An Introduction to the Metaverse

| November 17, 2023

Share this article

Metaverse

The amalgamation of human life and technology has begun and is evident with our use of devices and the ecosystem of applications they bring. All aspects of life, including work, communication, entertainment, and payments, are conducted through these devices with the click of a button. As they become a more prominent part of our lives, the line between the real and the virtual worlds is beginning to fade. Our interactions are moving online — work meetings, social interaction, and attending concerts can all be done at the convenience of our homes through modern technology like smartphones, computers, and Augmented Reality gear, just to name a few.

While interactive spaces exist online where people meet to discuss business, play video games, or even attend classes, the race is on to create undivided ecosystems where siloed spaces can be combined into a vibrant virtual world that will become an extension of the real world. Big corporations like Meta, Microsoft, and more are in the process of creating an alternate dimension for everyone to dive into and are referring to as the Metaverse. Likewise, the world of blockchain is also witnessing several developments with Metaverse projects, although more open and fully decentralized, as opposed to the walled gardens that the ecosystems created by centralized corporations are.

What Does the Vision of a Metaverse Look Like?

The metaverse is a yet-to-be-fully-developed concept that mostly exists in abstraction. While developments are being made constantly, it is conceptualized to be a three-dimensional augmented reality space that exists in parallel with the real world. People can access this alternate plane with the use of augmented reality technology — AR goggles, glasses, and headsets — to enter a highly immersive and interactive world. Here, people can carry out tasks and activities from their lives virtually, like attending classes, conducting business, going shopping in e-commerce malls, gaming with friends, or just hanging around witnessing the vibrant landscape of the metaverse.

The use of technology like AR to enter virtual worlds is already implemented by the gaming industry, which is why it is at the forefront of metaverse development. Video games like Roblox and Fortnite are allowing for highly interactive gameplay and socialization for their users. While this is not the metaverse, it offers us a glimpse of what it is going to be. These projects get massive numbers of people interacting with each other but are barely interoperable with other projects and applications, therefore limiting their use cases and preventing them from becoming what a true metaverse would look like.

The metaverse, once built and ready to use, will allow users to interact with each other on several applications as they move around with portable avatars and digital items through the ecosystem. Think of it like accessing an AR chatroom right after finishing a business meeting — users can spawn from one application to another with the same avatar, the same digital identity, and more. This level of interoperability would allow users to move around the metaverse freely with their digital possessions, imitating how people live in the real world. Although cross-compatibility between different metaverse projects of the now is not something the centralized companies behind them are interested in, the high level of interoperability needed to create a massive open world is possible with the blockchain.

The Role of Blockchain in the Metaverse

Blockchain networks like Ethereum are at the forefront of building interoperable protocols on their ecosystems, allowing users to interact with all protocols and users present on the networks. Several blockchain components will be operating aspects of the metaverse, but the more fundamental ones, like blockchain wallets, NFTs, and cryptocurrencies, will play the biggest roles. Digital identities, ownership, and economies are important features that will go into the makings of a successful metaverse, and such features will be facilitated by blockchain technology. Thus, several metaverse protocols can be found in the development and deployment of blockchain networks as blockchain use cases complement the metaverse.

Wallets

Blockchain or cryptocurrency wallets are the basic infrastructure allowing users to interact with dApps and web3 ecosystems. Wallets are primarily used for storing cryptocurrencies like crypto coins, tokens, and NFTs. Since token transactions initiate dApp functionalities, wallets are going to be an essential aspect of utilizing metaverse applications. More importantly, however, blockchain wallets act as digital identities for blockchain and web3 users, which will be translated to the metaverse, where user interaction and activity will require digital identities.

NFTs

NFTs, as a blockchain use case, are by far the most versatile. They are already showing great use cases in the form of digital collectables like in-game assets on Axie Infinity, land parcels on Decentraland, and digital real estate, just to name a few. Their ability to convert digital items into unique tokenized assets will bring monetization capabilities to the metaverse, the economics of which will be handled by NFT counterparts — fungible cryptocurrency tokens.

