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Let’s pretend for a minute that the metaverse is hosting a job fair — not for people but for technologies.
Hundreds of today’s top technologies show up, resumes in hand, eager to find their place in the next iteration of the internet. NFTs, VR headsets and Nvidia GPUs all start having great conversations with the metaverse recruiters. Hands are shaken, deals are made and jobs are offered right on the spot.
Then bitcoin enters and the room goes silent.
At first, the original gangster crypto just assumes that it’s simply because everyone’s intimidated. And yet, nobody’s making eye contact. Metaverse recruiters aren’t even asking for bitcoin’s resume, let alone offering it an interview.
Bitcoin starts to see the writing on the wall. Despite over a decade of accomplishments, accolades and pioneering achievements, bitcoin may not have the right “qualifications” to join the metaverse — and may be forced into an early retirement.
So why is the current iteration of bitcoin not a great fit for the metaverse? What’s holding it back? And will bitcoin’s exclusion lead to its downfall?
Let’s discuss why the metaverse could kill bitcoin.
The Short Version
- To expand into the metaverse and Web3, tech giants are looking at ways to use crypto and blockchain technology.
- But one thing is clear: Bitcoin is unlikely to be part of it.
- Bitcoin is old, clunky, very volatile and not environmentally friendly. And that’s why companies are looking at more stable cryptos like ether.
What Is the Metaverse?
The metaverse is essentially virtual reality (VR) meets the internet. VR workspaces, classrooms, video games, influencer pages and bustling virtual marketplaces, all interconnected seamlessly.
In a one-hour keynote sponsored by Meta (the tech giant formerly known as Facebook) about the metaverse, Mark Zuckerberg showed off some pretty neat demos. These included a teacher giving her students a walking tour of ancient Rome and an Instagram user instantly teleporting to the concert her friend posted about. And toward the end of the video, Zuckerberg explained the reason for the name change from Facebook to Meta.
The metaverse may sound like a gimmick to some but not to the tech giants. Titans like Google, Meta and Microsoft have all shared their multi-billion dollar plans for colonizing what they call “Web3” or internet 3.0. (Internet 2.0 was the advent of user-generated content in the mid-2000s.)
If the world really does migrate en masse to the metaverse over the next decade as these companies anticipate, it’s going to create some winners and losers. Here’s why bitcoin may fall into the latter category.
7 Reasons Why the Metaverse Could Kill Bitcoin
Google “metaverse bitcoin” and you’ll find surprisingly few results.
And the more you think about it, the more it makes sense. Bitcoin may be popular, but that’s pretty much all the aging crypto has going for it.
Bitcoin may not be invited to join the metaverse for many reasons. We take a quick look at seven of those reasons below.
1. Bitcoin Uses More Power Than Many Countries
According to a Statista, each bitcoin transaction requires 2,264 kilowatt hours’ (kWh) worth of electricity to process.
That’s because bitcoin still uses the old-school proof-of-work model. This process requires walls of computing power to verify each transaction and add it to the blockchain.
For perspective, the average American household consumes just 893 kWh per month, according to the U.S. Energy Information Administration.
And bitcoin’s rate of consumption is growing. Who knows how much power bitcoin will need by the time the metaverse arrives in 2025.
Bitcoin’s rising power needs leaves the metaverse builders with two choices:
- Take on the immeasurably expensive environmental PR disaster of preserving the Bitcoin blockchain, or
- Leave the foundation of the metaverse’s economy in the hands of anonymous miners across the world.
Well, even if they did choose option #1 and try to adopt bitcoin as a metaverse currency, they’d run headfirst into another issue:
2. It’s the Oldest and Least “Useful” Crypto
Bitcoin was never intended to be an investment. Rather, its mysterious progenitor Satoshi Nakamoto used the granddaddy of crypto only to prove a hypothesis: that blockchain tech could replace trusted third parties in online transactions (banks, PayPal, etc.).
(Case in point, in Nakamoto’s original 2008 whitepaper, Bitcoin: A Peer-to-Peer Electronic Cash System [PDF], the word “bitcoin” never appears again after the title).
Bitcoin served its purpose. And then Nakamoto effectively put it on a shelf. It stopped receiving “updates” around 2012, and its age is starting to show. Other cryptos are faster, more efficient and more practical. And this leaves bitcoin looking like a Ford Model T among Teslas.
Ethereum and Cardano are being considered for the metaverse because these blockchains can store more than just fungible data. Both can store smart contracts, NFTs and more.
And considering that NFT trading volume rocketed past $25 billion last year, it’s a safe bet that the metaverse will be built using cryptocurrencies and the accompanying blockchains that support them.
Besides, would you want to drive a Model T on the autobahn?
3. Regulators Aren’t Big Fans
It’s no secret that bitcoin has been a big headache for regulators across the globe. It’s notoriously difficult to tax. And some authorities worry it’ll become a vehicle for financial crime — especially now that it’s been adopted as a national currency.
Banks in El Salvador are required by law to accept bitcoin, which both the IMF and the Financial Action Task Force are worried will make it a haven for money laundering or financing terrorism.
Clearly, adopting bitcoin as an official currency — in the real world or the metaverse — exposes a government or private enterprise to some legal liability. And that’s extra liability that the tech giants surely aren’t keen to burden their busy lawyers with.
