Cryptocurrencies and the metaverse. It sounds like a match made in investors' heaven. Both could offer tremendous growth prospects over the next decade and beyond.
Unsurprisingly, investors are already placing their bets on the intensifying horse race among metaverse cryptocurrencies. There could be a dark horse in the competition, though. Could Ethereum (ETH -0.19%) be the biggest metaverse cryptocurrency winner of all?
One common denominator
Financial services giant J. P. Morgan (JPM -0.96%) predicts that the annual metaverse market will top $1 trillion. The company has even already set up shop in Decentraland's (MANA 0.75%) Metajuku mall.
J. P. Morgan obviously views Decentraland as a potential metaverse winner. In its "Opportunities in the Metaverse" report, the big bank also identified The Sandbox (SAND -0.77%), Somnium Space (CRYPTO:CUBE), and Cryptovoxels as leading Web 3.0 metaverse worlds.
Other gaming coins are metaverse contenders as well. Axie Infinity (AXS) and Enjin Coin (ENJ -1.02%) especially stand out. Even more could be on the way. For example, the developers of Shiba Inu (SHIB -2.45%) have ambitious metaverse plans.
There's one common denominator for all of these metaverse cryptocurrencies -- Ethereum. Decentraland, The Sandbox, Somnium Space, Axie Infinity, Enjin Coin, and Shiba Inu all have their own native tokens. But they're all built on the Ethereum blockchain. Cryptovoxels is also built on the Ethereum blockchain with buying and selling conducted with Ether tokens.
A metaverse magnet
Why is Ethereum such a metaverse magnet? There are several likely reasons.
Perhaps the most important factor behind so many metaverse cryptocurrencies using the Ethereum blockchain is its widespread overall adoption. More than 40 of the top 100 cryptocurrencies based on market cap are built on the Ethereum blockchain. Most of them don't have any connection with the metaverse.
But metaverse cryptocurrencies probably aren't using Ethereum because of a digital form of peer pressure. The developers of these cryptocurrencies understand the advantages of the smart contract functionality supported by Ethereum. And they no doubt like that the Ethereum network has been around for several years.
Of course, metaverse cryptocurrency developers also realize the downsides of building on Ethereum -- notably including high transaction fees. However, they know that improvements are on the way with phase 2 of three in Ethereum's major upgrade slated for this year.
There's no guarantee that the Ether token will be the biggest metaverse cryptocurrency winner despite so many contenders using the Ethereum blockchain. Most of the top metaverse cryptocurrencies have handily outperformed Ether over the past 12 months. That trend could continue.
But it's notoriously difficult to pick a winner in the early stages of a new technology. For example, there were many companies that investors poured money into when the Internet first began gaining adoption. A lot of them -- even some that initially seemed especially promising -- no longer exist.
As was the case with the Internet, though, the metaverse won't be a zero-sum game. There will be multiple winners. Ethereum might not be the biggest winner of all. However, with so many metaverse cryptocurrencies using its blockchain, it looks like a pretty safe bet to at least be one of the winners.