Crypto, metaverse, ... what to make of it?

Terms like cryptocurrency, blockchain, metaverse and many others are flourishing right now. More and more new so-called projects are emerging and we hear of enormous profits. What are we supposed to make of this? Is it a lack of understanding if I don't invest? Am I missing out on the next big development? The honest answer: we don't know! It is still a very young development. Many projects will fail. New, fantastic success stories will be written.

Do I not understand it?

The new terms can be daunting and lead to the assumption that something completely new is being created. Yet understanding them is not very difficult in principle and not dissimilar to the world as we know it. As an investor today, I basically know five forms of investment: Cash, bonds, shares, real estate and gold. Cash is a classic means of transaction, used primarily for the exchange and trade of goods. Bonds are loans with which I can deposit cash for a certain period of time. Shares, on the other hand, are investments in companies, projects and the like which produce something or provide a service. Real estate is space which is used for private or business purposes. And gold? Gold serves as a safe haven when all else fails.

If you consider these actual functions, it is easier to understand the developments in the digital or virtual space. To put it simply, the virtual projects are attempts to replace or rethink today's approaches.

• Cash: In today's system, banks play an important role in payment transactions. This works well in principle, but also has disadvantages such as high costs and cumbersome mechanisms to ensure security. Attempts are being made to establish an alternative. This has not yet succeeded, or only to a very limited extent.
• Bonds: The situation with bonds is similar to the one with cash. A loan is typically securitised in bonds, with banks or similar institutions taking on a central role with similar disadvantages. Blockchain technology is expected to bring significant improvements here. This has not really been achieved yet.
• Equity: The organisation of companies and, in this case, the regulation of shareholdings is a complicated process today that is mainly coordinated via central contact points. Here, too, a new approach (decentralisation through blockchain) is expected to bring improvements. This has not really succeeded yet.
• Real estate: In the case of real estate, one probably only thinks of virtual developments as an afterthought However, this is precisely what is being conceived when it comes to the metaverse. Today, when people shop in a shopping centre, a boutique or online, this could also take place in a virtual space in the future. You can think of the same thing in the private sphere, like going to a concert with friends. This has only been achieved in a very rudimentary way.
• Gold: Gold has a very long tradition and is deeply rooted in the way it functions as a stronghold of safety. But gold also has disadvantages which people would like to have eliminated. For example, it is very difficult and cumbersome to exchange. Today, this has been achieved to a good degree with Bitcoin. However, the test as an alternative to gold is still to come.

Am I missing the next big development?

There is a gold rush, yes. And some will bet on the right horses. But most of it is simply too uncertain. Take the example of New York. When America was discovered, settlers had a myriad of choices of where to settle or buy a piece of land. Like today in the metaverse. The lucky ones chose a spot by the Hudson River. Others didn't. And it was usually not the first owner who got really rich, but the one who saw the potential at a later date. Again, as a reminder - new opportunities are always emerging and are not bound to a small window of time.

Conclusion: it is not a lack of understanding that should stop one from getting involved in the new projects. Rather, it is the awareness that we are still in the experimental phase. Those who like to experiment are advised to do so with reasonable effort and commitment. Those who don't like it should watch and wait with curiosity.