MetaFi — Decentralized Finance in the Metaverse
Written by Javan Sardarabady
With the emergence and development of blockchain technology, various innovative concepts have gradually emerged that will shape the future of the internet and the finance sector. One concept of great importance in crypto and has been gaining attention since late 2017 is Decentralized Finance or DeFi for short. While in mid-2020 the DeFi Sector had a TVL (Total Value Locked) of $1.91 billion, we are now at $77.29 billion two years later.
At the same time, another concept has emerged that has reached even more mainstream compared to DeFi. The Metaverse. A collective virtual space where users connect, play games, participate in events and experience a wide range of social activities. The Metaverse will have a decisive impact on the digital economy and our social lives.
The term MetaFi represents the convergence of the two technological concepts. What exactly MetaFi is, how it works and how exactly it comes to be applied is the topic of this article. So, if you want to learn more about how DeFi is used in the metaverse, take a moment to read this article.
MetaFi is a combination of two terms. Meta stands for Metadata and Fi stands for DeFi. MetaFi is a concept that combines different projects like the Metaverse, GameFi, NFTs, and Web3 and provides them with complex DeFi infrastructure. It is based on metadata that uniquely defines the ownership of assets. MetaFi encompasses the interplay between fungible and non-fungible tokens to create complex financial transactions. For example, through MetaFi, a user can use a fragmented part of an NFT as collateral for DeFi lending platforms.
MetaFi thus brings the infrastructure and principles of DeFi to the Open Metaverse. The idea behind MetaFi is to implement diverse blockchain functions in one meta-ecosystem and make digital assets accessible on different blockchains. Defined metadata standards used across different platforms and blockchains should solve the problem of interoperability. The goal is to use these standardized metadata characteristics to build and develop a new virtual ecosystem that will drive mass adoption of Web3 and provide new application opportunities for users.
How does MetaFi work?
We have now clarified what is behind the concept of MetaFi. But how exactly does MetaFi work?
The basis here is metadata information on blockchains about the assets. Most blockchains contain descriptive, statistical, and legal information about digital assets. For example, metadata from an NFT includes a link to the associated image or video. With the creation of metadata standards, assets can be made easily machine-readable and sortable.
This can then make digital assets accessible on different blockchains, which can pave the way for innovative and interoperable projects.
Let’s now look at some applications of MetaFi. Even though the concept and development of MetaFi are still in their early stages, there are already some use cases of MetaFi.
· Virtual worlds
A digital space where users can socialize, work, play games and engage in a range of activities as they would in the real world. The best-known examples here are the Sandbox or Decentraland.
With MetaFi, an infrastructure with standardized metadata will allow users to seamlessly experience and interact between various virtual worlds. Likewise, the functionality and interoperability of digital assets can be improved.
Marketplaces are decentralized platforms on which NFTs can be freely traded. The capabilities of marketplaces will be enhanced by MetaFi to list all types of assets that can exist in different blockchains. This will make it more convenient and more efficient for users to trade NFTs.
· NFT Yield Farming
NFT Yield Farming can be used to make money by using NFTs as collateral or renting them out. Most notably, this is a popular strategy in games where valuable NFT game items can be rented out to users who would not normally be able to afford them.
These were just a few of the many different use cases of MetaFi. As time goes on and the concept continues to evolve, there will be many more to come.
MetaGameHub DAO and MetaFi
MGH DAO is all about MetaFi. The valuation algorithm is at the heart of a wide range of MetaFi tools, ranging from Metaverse Staking to Land Farming to LAND indices and, in the future, all kinds of Metaverse-related financial tools. DeFi in the Metaverse can contribute to an efficient, transparent, and decentralized ecosystem and the use cases of MetaFi will be endless. MetaGameHub DAO is therefore continuously developing appropriate infrastructure and tools to successfully implement DeFi principles in the Open Metaverse.