4. Bitcoin’s Volatility Would Inhibit Trade in the Metaverse
Bitcoin’s minute-to-minute volatility may be a thrill ride for long-term HODLers and casual observers, but it’s making anyone trying to use bitcoin as a currency feel nauseous.
When El Salvador gave every citizen $30 worth of bitcoin during the rollout, many rejoiced. After all, roughly a quarter of El Salvadorans live on less than $5.50 a day, so a $30 bonus wasn’t a mere stipend; it was a stimulus.
However, nine out ten El Salvadorans also didn’t understand what bitcoin was. So a week later, when they discovered that their $30 was now worth only $24.19, they rushed to the country’s newly installed bitcoin ATMs to dump it.
Bitcoin can be a currency or an investment, but not both simultaneously. In the metaverse, if either the buyer or the seller doesn’t trust bitcoin, trade grinds to a halt.
Not what you want if you’re trying to build a creator economy in the metaverse.
Even if the tech giants were able to magically step in and stabilize the value of bitcoin, they’d have an uphill battle to get other companies on board with trading in bitcoin, since:
5. It’s Already Flopped as a Real-world Currency
As you’ve probably surmised by now, El Salvador’s attempt to adopt bitcoin as legal tender isn’t going well.
El Salvadoran president and famously bullish crypto stan Nayib Bukele intended for his country’s bitcoin gambit to a) stimulate the economy and b) save his citizens $400 million in remittance fees.
But both goals remain far out of reach.
In January, Moody’s downgraded El Salvador’s credit to “very high risk” of default and its national debt is selling for just $0.36 on the dollar.
And as hinted above, the bitcoin adoption rate among citizens is abysmal. Those who aren’t deterred by the coin’s falling/volatile value also have to contend with remittance fees for using Bitcoin. Some money-sending methods cost less than sending bitcoin.
El Salvador’s bitcoin adoption was supposed to showcase all the ways bitcoin could be a bona fide legal tender. Instead, it perfectly highlighted all the reasons it couldn’t — to the world and to the builders of internet 3.0.
6. The Tech Giants Can’t Control It
One of bitcoin’s shining qualities is its decentralized nature. No single entity owns bitcoin; it’s difficult to monitor and virtually impossible to control.
That’s why the people love it.
And it’s precisely why China banned it and built a state-sponsored copycat that they could actually monitor and control: the digital yuan.
That may sound pretty Orwellian, but the American tech giants are surely thinking along similar lines as the Chinese central bank.
Hmm… a crypto that we control is better than one we don’t.
The tech giants’ big plans for the metaverse — monetization, data harvesting and blockchain app development — will move along much faster if they use their own homemade crypto instead of someone else’s.
Which leads me nicely to the final reason I see bitcoin becoming the first major casualty of the metaverse.
7. The Metaverse Has Already Started Hinting at Its Chosen Cryptos
The industry titans that run internet 2.0 have already started hinting at which cryptos they might use to build internet 3.0.
Since 2019, Meta has been trying to navigate its metaverse-ready stablecoin, diem, through regulatory waters. In February 2022, however, it was torpedoed. They’re trying again with paxos (USPD), still tied to their Novi crypto wallet.
Microsoft hasn’t revealed a specific crypto yet, but they received a U.S. patent for a “crypto token creation service” and announced a partnership with Coinbase to streamline NFT purchases — which, as you recall, are mostly powered by Ethereum.
Apple allocated an unknown portion of its $25 billion yearly R&D budget to research about the metaverse. In November 2021, Tim Cook stated that crypto was something the company was definitely looking at but had no plans to either invest in crypto or accept it as a form of payment. This effectively eliminates bitcoin from their future plans since those are the only two purposes it serves.
Outside of tech company plans, early metaverse investors are bullish on blockchains like The Sandbox, which helps facilitate world and game creation, Enjin, which powers NFTs more efficiently than does Ethereum, and Render, which crowdsources CPU power.
Should I Sell My Bitcoin Before the Metaverse Arrives?
Wait for the headlines to arrive.
If bitcoin gets a “job” in the metaverse (i.e., creators get paid in bitcoin), there may be hope yet that values will hold during the migration.
However, as more and more companies announce their plans for the metaverse — and none of them mention bitcoin — more and more institutional investors will start to smell smoke and quietly exit their positions. The media will pick up on it and a mass selloff will occur overnight.
It’s a formula we’ve seen with every speculative investment since Dutch tulips.
The Bottom Line
There may yet be a ray of hope for bitcoin. Google Pay now accepts bitcoin, and Twitter’s Jack Dorsey has stated in no uncertain terms that bitcoin will be a part of Twitter’s future.
Even still, bitcoin’s value is extremely transient, upheld by speculation and incredibly sensitive to negative press. Sure, it’s rebounded from bad press before; but its lack of employment in the metaverse will highlight all the red flags on its resume: power consumption, lack of utility and more.
Bitcoin may have opened the door for crypto and blockchain technology, but it never actually walked through it. It was never upgraded, iterated upon or optimized to stay with the times.
And now with the rise of the metaverse, a new door opens — and the door bitcoin never walked through may be about to close.