Of course, NFTs will play other important roles in the metaverse beyond adding value to digital possessions. These tokens will be implemented with e-commerce on the metaverse, allowing for proof of ownership with token transfers and allowing for the tracking of ordered products in the real world along their supply chains. Similarly, it will be used by all kinds of entities operating on the metaverse for ownership proof and tracking capabilities.

Cryptocurrencies

Cryptocurrencies in the form of coins and tokens will foster a rich decentralized economy in the metaverse and, along with the underlying blockchain, will function as its primary payment system. Cryptocurrency will allow for cross-border exchange of value over the vibrant digital realm, bringing about employment opportunities, novel streams of revenue, and better financial systems to metaverse users.

While the central components of blockchain technology will play a heavy role in the metaverse, it is in no way an exhaustive list. There are several others that will be involved in shaping up the metaverse as a truly functioning and interconnected ecosystem. Every aspect of blockchain will complement metaverse functionality and bring about use cases and convince individuals and businesses to adopt the metaverse as a plane for communication, business, and entertainment.

Metaverse Use Cases

The use cases brought about by the metaverse will encompass all aspects of digital interaction that individuals experience today. Further, with blockchain decentralization, the metaverse will boast a wide range of DeFi and GameFi applications allowing users to benefit economically from their interaction with the metaverse. Monetary use cases are already being witnessed by those indulging in metaverse gaming projects like Axie Infinity and Decentraland. Users from countries like Vietnam and Venezuela are reporting making full-fledged incomes from such projects, which are forming the foundation of the metaverse.

As new opportunities to generate revenue arise, older systems will adapt to the development of the metaverse. E-commerce, web-based businesses, and traditional companies will shift their models to incline toward the metaverse and generate revenues from the herds of users that will flock to this digital phenomenon. Digital stores, office spaces, and other real-world commercial infrastructures will be set up on the virtual real estate and spaces in the metaverse. Of course, metaverse use cases that are already popular, like education, event attendance, and media streaming, will all be part of a larger ecosystem of applications as a totally formed metaverse comes into existence.

Metaverse Is the Logical Evolution of Technology

The metaverse is still in its infancy and is quite some time away from being fully developed for the masses. Massive corporations and independent developers are working to make this conceptualized idea, first spoken about in the 1992 classic novel Snow Crash, an actuality. Large sums are being invested into metaverse projects — which is a direct reflection of the confidence in the utility it will bring to the world. Logically, the development of the metaverse seems like the natural way to go as technology is taking the world online, and people are spending more time in virtual spaces and relying on web infrastructure to get daily tasks done.

The creation of the metaverse will take several forms, depending on how those developing it defines it. With corporations expected to build an ecosystem of interlinked applications that cannot interact with those outside their realm of development, the real anticipation is on the flipside with the developments taking place in the world of blockchain and web3. Several developers are building decentralized metaverse applications that will provide high interoperability, monetizing mechanisms, and complete openness for anyone wanting to hop into a boundless digital realm.

Learn more about Liminal here.

Remember to keep yourself updated on our blog and social media channels.

More on Crypto

As we continue constructing a fully regulated digital asset custody platform, ensuring secure storage for both crypto and fiat assets remains a critical priority. 

To facilitate the last checkpoint of enabling institutions to convert their digital asset treasury into fiat currency, we’re expanding beyond pure wallet infrastructure and integrating seamless fiat off-ramp capabilities for our partners.

We’re thrilled to announce our partnership with Encryptus, licensed and compliant off-ramp solutions tailored for institutional clients. This collaboration elevates Liminal’s service offerings by empowering our partners to convert their digital asset treasuries into fiat currencies efficiently.

Integrating A Seamless Off-Ramp Solution

The digital asset ecosystem historically faced friction points when transitioning between fiat and cryptocurrencies. Off-ramp solutions address this pain point by enabling efficient and streamlined conversion between asset classes, minimising value loss and simplifying compliance processes.

Here’s how off-ramp changes the game:

  • Reduced Friction: Frictionless conversion minimises delays and operational complexities associated with traditional fiat-crypto exchange methods.
  • Enhanced Efficiency: Streamlined workflows expedite asset conversion, increasing speed and cost-effectiveness for institutional and individual users.
  • Optimised Value Preservation: Advanced off-ramp solutions prioritise minimising price slippage and value loss during conversion, protecting user portfolios.
  • Simplified Compliance: Integrated compliance features navigate regulatory complexities, ensuring adherence to relevant financial regulations.

