The emergence of DeFi (decentralized finance) in 2018 is one of the most debated topics in the crypto space. Because DeFi operates in systems that do not require permission and trust, its vision is thought to violate traditional financial accessibility and the principles defining the sovereignty of wealth.
Metaverse is another popular Web3 concept that has sparked the interest of many, and it has evolved into another technical invention that combines augmented reality and virtual reality, supporting human interaction in various social and commercial activities (such as playing games, watching movies, hosting virtual conferences, etc.).
In addition, the Metaverse offers a virtual space and a virtual economy for people with avatars to work, earn money, buy and sell property.
The combination of these technologies gave birth to the new concept of MetaFi. There is no single definition of MetaFi, but there are two versions of it. The meaning of each is different, but they all agree on one thing – it is a concept that implies the unification of DeFi infrastructure and all types of blockchain projects into one meta-universe: GameFi, SocialFi, Web3 and NFT.
Metadata + DeFi
MetaFi is an integration of two concepts: “Meta,” which stands for metadata (not Metaverse), and “Fi,” which comes from decentralized finance (DeFi). The MetaFi concept aims to standardize blockchain technology and how it works to create a single standard for improved interaction on the Web3. The new concept aims to bring together all blockchain-based projects and innovations, such as Metaverse, GameFi, SocialFi, Web3 and NFT, offering an advanced and sophisticated DeFi framework under one roof.
The cryptocurrency exchange Binance invented the term “MetaFi” in 2022 as a new and innovative paradigm shift aimed at standardizing blockchain technology for traditional large-scale Web2 applications (social networks, gaming apps, browsers, etc.).
What is Metadata?
Metadata is data that provides information used to describe data contained in web pages, documents, or files. Simply put, metadata is a set of data that describes and provides information about other data. For example, metadata associated with images taken on your device might include information about resolution, date, and location. Another example of metadata is data associated with blockchain transactions, including the day, time, and hash values of said transaction.
In the case of NFT, basic properties such as the name, description, image references and anything else the creator deems important are described to help users identify the features and properties of the image, artwork or collectibles.
What is Metaverse?
The Metaverse is a virtual world in which people interact with each other as they do in the real world with the use of interactive avatars. The metaverse originated from the novel “Snow Crash,” written by Neal Stephenson in 1992, where people interacted with each other in a three-dimensional environment. “First Player Standby” is a good example of what the metaverse looks like. In the movie, the players had different experiences, such as doing extreme physical activities or driving technologically advanced vehicles.
Possible applications of MetaFi
MetaFi will provide various possibilities with decentralized applications (DApps) in a multitude of ways once it is fully developed. Here are some of them:
MetaFi can be used to create a standardized marketplace for each individual list of asset types that may exist in multiple chains. This will enhance the collectors’ experience by giving them access to all NFTs in a single interface, making exchanging assets very convenient and efficient. one. NFT marketplaces like Opensea and Rarible allow users to trade independently and create NFTs directly. MetaFi will offer anyone interested in buying and selling on these marketplaces a one-stop store for all types of NFT. These items will not be limited to just images, but will also include virtual wearables, in-game items, NFT art or real estate and more.
The concept of the metaverse aims to create multiple and persistent shared interfaces where users can have different experiences together and interact with each other for different purposes: communication, commerce, gaming, etc. With MetaFi, applications that support these virtual worlds, such as Sandbox, Axie Infinity, and Decentraland (Metaverse’s most famous projects), can seamlessly and reliably interact with each other. MetaFi will also enhance the functionality of digital assets and virtual tokens by providing options for use outside of their native virtual worlds.
With MetaFi, you can leverage your NFTs – borrowing by using your NFTs as collateral. The borrowed asset can then be extended with a secured NFT at a higher rate, resulting in higher profits. The owner receives a portion of the lender’s income for leasing his NFTs to others. This shows that integrating NFTs into DeFi’s crop-growth liquidity provisioning tokens is possible because MetaFi’s goal is to provide a framework in which DeFi and other blockchain-based projects can be synergized.
Currently, the technique and cost of creating and exchanging fan tokens varies for each blockchain. MetaFi will help simplify the process of creating, buying and trading fan tokens. Owners will be given access to different forms of value, which can be interchangeable or non-interchangeable tokens, giving them access to different communities and minted tokens in the future.
What is so special about MetaFi and what are the Challenges
The idea behind MetaFi is to link all blockchain projects into one ecosystem using a single metadata standard. It should be used in all blockchain technologies: cryptocurrencies, NFTs, GameFi, DeFi, DAO, etc.
Thanks to metadata standards, assets will be easy to read and sort. They will be usable in any blockchain. For example, if the metadata in the blockchains were of the same standard, one NFT marketplace would be able to contain NFTs from all the blockchains. But such a metadata standard would not work without the infrastructure – so called crosschain bridges. This is a set of tools for creating communication between blockchains. In it, smart contracts freeze and release tokens, oracles keep track of price matches, and nodes perform validation. As a result, assets are frozen in one blockchain and copies are released in another. All projects approach this solution differently, but the principle described remains the same.
One of the examples of this approach – the MetaFi project. It is a launchpad (launchpad is a platform where crypto startups raise funds for further development and launch) that focuses on GameFi, NFT, and meta universes.
The MetaFi team plans to launch two products in the fourth quarter of 2022:
Metaverse bank – a platform for NFT transactions from different projects. Its users will be able to buy, sell, lease, store and stack their tokens. The platform will work with crosschain bridges, as well as the entire ecosystem of the MetaFi project; Guilt agregator – a platform where users will be able to search for different Play-to-Earn guilds and interact with them through a single interface. Crosschain bridges will also be used here.
There are some other obvious MetaFi limitations that will come into play.
Lack of hardware and software tools
To build a standardized infrastructure that fits MetaFi’s vision, which includes marketplaces, tools for creators and various business models, the Internet will need more capabilities to support VR, AR and AI-based 3D virtual worlds, as well as network security. Although companies such as CUDOS are integrating cloud computing to connect developers and blockchain services to the global pool of computing power. However, mass adoption is still relatively slow for businesses.
Another limitation of MetaFi is that different blockchains create frameworks that only work within their networks, with no ability to interact with other platforms. To achieve scalability and interoperability between different disparate blockchains, it is important to explore improvements in fundamental/infrastructural technologies, such as Layer 1 blockchains, to ensure that applications running on blockchain protocols are more accessible across the board. This ensures that applications running on these blockchain protocols will receive lower transaction fees, increase speed and provide scalability.
While several projects are starting to provide interoperable solutions and infrastructure, the road to unrestricted blockchain connectivity has only just begun. MetaFi can only remain a concept until interoperability is achieved at all levels of the blockchain ecosystem.
When it comes to DeFi, there is a need for a stable tokenomics so that users are guaranteed more stable and reliable incentives to accelerate long-term growth and prevent large sell-offs by users driven by APY volatility or incentive rewards. This needs to be taken care of before the MetaFi concept can be fully adopted.
Exciting times ahead! While the future of MetaFi is still uncertain, it demonstrates the possibilities that will significantly change the blockchain space, giving users easy access to their digital assets and personal data. Whether in the meta-universe, games, or other areas, this MetaFi concept will have many applications and more innovations in the blockchain and cryptospace.