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Goldman Sachs: Blockchain is the core of the development of the metaverse and web3

Financial giant Goldman Sachs has stated that encryption technology will become the core of the virtual world, as it will allow people to securely own digital items in different virtual worlds.
 

Wall Street bank analysts led by Rod Hall from Goldman Sachs said in a report released on Tuesday that blockchain is one of the most destructive technology trends since TCP/IP and HTML "introduced the Internet in the 1990s".

Metaverse is a loose term referring to a virtual world where people can engage in gaming, work, entertainment, socializing, and trading in the form of avatars.

In October, Facebook announced that it would change its name to Meta and focus on building a virtual world, saying that this is the future of the Internet.

Decentralized, encryption focused game metaverse like Axie Infinity and The Sandbox have been attracting users recently. They allow players to create and trade items in the form of irreplaceable tokens or NFTs (a secure encrypted collectible), and have an in-game economy that uses cryptocurrency.

Goldman Sachs analysts say that encryption technology must be at the core of the development of the metaverse, as it allows users to securely own assets or items and transfer them to different platforms without the need for central permission.

For example, The Sandbox runs on the Ethereum encrypted network, allowing users to buy and sell in-game land and NFTs on exchanges outside the metaverse, such as OpenSea.

We believe that the metaverse is likely a fusion of different 3D spaces, and users will periodically move between these spaces, "Goldman Sachs said.

If any virtual goods or services cannot be moved from one space to another with users, we believe their value may be even more limited

The analyst added, "As far as the metaverse is concerned, blockchain is the only technology we see that can uniquely identify any virtual object independently of a central authority. The ability to identify objects and then track ownership is crucial for the ultimate functionality of the metaverse

Blockchain is a digital ledger for transactions, supervised by all members of the network rather than the central party. Blockchain technology powers Bitcoin, where users known as "miners" must solve password problems to verify transactions and maintain network security.

Although Facebook/Meta has released early versions of the metaverse, it is currently unclear whether the company believes that decentralized blockchain technology will play a significant role.

Many cryptocurrency enthusiasts are concerned that the company's financial strength and power on social media means it may dominate the virtual world and tightly control creation and transactions.

At the same time, critics are highly skeptical of the entire idea of the metaverse and point out that previous virtual worlds (such as Second Life) have existed for many years, and virtual reality headphones have never truly become popular.

Goldman Sachs' report is generally bullish on blockchain, although the bank has stated that it is too early to develop a clear investment strategy around it.

For Web 3, Goldman Sachs believes that blockchain allows for "partial elimination of centralized control". The statement adds that in the future, users will be able to log in without the need for a third party such as Meta, Google, or Apple.

Goldman Sachs analysts state that blockchain has a broader and more profound impact on decentralized identification and ownership of digital and physical entities

They said that this technology can increase privacy on the Internet and get rid of the need for centralized control of a series of industries such as supply chain management.