questions to answer:

  • How to guarantee the safety performance?

The blockchain networks of Bitcoin and Ethereum are relatively secure, but the degree of security of the applications built on them cannot be guaranteed. It’s like the Internet is safe, but the information leakage scandals of major companies’ information being attacked by hackers continue.

As of the beginning of November this year, there were 82 attacks on the blockchain network. The initial stolen funds were about 1.816 billion U.S. dollars, but about 700 million U.S. dollars of them had been returned, and the total amount of stolen funds reached 1.116 billion U.S. dollars.

For example, Cream Finance is a cryptocurrency lending agreement. I can store idle cryptocurrency in it, and users in need can borrow and use it, and I will collect interest. On October 27th, after hackers obtained funds through flash loans, they used contract design flaws to drastically change the price and withdraw the money to make a profit. This process is very likely to take away the cryptocurrency in my existing agreement and cause property damage.

The pursuit of security has given birth to many encryption protocol audit institutions, but they still cannot completely avoid code vulnerabilities and the risk of man-made money running away.

  • When will the price stabilize?

In recent years, the reason why cryptocurrency has become the sweet pastry in the eyes of many institutional investors is that the huge price increase has brought huge wealth.

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Bitcoin price trend in the past year, from coingecko

This is the price chart of Bitcoin over the past year. The highest point is close to $7,000, and the lowest point is hovering around $3,000. The income has doubled in less than a year, which is difficult to see in the traditional investment field. .

Since the cryptocurrency market has not yet fully accepted the supervision and can be traded 7*24 hours, there is no concept of limit up and down, so it is not uncommon to see a rise of ten times and one hundred times , and it is commonplace to plummet to zero.

We should wait for the future when cryptocurrency can get rid of the label of “speculation” and become a relatively stable currency, and then look at the possibility of its integration with the meta universe.

  • Do you pay taxes?

In recent years, a large number of investors have gained income by purchasing cryptocurrencies and opening leveraged contracts, and the mainstream society’s acceptance of cryptocurrencies has also increased. The United States has even launched Bitcoin futures ETFs, officially treating Bitcoin as Investment products. Countries began to consider taxation issues.

Singapore does not collect taxes, and to a certain extent Singapore has become a tax haven. Austria plans to start levying a 27.5% capital gains tax on cryptocurrency assets such as Bitcoin and Ethereum in March next year. South Korea said that it will start levying a 20% capital gains tax on cryptocurrencies in January next year.

my country currently does not regard cryptocurrency as an investment product, nor does it protect crypto assets legally, so there is no relevant policy. And how can a currency that is not accepted by China become the universal currency of the meta-universe world?

Central Bank Digital Currency

China’s central bank digital currency, e-CNY, is a digital alternative to banknotes. Except for the form of digitalization, currency functions and attributes are exactly the same as banknotes. As early as last year, many cities started pilot projects. At the moment of writing the article, the digital RMB Winter Olympics scenario pilot has entered the sprint stage.

At present, internationally, Zimbabwe and Nigeria have launched legal digital currencies, and the Eurozone, the United States, and Japan are studying.

Moving the existing currency system to the meta universe sounds like a way to stabilize insurance. Moreover, the current international remittance is an account-based system. The use of central bank digital currency in cross-border payments means that it is converted from an account model to a token model, reducing costs and improving efficiency. It can be an alternative to cross-border payments and transfers.

However, the research process of different countries is different, the underlying system of cross-border payment and transfer has not been established, and the amount of legal currency exchange foreign currency is restricted… If you want to use the central bank’s digital currency in the meta universe, it will take a long time.

In addition, the use of the existing legal currency system will greatly reduce the imaginable space of the meta-universe world. We cannot arbitrarily make cross-border payments, loans, investments, and donations. Everything must be restricted by the country. Countries that have not established diplomatic relations do not communicate and trust each other, which runs counter to the open and inclusive vision of the Metaverse.

Concluding remarks

I really want to make a prediction to predict the cryptocurrency in the meta-universe world in the future. But that would only be as ridiculous as people in the 90s imagined the Internet. All I can do is analyze the current solutions, or cooperate with testing when new solutions appear.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-metaverse-without-an-economic-system-can-never-succeed/
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