Nonfungible token-based projects like Loot and The N Project have helped spike interest in the Metaverse to an all-time high, raising hopes again that blockchain will finally break through to the masses. Will it, or is history doomed to repeat itself? The problem is that the very things that capture the imagination of the public are the very same things that ultimately degrade the performance of the underlying platforms and raise barriers to entry higher than ever. In this article, I’ll explore the fundamental issues responsible for creating this dynamic with the goal of helping address these issues once and for all.
The fundamental problem is that legacy blockchain technology — specifically Ethereum — introduces massive barriers to entry that hinder the ability of the Metaverse to onboard new users. These issues are then exacerbated by the failure to allow users of the network to statically price their network usage.
Apes and penguins are pricey
The fees required to use popular NFT marketplaces can be an insidious problem because projects often foist these costs onto the user with often-unrealistic expectations of their profit-making potential. A quick look through Etherscan reveals the mind-numbingly high value of transaction fees paid per project. Projects like Bored Ape Yacht Club and Pudgy Penguins have had their users pay 106.7 and 111.4 Ether (ETH), respectively, to interact with their smart contract. Combined, users of these two projects have had to pay nearly $1 million in transaction fees alone!
Axie Infinity, truly NFT-based?
But here’s the thing: Those projects aren’t actually NFT-based games! In Axie Infinity, players can battle and breed little creatures which can then be sold or leased to other players precisely because they are implemented as NFTs. This is what makes Axie Infinity a great example of a game that is truly NFT-based. The problem is that, the more a game actually leverages NFTs and the benefits of a blockchain-based asset, the more ETH fees users have to pay.
Both the trading and breeding aspects of these games incur transaction fees on the Ethereum blockchain. Axie Infinity has paid over 15,000 ETH in transaction fees, which roughly equates to over $60,000,000! That’s money that the developers could have spent to improve their product but, more importantly, that’s money that users could have spent purchasing even more digital assets from both Axie Infinity and other game developers.
The catch-22 for new users and publishers
Many new users attracted by the NFT craze go right to a marketplace like OpenSea to list …….