With our partnership with Encryptus, we have embedded their institutional-grade APIs, connecting their off-ramp solution within Liminal’s wallet and custody platform. 

This integration simplifies our clients’ liquidation requirements while keeping their assets secure and more:

  • Effortless Digital Asset to Fiat Conversion: Our partners will be able to access treasury management and facilitate business payments in 54 countries and individual payments in an extensive network of 80+ countries.
  • Streamlined Compliance and Regulation: Our partners will be able to leverage Encryptus’s rigorous licensing and compliance framework, ensuring adherence to stringent financial regulations.
  • Enhanced Platform Value: We will be able to expand the functionality of the Liminal custody solution, attracting institutional users seeking comprehensive digital asset management capabilities.

Moving Towards A Robust Off-Ramp Partnership With Encryptus

The partnership between Liminal and Encryptus earmarks a significant step forward in secure digital asset custody, representing a shared commitment to pushing compliant practices while supplying institutions with easy access to convert their digital assets to fiat. 

For Encryptus, the opportunity to integrate with Liminal’s established platform presents a chance to reach a wider audience and scale their innovative off-ramp solutions to new heights. By streamlining fiat conversion within Liminal’s secure custody infrastructure, Encryptus gains access to a trusted network of institutional users seeking seamless and compliant treasury management.

For Liminal, this collaboration reinforces our dedication to partnering with companies that demonstrably prioritise clear governance and robust policy frameworks. By aligning with Encryptus’s stringent compliance standards, we reaffirm our commitment to building a secure and sustainable future for digital assets, where trust and regulatory certainty go hand-in-hand.

January 22, 2024

Hello world, it’s that time of the month when we share the biggest security breaches in the world of Web3 through our Security and Regulatory Newsletter. 

Liminal believes in optimizing security and custody practices globally across the Web3 industry. Through our Newsletter, we highlight security, regulations, and compliance incidents that have happened in the past month and how one can follow better Security practices to safeguard their digital assets. 

We will also highlight regulatory changes that might have happened globally, which were significant to the overall ecosystem.

Dive in and get a detailed analysis of everything security and regulation in the domain of web3 with Liminal’s Monthly Security and Regulatory Newsletter.

Web3 Security Compromises in January

Abracadabra exploited for almost $6.5 million, Magic Internet Money stablecoin depegs

The Magic Internet Money ($MIM) stablecoin has lost its dollar peg again, dipping all the way below $0.77 in a flash crash before returning to around $0.95.

The depeg appears to be related to an exploit of the Abracadabra lending protocol, which allows people to borrow $MIM. An attacker exploited an apparent flaw in the platform’s smart contracts to drain around $6.5 million.

Goledo Finance hacked for $1.7 million

Goledo Finance, an Aave-based lending protocol, was exploited through a flash loan attack. The attacker stole assets estimated by CertiK to be around $1.7 million.

Goledo Finance contacted the attacker to offer a 10% “bounty” for the return of the remaining assets. In a message on January 29, the attacker wrote: “I hacked Goledo and want to negotiate.”

Socket service and its Bungee bridge suffer $3.3 million theft

The Socket cross-chain infrastructure protocol was hacked for around $3.3 million in an attack that exploited its Bungee bridge. The thieves were able to exploit a bug that allowed them to take assets from those who had approved a portion of the system called SocketGateway.

A little over 700 victims were affected, and the highest loss from a single wallet was around $657,000. 121 wallets lost assets priced at more than $10,000.

On January 23, the protocol announced they had recovered 1,032 ETH (~$2.23 million) of the stolen funds.

Web3 Regulatory Practices for January

The EU Imposes Stricter Due Diligence Rules for Crypto Firms

On Jan. 17, the European Council and the Parliament came to a provisional agreement on parts of the Anti-Money Laundering Regulation (AMLR) that now extends to the crypto sector.

Under the new rules, cryptocurrency firms will be required to run due diligence on their customers involving a transaction amounting to €1,000 ($1,090) or more. 

However, the agreement isn’t final yet as it has to be first officially adopted by the Council and Parliament before the rules can be applied.

