Crypto and the Metaverse: How Digital Currency Powers Virtual Worlds

The metaverse, a sprawling virtual realm blending augmented reality, virtual reality, and blockchain technology, is no longer the stuff of science fiction.

Platforms like Decentraland, The Sandbox, and others create expansive digital worlds where users can socialise, work, and play.

Cryptocurrency is at the heart of these virtual economies, acting as the fuel that powers transactions, ownership, and innovation.

Cryptocurrency expert Mr John Fenga describes this fusion of virtual worlds and digital currencies as a “revolution in digital ownership and commerce.”

Mr Fenga said: “Cryptocurrencies are the backbone of the metaverse, providing the infrastructure for users to own assets, transact seamlessly, and participate in a truly global economy.”

Cryptocurrencies enable the creation and exchange of digital assets within virtual worlds.

These assets range from virtual real estate to wearable digital fashion items and even unique digital artworks. Blockchain technology ensures these transactions' security, transparency, and authenticity, a feature essential for the thriving economies of platforms like Decentraland and The Sandbox.

Decentraland, for example, uses its native cryptocurrency, MANA, to facilitate purchases within its ecosystem. Users can buy virtual land, build structures, and host events — all powered by MANA tokens.

Similarly, The Sandbox utilises its token, SAND, to drive its in-world economy, allowing users to trade assets, build games, and earn revenue from their creations.

“Without cryptocurrencies, the metaverse would lack the seamless transaction system that makes it so dynamic,” Mr Fenga said. “They provide the financial framework for innovation and engagement in these virtual spaces.”

One of the most intriguing aspects of the metaverse is the rise of virtual real estate. Companies and individuals are purchasing digital land parcels, often at staggering prices.

These properties host virtual storefronts, galleries, and even live events, generating income for their owners.

For instance, a virtual plot in Decentraland sold for $2.4 million in 2021. In The Sandbox, high-profile brands like Adidas and celebrities like Snoop Dogg have purchased land to create immersive experiences.

“Virtual real estate isn’t just a novelty—it’s a legitimate investment vehicle,” Mr Fenga said.

“The scarcity of these digital plots, coupled with the metaverse’s growing user base, has driven demand and value.”

However, Mr Fenga warns of the risks. “As with any investment, there are no guarantees. Prices can be volatile, and the market is still evolving. Thorough research and cautious investment are essential.”

Non-fungible tokens (NFTs), unique digital assets verified on the blockchain, are another cornerstone of the metaverse economy. NFTs allow for the ownership of everything from virtual art to gaming assets, providing creators a way to monetise their work.

In games like Axie Infinity and platforms like The Sandbox, users can earn, buy, and sell NFTs representing in-game characters, items, or even land. This has led to the rise of play-to-earn models, where players generate real income through participation.

“NFTs have revolutionised how we think about ownership and value in digital spaces,” Mr Fenga said. “They empower creators while providing users with a tangible stake in the virtual worlds they inhabit.”

Despite its rapid growth, the intersection of cryptocurrency and the metaverse faces significant challenges. Regulatory uncertainties, technical complexities, and concerns about sustainability are pressing issues that must be addressed.

“Regulation is crucial to ensuring that these virtual economies are fair and secure,” Mr Fenga said. “Without clear guidelines, there’s a risk of fraud and exploitation, which could undermine user trust.”

Additionally, the environmental impact of blockchain technology has come under scrutiny. The energy-intensive nature of some cryptocurrencies has raised questions about sustainability, prompting efforts to adopt greener solutions, such as Ethereum’s recent shift to a proof-of-stake model.

“Balancing innovation with responsibility is critical,” Mr Fenga said. “The industry must prioritise sustainability to ensure long-term viability.”