So what happens to the three topics of decentralized finance (DeFi), non-fungible tokens (NFT) and metaverse, which have bothered crypto investors in recent times? With blockchain technology, established processes and structures should be implemented more efficiently and easily (DeFi, NFT), but new digital worlds should also be opened up using metaverse.
A large number of projects have already appeared on the market and offer attractive solutions. Most of them received great praise in advance. The euphoria, which was entirely justified, has been dampened by the economic and political realities.
But it would be wrong to just write off DeFi, NFT and Metaverse. Investors are advised to take a diversified approach to these issues in accordance with the rules of venture capital and to try to classify the solutions on which the projects are based correctly.
NFT a bubble of technical euphoria?
An NFT is more than just a fun monkey cartoon that market participants were obviously willing to spend significant amounts on. Institutional investors are certainly interested in taking advantage of the opportunities that NFT offers. But the high volatility of the market and the rather sluggish decision-making processes of companies have not yet led to sustainable applications.
There are good reasons to assume that there are definitely projects that could be of interest to companies. NFT facilitates the clear and non-replaceable assignment of originals. These are digital contracts with which the ownership of real goods can be traced at any time without the need for an intermediary.
The application in the field of intellectual property has great potential, especially because it could be used to implement compensation transparently and effectively. This is where cryptocurrencies and blockchain technology can come in handy.
Revolution or fringe phenomenon?
The history of the financial market repeats itself. Decentralized solutions have emerged many times before, always associated with high profit expectations, but the risks associated with them immediately call the regulator to action, and it all takes place within the framework of an established system. But rigid and well-established structures and processes are not easy to replace, especially since they always suggest stability and safety.
A key point in DeFi is the democratization of financial services, which above all means lower costs and wider access. About 20% of the world’s population has little or no access to established financial institutions. Blockchain technology has the potential to provide a solution to this problem.
Various blockchains are already on the market for DeFi applications. Most of these applications are based on Ethereum blockchain. Credit and trading applications are the most common. The initial euphoria built around DeFi has subsided noticeably. The idea of making the financial market more efficient with blockchain-based applications will prevail, but it is currently difficult to assess which projects will be the winners.
Metaverse – reality becomes digital
Established technology companies like Microsoft and Meta have taken on this topic. The focus is on merging different systems that were not connected before. In the future, services and products should be made available in the meta-verse and allow users to interact in an expanded virtual world.
But there are also brand new companies that rely solely on Metaverse. For example, The Sandbox (SAND) or Enjin (ENJ). Both are to be found in the world of virtual gaming platforms. Metaverse is a further step in the development of the Internet, which opens up new opportunities for collaboration and thus also provides opportunities for investors. Metaverse is certainly a topic that should not be neglected, but investors should be patient. A quick win will not be easy.
The decline in the overall crypto market over the last few weeks has certainly raised some questions about the topic’s sustainability. Investors dealing with cryptocurrencies are bad if they only look at the big price gains in recent times. A detailed assessment of the projects is crucial. The high volatility and dynamics of the market certainly speak in favor of a reasonably diversified approach at the token level and the associated overarching themes.