In this guide, we will unravel the critical concepts surrounding blockchain interoperability, including omnichain, multichain, and...
Here is everything you need to know about MetaFi – a new paradigm that aims to standardize blockchain technology for traditional Web2 large-scale applications, including games, social media, and the Metaverse.
Since the inception of blockchain technology, several related innovations have sprouted up. The blockchain has become a parent to many projects like non-fungible tokens (NFTs), crypto, decentralized finance (DeFi), and metaverse, among others. Also, many processes occurring in the blockchain sphere are pure interactions of these projects. This guide will treat one of these upcoming interactive innovations called MetaFi. Though MetaFi is an interaction of the metaverse and DeFi, these words do not make up the acronym. Further explanations will clarify the full meaning of MetaFi and what it entails.
The term ‘MetaFi’ represents two words: Meta stands for Metadata, and Fi stands for DeFi. Metadata is a dataset that gives details about other data, while DeFi stands for decentralized finance. A perfect example of Metadata is a file stored on a device containing information like date, location, file size, etc. Similarly, every blockchain transaction has metadata.
In 2022, Binance introduced MetaFi. As defined by the company, MetaFi is a new paradigm shift that aims to standardize blockchain technology for traditional Web2 large-scale applications, including games, social media, and the metaverse. The MetaFi concept provides a merged platform that supports interoperability. On a larger scale, MetaFi combines all blockchain-related projects, including Metaverse, GameFi, SocialFi, Web3, and NFTs, by intertwining core DeFi components. To have a better grasp of MetaFi, we have to discuss a bit more about the two interacting projects: Metaverse and DeFi.
The Metaverse is a virtual universe that provides an immersive and realistic space where users can connect socially. Users can play games, host meetings, shop, and carry out other real-life activities in the Metaverse. Metaverse uses technologies like the Internet of Things (IoT), blockchain, virtual reality (VR), augmented reality (AR), artificial intelligence (AI), etc. On the other hand, DeFi is a financial technology that eliminates the authority of a third-party or centralized control like banks over owned financial assets. Unlike traditional financial firms, it provides users maximum security, faster transaction speed, and a charge-free platform.
A close look at MetaFi structure gives a better understanding of what it entails. Three essential components make up MetaFi: foundations, DeFi, and verses. Foundations are the building block and an essential part of MetaFi. They contain the core framework that serves as layer zero, one, and two solutions. Applications run on the framework through shared application logic and security.
DeFi is another integral part of MetaFi, which comprises the financial applications of the framework. These ever-functioning applications are known as Money Legos. Money Legos help developers create a new protocol, increasing the speed and efficiency of financial services to DeFi users. Money Legos performs tedious financial dynamics using smart contracts.
The third and final part of MetaFi is Verses. It is a collection of domains and verse which makes up the whole metaverse. Verses connect the layers of verses to various parts of the Metaverse. These connections are based on compatibility and cost-effective value transfer.
The functioning mechanism behind MetaFi is straightforward. Considering the full meaning of MetaFi, the innovation uses Metadata and DeFi. MetaFi leverages the availability of Metadata for blockchain assets to enable interoperability. MetaFi’s principal aim is to make several blockchain functions accessible in a single ecosystem. Therefore, the ecosystem becomes interoperable due to the use of metadata across every blockchain and platform. The amalgamation of blockchain projects provides end users with a beneficial and full-blown economy. With MetaFi, basic components of the Metaverse and DeFi can be combined.
MetaFi will foster the adoption of Web3 and blockchain through its ecosystem. MetaFi’s ecosystem is based on an integrated system that combines metadata parameters and digital assets. Invariably, MetaFi will increase the use cases of Web3 and blockchain technology.
MetaFi has a huge scope, the opportunities and uses of MetaFi are endless.
The virtual world is one of the MetaFi applications. MetaFi allows for interaction between two or more virtual worlds. This example enhances the use of digital assets and visual tokens. Many sales outlets like Walmart and McDonald’s currently run spaces in the meta ecosystem. MetaFi also allows for decentralized identity management and reputation management where users can access their digital identity and asset using a safe means.
