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MetaFi: Applications and Limitations

MetaFi concept is first introduced one day after Valentine’s day, when Binance announced to the public that they are uniting Binance Smart Chain and Binance Chain to create one single ecosystem, BNB Chain. This marks the first move of the world’s biggest cryptocurrency exchange, Binance, to focus and push the already hot topic, Web3 and Metaverse, as BNB’s driving factor of development in 2022. This article will collect comments from different sources about MetaFi in the past few days and look into the potential and challenges that MetaFi might encounter in the future. 


What is MetaFi?

Everything in the blockchain world now has its own “Fi”. Similarly, MetaFi is Binance’s umbrella term for a united concept of all the latest technological blockchain projects: DeFi, GameFi, SocialFi, Web3, and NFTs. According to BNB Chain’s blog, the combination of metadata (Meta) and DeFi (Fi) into MetaFi will be a new paradigm shift that aims to standardize blockchain technology for traditional Web2 large-scale applications, including games, social media, and the metaverse. Functioning as a DeFi infrastructure, MetaFi is expected to provide advanced and sophisticated support for interoperability.

Forbes recently also wrote an article with the headline “Decoding MetaFi: The next Frontier in Blockchain’s evaluation”, saying that 2022 is a high time for the evolution of how we interact with technology and how technology interacts with the world, with the development of Web3 Metaverse to connect it all. And the appearance of MetaFi will promise the existence of the world where personal data, and all the benefits of owning this data, belong to the individual. As BNB Chain wrote, MetaFi is “a means to an end” of all the current problems that Centralized data faces. 


MetaFi applications

The recently widely-discussed term “Metaverse” may create some confusion that MetaFi is a Decentralized Finance platform for Metaverse. However, as mentioned above, while many of MetaFi applications may be developed for practical uses in Metaverse, there are more to the benefits that MetaFi can bring, which are nearly unlimited.

1. MetaFi in Virtual worlds:

Virtual worlds are digital spaces for the purpose of social, commerce, or gameplay which may mimic the real world and its physics. They often comprise an element of scarce land represented as NFTs that can be purchased, traded, and built on freely. The most notable examples include popular projects such as The Sandbox or Decentraland. The adoption of blockchain in virtual worlds has moved forward significantly since the beginning of 2021, back when only a dozen people actively participated in them on a daily basis. In the last 30 days, 6.5 thousand unique addresses have interacted with the smart contracts of Somnium Space and Decentraland. The Sandbox and Crypto Voxels also witnessed a four-time increase since the beginning of November

2. Marketplaces: 

Marketplaces are digital hubs that match supply and demand through the act of, you guessed it, trading virtual items, allowing for greater discoverability of NFTs and facilitating better price discovery. Marketplaces such as OpenSea, Superrare, and Rarible allow users to freely trade and mint NFTs directly. From there, these NFTs can become valuable financial assets. The NFT boom has caused marketplaces volume to skyrocket. OpenSea’s 30-day trading volume in January 2021 was only 1 million dollars, while in November 2021 it surpassed $2 billion dollars, a 2,000x increase.

3. Yield-Bearing NFTs: 

NFTs can produce yields in 2 ways: indirectly or directly. Producing yield indirectly includes using NFTs as collateral for taking out loans and then reinvesting the loaned funds at a higher rate. Producing yield directly can be achieved by combining an NFT with yield-bearing DeFi LP tokens. For example, the platform Charged Particles aims to provide a framework to add these DeFi elements to NFTs. Also, a persistent trend over the past months has been for NFT-first projects to add a native token, adding another yield-generating element to their NFTs. 

4. MetaFi for Fan token:

These can be both fungible and non-fungible tokens that give their holders access to various forms of values, which can be access to a community, specific people or tokens minted in the future. A good example is The Bored Ape Yacht Club, a collection of 10,000 ape NFTs, where owning one not only gives holders access to a community Discord but allows them to speculate on future value delivery by The Bored Ape Yacht Club franchise.


MetaFi’s Limitations

For MetaFi to start realizing its true potential, much still needs to be developed. There are a couple of limitations in the current state of MetaFi that need to be overcome in order to bring about a notable wave of adoption. These challenges were much in concern by recent research about MetaFi conducted by Outlier Ventures (2021), in which they mentioned the three key challenges to MetaFi, which are similar to what BNB Chain mentioned in their blog: 

1. Lack of necessary tools for MetaFi:

For MetaFi to develop, the infrastructure such as marketplaces, financialization primitives, creator tools, community-oriented business models, etc., need to be completed to give both users and developers easier access to the blockchain and dApps running on top of it. It is necessary to explore improvements on foundation technologies like layer 1, which will lower transaction fees, increase throughput, enable scaling, and overall make applications running on blockchain protocols more accessible.

2. Legal and governance issues around fractionalization:

If you divide an NFT into 100 pieces and distribute them to different people, especially if that NFT carries rights such as voting or yield, it is not always clear who can do what and when and how those rights are managed. This area needs to be legitimate and transparent to protect all participants.

3. Standards across blockchains:

Additional challenges come naturally from the blockchain where MetaFi runs and operates. The Metaverse and its related applications are now being built mostly on Ethereum and different layer one or layer zero blockchains, and these blockchains are still not 100% interoperable.



2022 has started and it is now the time for the new stage of development for blockchain technology. Even though MetaFi is still in the infancy step, its application has already gone out of the dark, proving its usefulness in many areas like Web3, NFT, SocialFi, and GameFi in a successful 2021. Under the support and pursuit from BNB Chain, MetaFi definitely holds great potential in the near future.

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