Nonfungible token-based ventures such as Loot and The N Project have contributed to rekindle interest in the Metaverse, rekindling expectations that blockchain would eventually reach the public. Will it succeed, or will history repeat itself? The difficulty is that the exact things that pique the public’s interest are also the precise things that impair the underlying platforms’ performance and increase entry barriers higher than before. In this post, we’ll look at the basic flaws that contribute to this dynamic, with the objective of resolving them once and for all.
The core issue is that traditional blockchain technology, notably Ethereum, creates significant entry barriers, limiting Metaverse’s capacity to enrol new users. These problems are worsened by the network’s refusal to allow consumers to set fixed pricing for their consumption.
The cost of apes and penguins is high
Fees for using popular NFT markets maybe a sneaky concern, because projects frequently impose these levies on users with excessive expectations of their profit potential. A short glance with Etherscan reveals the astronomically large value of transaction fees paid for each project. Users have paid 106.7 and 111.4 Ether (ETH) to engage with smart contracts created by projects like Bored Ape Yacht Club and Pudgy Penguins, respectively. The transaction fees alone for these two enterprises have cost approximately $1 million!
Is the Axie Infinity actually based on NFT?
But here’s the catch: Those projects aren’t NFT-based games at all! Due to the implementation of NFTs in Axie Infinity, players may combat and produce little animals that can subsequently be sold or leased to other players. Axie Infinity is a superb example of a true NFT-based game because of this. The issue is that the more a game uses NFTs and the benefits of a blockchain-based asset, the more ETH customers must pay in fees.
On the Ethereum blockchain, both the trade and breeding parts of these games incur transaction fees. Axie Infinity has paid over 15,000 ETH in transaction fees, which is nearly $60 million! That’s money that might have gone toward improving the game. But it’s also money that customers could have used to buy more digital items from Axie Infinity and other game producers.
The catch-22 for new users and publishers
Many new users are drawn to the NFT craze. And immediately go to an online marketplace like OpenSea to offer their own NFT. In a perfect world, this would be an excellent chance to recruit another blockchain supporter. By providing a terrific user experience. Unfortunately, the cost of merely advertising an item for sale on OpenSea is now roughly 0.1 ETH ($400). That isn’t the type of user experience that leads consumers to believe they are utilising cutting-edge technology!
These exorbitant costs impact novice users who are trying to figure out what all the fuss is about with blockchain. As well, they also discourage larger companies from developing on top of blockchain platforms. Why would major video game producers include NFT interoperability in their titles if end users would have to spend upwards of $100 to exchange in-game weapon skins? No one would be enthusiastic about in-game NFT assets that are more expensive to trade than the main game.
Even if a huge video game publisher wished to cover these blockchain transaction costs for their player base, the fees would be prohibitively expensive and rise in lockstep with the game’s lifespan. In effect, as the replay value of their game improves, this game publisher will be punished! Given these flaws in blockchain transaction pricing, it’s no wonder that video game creators and publishers have been slow to embrace blockchain for the digitization of in-game assets.
Current NFT-based games on older blockchains clearly have significant difficulties. This is mostly due to their transaction pricing model. Which discourages video game producers from incorporating NFT assets into their games. And makes it difficult for new users to embrace them. Unfortunately, triple-A video game titles aren’t likely to use blockchain to track ownership of in-game assets any time soon. The cost of transacting on a fee-based blockchain would simply be far too high for consumers or publishers to bear.
However, there is reason to be optimistic. A blockchain user’s experience maybe made free of costs. Since its debut in 2016, the Steem blockchain (which notably split into Hive in order to foil Justin Sun’s aggressive takeover) has operated on a fee-free paradigm. Splinterlands, one of the most popular blockchain games, has taken advantage of Steem’s. And now Hive’s fee-free qualities to great benefit.
The inclusion of a token derivative or “property” lies at the heart of the solution found inside those blockchains. In place of something like Ethereum’s gas, this is used to “pay” for transaction costs. And it can be “delegated” from one user (such as a developer) to another (like a player).
Consider what would happen if Axie Infinity developed on top of a fee-free blockchain. That used a token derivative instead of requiring users to spend their whole amount. If this had been the case, the game’s developers might have purchased a certain amount of local money equal to the amount of network bandwidth they would require. And then delegated network resources to new users.
To begin with, it would have enabled new players to exchange Axies and interact with in-game smart contracts for no transaction costs. Since a result, the game’s player base would naturally increase. As the expense of playing the game would no longer be a deterrent. It would decrease the entrance barrier, bringing in more new players and driving up demand for in-game assets.
Game publishers and developers could be able to pay a one-time set charge for constant network usage under such a fee structure. For games like Axie Infinity, you pay each transaction on Ethereum, which costs over $60,000,000 as of November 2021. Of course, what happens if the token derivative is depleted? Wouldn’t they be back to square one? Not if it regenerates over time, at least.
We’re dealing with a characteristic of a token rather than the token itself. Hence, we may program it in any way we want without incurring major financial costs. This property’s goal is to encourage network utilisation rather than to trade value, and it can be structured appropriately. If we don’t want to force customers to buy new tokens all the time, we can just have the token property regenerate over time. Which will provide us with the static price we’re seeking, as well as potentially endless transactions for the user!
As a result, a game like Axie Infinity would just have to pay a one-time price and never have to pay, or have its players pay, transaction fees again.
Resources maybe continually delegated from the publisher or developer to the active player or user base. Allowing gamers to interact with smart contracts for free. As well, effectively addressing a $60 million inefficiency in the NFT gaming industry.