The Metaverse: And How It Will Revolutionize Everything

by Matthew Ball

Ethereum has its detractors, who level three primary criticisms: its processing fees are too high, its processing times are too long, and its programming language is too difficult. Some entrepreneurs have chosen to address one or all of these problems by constructing competing blockchains, such as Solana and Avalanche. Other entrepreneurs instead built what are called “Layer 2” blockchains on top of Ethereum (the Layer 1). These Layer 2 blockchains effectively operate as “mini-blockchains,” and use their own programming logic and network to manage a transaction.

Dapps Unlike the major blockchains, many dapps are only partially decentralized.

the success of a dapp depends on its ability to attract developers, network contributors, users, and often capital providers, too. This requires the sale and awarding of at least some tokens to outside groups and early adopters. And to maintain community support, many dapps make a commitment to what’s called “progressive decentralization,”

As an application becomes more successful, it tends to become more controlling. Google’s Android and Apple’s iOS followed this path. Many technologists view the phenomenon as the natural arc of a for-profit technology business—as it accumulates users, developers, data, revenue, and so on, it uses its growing might to actively lock in developers and users. This is why it’s difficult to export your account from Instagram and re-create it elsewhere. It’s also why many applications close their APIs as they scale or face competition.

we generally recognize that ownership of a user’s account, social graph, and data to be the primary store of value.§ By keeping most of this outside the hands of an application (or in this case, a dapp), blockchain enthusiasts believe they can disrupt the traditional developer arc.

We’ve arrived at a simplified understanding of blockchain operations, capabilities, and philosophies. But the technology remains well below modern expectations for performance (today, a blockchain-based Instagram would likely store almost everything off-chain and every photo would take a second or two to load). More importantly, history is littered with technologies that might have disrupted existing conventions, only to fall short of promise or potential. Might blockchains fare better?

The greatest indicator of what blockchains might accomplish is what they have already achieved. In 2021, total transaction value exceeded $16 trillion—over five times as much than digital payment giants PayPal, Venmo, Shopify, and Stripe combined. In the fourth quarter, Ethereum processed more than Visa, the world’s largest payment network and 12th-largest company by market capitalization.

Overall spending on NFTs in 2021 was more than 90 times that of the roughly $350 million to $500 million spent on NFTs a year earlier, which in turn was more than five times that of 2019. In contrast, sales of traditional virtual items grew at a roughly 15% compound average rate.

the utility of NFTs is severely constrained today by the fact that most video games do not yet support them. And because none of the major console platforms or mobile app stores support purchasing in blockchain-based games, most of the games that do use NFT titles are limited to the web browser and as a result have rudimentary graphics and gameplay.

It is also why the majority of the most popular games, game franchises, media franchises, brands, or companies haven’t even issued NFTs—and why only a few million people are believed to have purchased an NFT, whereas billions of people make in-game purchases each year. As the functionality of NFTs improves, and the number of brands and participating users increases, the value of NFTs will of course grow. There’s certainly a lot of headroom to each.

almost no blockchain-based experiences are truly decentralized—even those that issue NFTs. The developers may not, for example, be able to revoke the rights to these NFTs but they could alter the code that uses it, or delete a user’s in-game account.

The fact that “decentralized” assets have “centralized” dependencies leads to two major conclusions. First, NFTs are useless—propped up by fraud, speculation, and misunderstanding. This was often the case in 2021 and is likely to remain largely true for years to come. Second, the untapped potential of this technology is extraordinary and will be realized as the utility of, and access to, blockchain-based games and products expands.