Another use case of MetaFi is the marketplace. Blockchain features NFT marketplaces like Rarible, OpenSea, LooksRare, etc, where users can gain NFTs in exchange for a digital token. MetaFi stretches the potentials and functionalities of the marketplace by allowing the purchase and sale of digital assets on decentralized and blockchain-supported platforms.
NFT yield farming is a MetaFi concept where idle assets serve as collateral or rental to make money in return. This method is common among blockchain games, where players rent expensive in-game items to players who cannot afford them. Fan Token is a potential use case for the MetaFi ecosystem. A sports club or fan club can mint fan tokens. Holders of fan tokens have exclusive benefits like VIP memberships, special events, voting rights, and so forth. For example, popular European football clubs like PSG, Barcelona FC, Juventus, and West Ham United have fan tokens. Die-hard fans can purchase these tokens on marketplaces like Chiliz, Binance, and Coinbase. MetaFi protocol can effectively aid the minting and trading of fan tokens.
MetaFi is a developing innovation in the blockchain sphere. As earlier stated, it is a cross-section of ecosystems based on metadata. There are several underdeveloped components of MetaFi, like VR, AR, and AI. To use the MetaFi, a specific cadre of hardware and software is required. These requirements pose a threat to both the developers and potential users of the MetaFi ecosystem.
While MetaFi tries to improve blockchain interoperability, it faces challenges regarding operability. Some blockchains create frameworks that are limited to their platform alone, preventing interactions with any other type of blockchain. Developers must tweak the foundation technologies of such blockchains to make applications (dApps) accessible on the platform. Other related challenges include differences in gas fees, network speed, etc.
Unclear tokenomics is a major challenge for DeFi. Many blockchain projects do not have stable and reliable incentives or long-term APY. This inexplicit token allocation hinders the combination of DeFi and the Metaverse. MetaFi developers must explicitly explain voting rights and earning yield to users.
Though MetaFi is still at its budding stage, it has a lot of potentials. Currently, only a tiny percentage of MetaFi’s potential has been explored. This innovative concept will attract several MetaFi applications to the blockchain space. However, developers must work on the challenges of MetaFi to provide a seamless ecosystem. The future of MetaFi is yet to come. There are many parts of MetaFi to explore.
MetaFi is an acronym coined from two words: Metadata and DeFi. It is a new paradigm shift that aims to standardize blockchain technology for traditional Web2 large-scale applications, including games, social media, and the Metaverse.
Metaverse provides a decentralized and financially independent virtual arena by integrating several elements and technologies of Web3 and Web 2.0. MetaFi functions using the interface layer and the financial layer of the Metaverse.
There are three major components of MetaFi. These components include Foundation, DeFi, and Verses. None of these components can function independently. Foundation is the core framework (building block) of MetaFi, while DeFi is the financial segment. Verses are the collection of domains and verses which make up the Metaverse.
The metaverse offers a 3D virtual space where users can carry out work, business, or social activities. Users can sell or purchase digital items like wearable NFTs and consumables in the metaverse. MetaFi helps the metaverse carry out virtual transactional activities. Also, MetaFi allows for interoperability between metaverses such that users can use items from metaverse A in metaverse B.
MetaFi is a great option because it creates a financial infrastructure between fungible and non-fungible tokens. This financial platform is compatible with a wide range of DeFi platforms. MetaFi serves as an umbrella for a wide range of blockchain functions.
There are a few challenges facing the development of MetaFi. The need for sophisticated software and hardware is a great hindrance to the growth of MetaFi. As such, developers and end users must purchase high-tech devices before accessing MetaFi. Also, unclear tokenomics of many DeFi projects challenge the amalgamation of DeFi with Metaverse. Finally, specific blockchain networks are incompatible with other networks. This setup foils the goal of MetaFi, which is interoperability.