So, after the EU passed its landmark MiCA regulation last year, which clarified rules about cryptocurrencies, regulators are now targeting the space with tighter controls. 

While these regulations bolster security and trust in the crypto market, potentially attracting more cautious investors and combating financial crimes, they also present challenges. 

The US State of Virginia Introduces Digital Assets Mining Rights

Recently, the Virginia State Senate introduced Bill No. 339, which outlines regulations for the transactions and mining of digital assets and their treatment under tax laws. 

The legislation exempts individuals and businesses engaged in crypto mining activities from obtaining money transmitter licenses. Additionally, it protects miners from any discrimination. 

Issuers and sellers of crypto are also exempted from securities registration requirements if certain conditions are met. Moreover, those offering mining or staking services are not to be classified as “financial investment” but must file a notice to qualify for the exemption.

The bill further incentivizes crypto’s use for everyday transactions by offering tax benefits. Under this, up to $200 per transaction can be excluded from an individual’s net capital gains or gains derived from using crypto to purchase goods or services, starting from Jan. 1, 2024.

Key Takeaways:

  • Hackers continue to exploit vulnerabilities in DeFi protocols and cross-chain bridges, highlighting the need for robust security measures.
  • Regulatory frameworks are evolving rapidly, with stricter AML rules and supportive legislation for emerging technologies like crypto mining.
  • Staying informed about these developments is crucial for navigating the digital assets market safely and responsibly.

Stay #LiminalSecure

These events highlight the constant evolution of Web3 security and regulation. You can confidently navigate this dynamic landscape by staying informed and prioritizing security best practices. 

At Liminal, we’re committed to empowering institutions to unlock the full potential of digital assets without compromising security or compliance norms with our robust custody and wallet infrastructure solutions. Join us on this journey towards a safer, more accessible future for digital assets.

January 15, 2024

Buckle up as we’re about to take a trip down memory lane. 

The year 2023 was a wild ride that showed signs of a plummeting market, groundbreaking innovation and regulatory hurdles. 

Contrastingly, in the same year, we saw no market-shattering crashes. Financial institutions extending an olive branch, key jurisdictions unlocking the doors to blockchain technology. 

Simultaneously, at Liminal, we experienced significant breakthroughs, re-engineering our positioning and becoming a pioneer in digital asset security with bank-grade custody. 

We took major strides this year, right from building comprehensive products to becoming a qualified custodian, from revamping our brand design to expanding our offices in newer locations, from partnering with hyper-local communities to onboarding a diverse set of clients,  we did it all. 

So, let us take you through everything we accomplished in 2023 and what the future holds.  

Liminal Became A Qualified Custodian

One of the prominent moves we made this year was to change our positioning as a regulated custodian from being a wallet infrastructure platform. 

We got two licenses in key jurisdictions to operate as a regulated custodian. 

The first one came from Hong Kong, where we acquired the TCSP license issued by the SFC, which oversees and regulates financial activities to ensure compliance with legal and regulatory obligations. 

Our next license came in the MENA region, where we got In-Principle Approval for the FSP license granted by the FSRA, a governing body in ADGM, to establish a progressive financial services environment. 

Both these licenses paved the way for Liminal to push its wallet infrastructure and offer bank-grade custody to institutions looking to operate in these particular regions. 

Liminal Introduced A Suite of Products & Features

Continuing our building spree, we launched new products and integrations to broaden the existing infrastructure and added more parameters of security, scalability and sustainability. 

Staking-as-a-Service

Liminal launched staking for institutions to eliminate the risks involved in running staking nodes and the vulnerabilities in hot wallet transfer. 

Hence, we introduced an industry-first mechanism of cold wallet staking to ease staking for institutions and secure assets explicitly.  

Whitelabel Solution

Accelerating the go-to-market time for organisations looking to build a secure and customisable application, Liminal launched its whitelabel solutions

Targeted to help organisations meet security standards, manage assets with maximum control, and add their custom branding to give it a personal touch. Our whitelabel solution is a first-in-class custodian-developed solution for institutional grade custody.

Smart Consolidation

We are building not just secure custody but also automation-based features to eliminate manual errors, increase the throughput of transactions and scale institutional wallets. 

