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I think we all could agree that metaverse is super cool. The colorful digital environments with gamified interactions and experiences give you a wow feeling when using different apps in the metaverse. And it’s not surprising to see why many people think the metaverse is the next phase of the evolution of the internet. Since the rebranding of Facebook to Meta, many more businesses are entering the metaverse domain to launch their concepts and apps. And we can expect a lot more dApps within the metaverse offering different services to users. In this article, we’ll discuss the relevance of smart contracts in the metaverse with examples and use cases.
Smart contracts are digital contracts written in code and executed on the blockchain. Contracts written on smart contracts are automatically executed when the predetermined conditions are met. Simply speaking, metaverse smart contracts are not at all different from blockchain smart contracts. It handles the governance of dApps launched in the Metaverse.
As discussed in a previous article, blockchains are important for the metaverse. A metaverse is where people can visit and socialize with friends or strangers, all in a digital 3D environment. Obviously, doing transactions in the metaverse is a necessity. But how would you trust a stranger you just met in the metaverse to do a transaction, for example, trading a digital collectible or paying money for a service.
Thankfully, smart contracts can facilitate these transactions. Using smart contracts in the metaverse can automate different operations and ensure trading and transactions follow predefined rules and regulations. Smart contracts already have numerous advantages over traditional arrangements. Here are the major advantages of smart contracts:
Because smart contracts are based on blockchain, they ensure the immutability of data. It allows contracts and agreements to be made without the need for the parties to know each other and avoid potential breaches of conditions or mistakes in the management and execution of the contract. This transparency provides the parties with security and trust because the data and information relating to the contract are available throughout the contract’s life cycle, transactions are duplicated, and all parties involved have a record.
For example, Smart contracts in metaverse gaming govern the ownership and transfer functions according to the norms of the game and ensure that entitlement records can not be tempered at any cost.
Smart contracts maintain complete trust in their execution. The agreement’s transparency, autonomy, and security eliminate any possibility of manipulation, bias, or error. Moreover, smart contracts do not require third parties or human intervention, offering autonomy and independence. This inherent feature of smart contracts provides additional benefits such as cost savings and increased process speed.
Smart contracts allow a gamer to securely create, store and transfer NFTs instead of something of equal or greater value. In a decentralized metaverse, this can only be possible with the help of smart contracts, which execute themselves only when certain predefined conditions are met and ensure trust among gamers.
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Smart contracts record all the critical details of every transaction. As a result, whenever your information is used in a contract, it is permanently saved for future reference. These attributes are easily recoverable in the event of data loss. Furthermore, businesses worldwide are becoming more conscious of their environmental impact. As smart contracts live and breathe in the virtual world, they enable the “go-green” movement that eliminates the need for large reams of paper.
Another appealing aspect of smart contracts is the potential to significantly reduce or even eliminate the need for litigation and courts. By using a self-executing contract, parties engaged in the contract agree to be bound by the underlying code’s rules and determinations. This helps metaverse users specify and carry out leasing agreements, especially in the real-estate sector. This includes automatically terminating the agreement if the renter violates rules or guidelines.
The efficiency with which smart contracts operate is a natural byproduct of their speed and accuracy. More value-generating transactions are processed per unit of time when efficiencies are higher. For instance, smart contracts allow adding new features and functionalities to Metaverse platforms without altering the Metaverse code.
Smart contract functions vary depending on a metaverse project’s structure, feature requirements, and technical aspects. Here are some examples of how metaverse smart contracts can serve different industries:
In 2017, the painting ‘Untitled’ by Jean-Michel Basquiat was purchased for $110.5 million. This painting was originally priced at $20,900 in 1984 and then resold after 33 years. This painting is one of the best examples of contemporary art’s appreciative value rising with industry trends. Every year, online art sales increase dramatically, but only a small percentage of people buy artwork online. However, tokenizing art opens investment opportunities for art enthusiasts. Smart contract solutions are pivotal to making the entire process more authentic, ensuring the proper transferability of the relevant ownership, and avoiding any possible disputes during or after the process.
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Many insurers have begun to engage with the metaverse directly but have not developed Metaverse-specific products. Hubb, an insurtech company, is investing resources in developing its Metaverse insurance infrastructure, with the integration of VR headsets as its first goal. Metaverse insurance coverage includes virtual property damage, identity theft, and health insurance for avatars which will be maintained through metaverse smart contracts.
Gaming-based Metaverse projects are more common and deserve the attention of smart contracts in the metaverse. For example, smart contracts for popular Metaverses like Decentraland and Axie Infinity focus on managing the trading processes for land, real estate, and other digital assets available in NFTs.
Deciding the functionality of a smart contract depends on various aspects. Each metaverse platform has its own set of smart contract rules for execution. As mentioned earlier in the blog, popular metaverse platforms like Decentraland focus on trading land because popular companies like Samsung and EY have their virtual space set up for commercial and training purposes. So creating a customized smart contract for your virtual space can be a great deal of work. So it would be better to approach a metaverse development company with your plans, and with their help, you can create a flawless smart contract.
Here are a few resources that can help you;
A smart contract, as a whole, is the best solution to pace up efficiency and security and reduce the costs in many processes in diverse industry sectors like real estate, retail, entertainment, etc. Using smart contracts allows the industry to provide good quality customer service. The possibility of the metaverse dominating today’s web while decentralizing infrastructure is far, but thanks to big technologies like IoT, AI, and VR powering its infrastructure. Smart contracts will continue to play an important role in the metaverse. However, smart contracts still require significant evolution to support ongoing innovation and changes.
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