What is MetaFi?

What is MetaFi? DeFi and Metaverse Unite!

After the recent popularity of metaverse projects, there has been a steep increase in interest around the term MetaFi, a combination of the words Meta and Finance. Browsing the internet for a definition of MetaFi, you’ll come across two explanations that generally point in the same direction, but have a slightly different point of view.

An introduction to MetaFi

To make sure we're clear on what we're talking about, let's start off with the definitions.

First, there’s MetaFi which defines Meta as metadata.

This concept of MetaFi can be seen as the integration of many different blockchain functionalities into a single Meta ecosystem that is interoperable due to set metadata standards used across many platforms and blockchains. Here, MetaFi aims to build and establish a new ecosystem centered on digital assets that will enable widespread adoption of Web3 and blockchain technology and provide users and players with new use cases. This ecosystem will be based on defined metadata criteria. A uniform standard would be produced as a result, fostering interoperability.

Then, there’s MetaFi which defines Meta as metaverse.

Here, MetaFi is viewed as the metaverse's main layer of financial applications. MetaFi is the infrastructure layer that unlocks value in the Metaverse, much as the Metaverse may be thought of as a synthetic layer on top of the real world. The word "MetaFi" is used to refer to the protocols, tools, and services that facilitate the intricate financial interaction between fungible and non-fungible tokens (and their derivatives) within the context of a larger ecosystem. For the producers, gamers, and digital natives whose opportunities to store and accumulate digital wealth are excluded from the conventional financial system, these tools that enable unlocking value are perceived as financial inclusion.

Looking at both of these definitions, for the context of this article MetaFi can be understood as the implementation of a wide range of blockchain functionalities, built on standardized metadata parameters, that allow for the intricate financial interplay between non-fungible and fungible tokens (and their derivatives) within the context of the wider ecosystem. This encompasses, but is not limited to applications that will be developed for use in the metaverse.

The creation of a full-fledged parallel economy for hundreds of millions of people will be made possible by MetaFi thanks to the meshing of various Web 3 processes, including the use of NFTs as collateral, increasingly complex financial instruments, novel forms of community governance (DAOs), and the utilization of previously inaccessible liquidity. This is made possible by the metadata that defines asset ownership.

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How does MetaFi work?

MetaFi makes use of the fact that most blockchains provide metadata for assets in order to increase interoperability. For instance, the metadata of an NFT nearly always includes a link to the associated image. A bitcoin (BTC) transaction also supports the addition of metadata, which lets you insert unencrypted data.

Assets will become quickly machine-readable and sortable by creating metadata standards that can be used on any blockchain. If they all supply their metadata in the same manner, an NFT marketplace, for instance, may start to comprehend and classify NFTs from numerous various blockchains.

MetaFi use cases

Below we will look at a few use cases that are already taking shape. As was already noted, there are countless possibilities with MetaFi.

Yield Farming NFTs

Using NFTs as collateral for loans and reinvesting the borrowed money at a higher rate are two ways to generate yield. Some NFTs allow owners to lend them to someone else who wishes to use them or stake them in order to make income. For instance, you could let gamers who couldn't otherwise afford them rent valuable or expensive NFT in-game items. For renting out their NFTs to others, the owner is compensated with a percentage of the lender's profits or a set sum of money.

Yield farming in MetaFi


Marketplaces are decentralized digital spaces where supply and demand may be matched, where NFTs can be found, and where NFTs can be published. On these marketplaces, NFTs are treated as financial assets and govern ownership. For anyone interested in buying and selling NFTs of any kind, including virtual clothing, in-game products, NFT art, digital real estate, and much more, these marketplaces may be the best option.

NFT marketplace for MetaFi


Metaverses are virtual environments that may or may not resemble the real world and can be utilized for social, professional, commercial, or gaming purposes. Those that resemble a real (digital) world frequently enable the free purchase, exchange, and construction of scarce land and buildings represented as NFTs.

Users have access to these virtual worlds where they can play, create, or simply hang out with friends and coworkers. Some companies, such as Heineken, have already realized immersive metaverse experiences, with their virtual brewery in Decentraland where visitors can see the production of Heineken’s newest beer, Heineken Silver. Other companies began selling land on which customers could construct their ideal homes, conduct architectural experiments, or simply hang out with their friends.

Metaverses offer a variety of straightforward and easy-to-use NFT implementations into virtual reality, such as consumables or wearable NFTs.

Limitations and difficulties with MetaFi

MetaFi can be thought of as a full metadata-based ecosystem within the context of a digital reality. As a result, it has a set of hardware and software requirements. The users and players that wish to interact with the MetaFi are also faced with difficulties to these criteria.

Naturally, the blockchain where MetaFi runs and functions on presents additional difficulties.

The crypto community must work on scaling and creating reliable tools, such as marketplaces, financialization primitives, creator tools, community-oriented business models, etc., to give users and developers easier access to the blockchain and dApps built on top of it. This will help MetaFi take on a clearer form. It's important to look into ways to improve underlying technologies like layer 1's, which will reduce transaction costs, boost throughput, allow scaling, and generally improve the accessibility of blockchain-based apps.

The ongoing GameFi and DeFi frenzy brought attention to the need for sustainable tokenomics that can offer users more consistent and dependable rewards. Long-term growth must be the focus of these incentives in order to prevent significant sell-offs sparked by erratic changes in APY or incentive payouts.

Last but not least, the crypto community needs to concentrate on governance and the legal aspects of the situation, which should strengthen token holders with useful features like voting rights and yield profits. To safeguard everyone concerned, this region needs to be transparent and straightforward.

What is next for MetaFi?

Although the future of MetaFi has not yet been fully exposed, several use cases are already starting to emerge. Decentralized identity management and reputation management systems that provide users with simple access to their digital assets and identities will play a significant role in MetaFi. All of these, though, are still in their infancy.

Naming services can help solve persistent issues with lengthy and complicated addresses. Without having to write in a lengthy ERC-20 or BEP-20 address, this would let you transmit your tokens to short address names. However, short address names leave room for human error.

In order for layer 0 or layer 1 networks, as well as different blockchains, to be fully meta, standards must be defined that foster interoperability.

Without safe and interoperable projects built with multi-chain capabilities and bridges that will ease the massive number of asset and data transfers, none of this will be achievable.

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