Taking this ahead, we launched the Smart Consolidation feature to automatically calculate all the active addresses and consolidate them into a single address. With this level of automation, managing multiple addresses becomes uber easy for wallet teams. 

Travel Rule 

To limit the use of cryptocurrencies for activities like money laundering and terror financing by regulatory bodies, travel rule was mandated for institutions to follow. 

Continuing the latest compliance integration policy, Liminal partnered with Notabene to introduce Travel Rule, enabling institutions to manage counter-party risk and extend the process of due diligence right from the Vaults dashboard.   

Liminal Accured List Of Security Certifications

Following our ISO certification for data privacy and risk management, we added two new security certifications to fortify our systems and build trust for our clients. 

Liminal Achieves Crypto’s Highest Security Mark: CCSS Level-3 Certified

Cryptocurrency security lacked a gold standard, creating a vulnerable ecosystem. Enter the CryptoCurrency Security Standard (CCSS), setting the bar for auditing and certifying custodian infrastructure and establishing levels of trust and confidence for investors. 

Liminal became only the second wallet infra platform and the first regulated custodian to be accredited with Level-3 certification, deeming wallets, transfer environments, workflows and engines safe and secure. 

Liminal Reciueved SOC 2 Type II Certification

To tackle threats in institutional-grade security, organisations’ SOC has been identified as the primitive compliance standard for service organisations to handle customer data.

Liminal successfully attained SOC 2 Type II certification, validating its setup of security controls & compliance processes to be industry standard. 

Liminal Level Up

Liminal unveiled its most significant platform upgrade ever, revolutionising the future design standard of a qualified custodian. This level-up activity included revamping our website and product UI, giving a completely new look and feel to not “Liminal” but “Liminal Custody”. 

The Liminal level-up activity was a strategic step and the biggest one for us this year to create an intuitive, inviting and tailored experience for our clients. 

Liminal Reached New Borders

We spread out our operations this year, reaching new borders and onboarding a new wave of institutions across gaming, DeFi, HNI wealth, treasuries, and exchanges! From Indonesia and Africa to India, UAE, and Korea, we are setting up custody operations worldwide. 

This isn’t just a roster of clients; it’s a network ready to spark connections, collaborations, and shared success to further the definition of secure assets. 

Liminal Collaborated With Law Enforcement Agencies

The best and the proudest moment of Liminal for this year was when we collaborated with CBI & Himachal Prashesh police department to aid them in seizing digital assets. 

This partnership put us on the map, as we became the first point of contact for LEAs in India, and we standardised the process of secure seizure of digital assets. Leveraging our expertise, we enabled a safe space for officers to learn the basics of custody, contributing to a safer digital landscape.

Team Liminal Grew Bigger

Building such a massive infrastructure, prioritising security and compliance over everything else, we had to grow the team to build at pace and expand at an even higher level. Not only did we grow in team numbers, but we also elongated our footprint to new destinations. 

Team Liminal went from 32 to 70 with 5 new offices in Mumbai, Ahmedabad, Hong Kong, Singapore and ADGM, setting up our custody operations steadfastly. 

What’s To Look Out For In 2024

We are excited to announce that our commitment to integrating the most secure digital asset wallets with a cutting-edge custody platform is swiftly becoming a reality. 

The upcoming year, 2024, will serve as a testament to this transformative journey. Moving beyond self-custody, we are constructing a comprehensive infrastructure encompassing both custodial and non-custodial wallets. Exciting products are set to launch starting from the first week of January, some of which are: 

  • Official Custody Platform Launch
  • Liminal’s Off-Exchange Settlement Hub
  • Secure Custody of Real-World ‘Tokenised’ Asset

The Web3 space has evolved explicitly this year, pushing the narrative of secure digital asset custody and security, introducing new regulations and compliance standards, licensing VASP providers and standardising the use of custodians as a trusted third party. 

At Liminal, we took major strides this year, from building comprehensive products to becoming a regulated custodian, from revamping our brand design to building the full infrastructure of custodial and non-custodial wallets.

January 5, 2024

Find Out How You Can Benefit From A Fully Self-Custodial Wallet Architecture