Foundations of Decentralized Metaverse Economies: Converging Physical and Virtual Realities

Abstract

Decentralized metaverse economies leverage blockchain cryptocurrency and asset tokens to enhance the concepts of digital ownership and scarcity, uniquely combining aspects of real, virtual, and blockchain economies. This study applies and extends token adoption and valuation theory to conceptualize and empirically analyze the dynamics in decentralized metaverse economies. We analyze over 4.5 million blockchain transactions from two blockchains across two years in the “The Sandbox” metaverse using vector autoregressive models. Our findings reveal complex dynamics among exchange rates, economic actors, and their activity, highlighting the exchange rate’s central role in fostering growth, particularly regarding creating scarce digital assets. The results provide insights for designing and regulating decentralized metaverse economies and offer a novel conceptual framework for understanding these emerging information systems. Our research contributes to the literature by bridging economic theories with the technological realities of blockchain-based metaverses, providing a foundation for future studies on the convergence of real and virtual economies in the metaverse.