The metaverse has a liquidity problem. Here’s how to fix it using interoperability, split assets, and DAOs
The metaverse is an emerging market that every investor watches, and yet it is difficult to enter for two reasons. First, it lacks a rating system and tools for investors to decide exactly which metaverse to invest in. And second, land assets in the metaverse have liquidity issues, so returns can be unpredictable. Sought-after land has high prices, while land away from sought-after areas is therefore less valued, and some first-time buyers find it difficult to resell their properties for a profit. To attract new investors to join the metaverse markets, a guarantee of liquidity is necessary, otherwise potential investors will not be interested in this ecosystem.
The lack of liquidity is partly due to several reasons. Interoperability between metaverses has not been sufficiently developed, assets are largely unaffordable, and there are security risks that complicate ownership. Conceptually, the metaverse is about open transferability and the use of protocols that act as standards for market transactions. There are some unknowns regarding these aspects of the metaverse, which companies developing and designing technologies for new virtual spaces should clarify to make it easier for ordinary people to invest in the metaverse.
Interoperability between metaverses must become a reality
The lack of interoperability between different metaverse protocols can be one of the biggest barriers to entry. Each metaverse has a native token and builds its own ecosystems. Moreover, metaverses are also built on different blockchains, which complicates the issue. Currently, some technologies are being developed to enable your NFT avatar to be able to cross platforms. Other pioneers attempt to create a level of interoperability infrastructure by creating reserve currencies that can be adopted across all metaverses.
To address interoperability and liquidity issues, especially for land ownership in the metaverse, a land bank might be the answer. A land bank could create standardized valuation and rating systems across metaverses to bring value to future investors. Having a land bank would also allow users to have a great experience on many metaverse platforms as it could provide them with opportunities to learn more about all available investment options and compare prices. Investors will be enticed by the ease of use of having a multiverse of possibilities in one consolidated list at their fingertips.
Asset splitting could make expensive assets more affordable
Buying virtual assets is expensive. With Bored Apes selling for $180,000 and land on Decentraland valued from around $10,000, those sums are astronomical for most investors. It will be hard to see any returns if the Metaverse remains financially inaccessible to the majority of people around the world.
One way to solve the liquidity problem in the metaverse is to split all kinds of digital assets, from land to NFTs. There are already fractional NFT vaults that create liquidity opportunities by allowing investors to buy shares in NFTs, instead of having to buy the entire asset themselves. Having a Decentralized Autonomous Organization (DAO) for investors and shareholders takes this idea one step further – with its members in this type of configuration, the DAO can collectively set the price of its assets. If members want to sell their shares or assets, the group can decide on a price that would meet the needs of the community. This way, the DAO is not entirely dependent on the virtual economy, and they allow liquidity for those who want to sell. There is also no hierarchical structure in a DAO – everyone who is part of the organization has equal participation and therefore can vote on the prices to be set.
DAOs can address security and transparency issues
The digital space is already teeming with vulnerabilities. The metaverse – with the complex bridging technologies necessary for its interoperability – amplifies these vulnerabilities with hackers and fraudsters seeking to exploit them. Brands looking to do business on metaverse platforms should develop their own security standards that are transparent and appealing to their customers, as security issues could be another major barrier to entry for more users. investors in the metaverse.
The good news is that blockchain technology is known for its transparency, so any transaction will be recorded and visible across the entire network. Due to the transparent nature of DAOs, the approach of using DAO structures for asset purchases on the Metaverse provides an additional layer of security that would go a long way in reassuring potential investors who are concerned about fraud. The blockchain code is open, the rules are defined in the smart contract and any changes to these two aspects must be voted on by the members of the DAO.
The Metaverse Has A Bright Future, But We Need To Be Careful
On paper, the Metaverse offers a great opportunity for financial liquidity and community engagement — but only if the needs of the people the Metaverse is meant to serve come first. It is a space where disenfranchised people in the real world could be financially and socially empowered. Creating investment opportunities through split assets and DAOs paves the way for liquidity as the metaverse expands. However, if the issues of interoperability, affordability, and security are not addressed, retail investors will continue to be reluctant and the metaverse will be just another regulated space dominated by corporate interests.