Decentralized Finance (Defi) has been the talk of the town in the crypto space since 2018. Its rise to fame is due to its decentralized finance model. At the same time, the world was experiencing another technological advancement in the form of the metaverse space and digital experiences. Fintech blockchain solutions combine both these technologies, which results in MetaFi.
MetaFi is the integration of two words-Meta for metadata and Fi for Defi. Traditional Web2 applications, including games, social media, and metaverse, face the issue of standardization. And MetaFi addresses this issue of blockchain technology and its work. Standardization will lead to a unifying experience for enhanced interoperability.
MetaFi gives advanced and sophisticated DeFi infrastructure to projects such as SocialFi, Non-Fungible Tokens (NFTs), GameFi, and Web3. Additionally, it places all these projects under one roof. All these things are possible due to metadata that defines ownership of assets.
MetaFi aims to place a wide range of blockchain functionality in a single Meta ecosystem. These functionalities are interoperable since various platforms and blockchains use defined metadata standards. MetaFi comprises a variety of fungible and non-fungible tokens along with community governance, such as Decentralized Autonomous Organizations (DAOs). It aims to develop and support a new ecosystem built on standardized metadata parameters. The ecosystem focuses on digital assets that grant mass adoption in Web3 and blockchain technology. Moreover, the mixture of these different crypto primitives empowers a completely developed parallel ecosystem, which serves users worldwide through blockchain.
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MetaFi uses the presence of metadata for assets on most blockchains to improve interoperability. For instance, an NFT’s metadata has a link to the related image. Moreover, owners can link metadata to a bitcoin (BTC) transaction, permitting you to add unencrypted data.
Making metadata standards functional on any blockchain will result in easily machine-readable and sortable assets. An NFT marketplace can comprehend and grade NFTs from many blockchains if they all show their metadata in the same way.
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MetaFi is the latest decentralized finance platform for the metaverse. It offers endless opportunities, and the following are the MetaFi applications that may soon enter the mainstream.
Virtual worlds are digital spaces that provide social, work, commerce, or gameplay environments. They may or may not depicts the physical world. When they show virtual places similar to the real world, they often include an element of scarce land defined as NFTs. Users can buy, trade, and build these NFTs for free.
The virtual world provides a space to play, create or interact with friends and colleagues. It comes with an extensive range of execution, such as wearable NFTs, consumables, etc. Additionally, it provides simple implementations of NFTs in virtual reality.
It is a decentralized digital trading platform that matches supply and demand. It permits the discoverability of NFTs and aids in better price discovery. Advanced NFT Marketplaces such as Opensea, Super rare and rarely enable users to trade independent and direct mint NFT. Thus for everyone interested in buying and selling, these marketplaces could be a go-to platform for all NFT types. That includes virtual wearables, in-game items, NFT art or real estate, and much more.
Also, Read: Develop Sorare Like NFT Marketplace
Users can generate income using NFTs. They can utilize NFTs as collaterals while taking loans and then investing the loans at higher rates. Owners can also stake their NFTs or rent them. Users can merge an NFT with yield-farming Defi LP tokens to achieve direct produce yield.
Fan tokens are cryptocurrencies that give membership perks to a community or organization. Apart from the membership, fan tokens can also provide access to voting rights, special events, and more. These tokens can be fungible as well as non-fungible. They can be access to a community, specific people, or tokens minted in the future.
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There is a scope for development when understanding the true potential of MetaFi. The platform has some limitations that developers need to overcome in the current state of MetaFi. The following are the three main issues with MetaFi.
Users need tools to develop infrastructure for MetaFi, such as marketplaces, financialization primitives, creator tools, community-oriented business models, etc. Additionally, the compilation gives users and developers access to the blockchain for running decentralized applications (dApps). Thus, it becomes necessary to examine layer 1. It will make entire applications on blockchain protocol more accessible with lower transaction fees, increase throughput, and enable scaling.
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If you divide NFTs into 100 parts and distribute them among people, there is a lack of clarity in managing them. It becomes more evident with NFTs that carry rights such as voting or yield.
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Additionally, where MetaFi runs and operates, the challenges come from the blockchain. In general, developers build metaverse and related applications entirely on Ethereum on various layer one and zero blockchains. However, these blockchains are not 100% interoperable.
The entire idea of MetaFi shows how it brings the best of metaverse and Defi together. In the year 2020, Defi garnered much popularity. But the working of Defi is limited, and in the future, they do not present viable prospects for large-scale adoption. On the other side, the metaverse is growing as a digital counterpart of the real world. Now, there are many applications of MetaFi in areas like Web3, SocialFi, and GameFi. So, the future of MetaFi seems promising as it holds a lot of potential. If you are interested in learning more about metaverse and Defi connect with our Oodles expert team.