Loot and The N Project, which are nonfungible token-based projects that use blockchain to fund their operations, have helped to increase interest in the Metaverse. This has raised hopes that blockchain will eventually become mainstream. Is history set to repeat itself or will it be different? Problem is, the very things that grab the attention of the public can also be the things that eventually degrade the performance and create barriers to entry. This article will explore the key issues that create this dynamic and help to address them once and for all.
The problem is that Ethereum, a legacy blockchain technology, creates huge barriers to entry that prevent the Metaverse from allowing new users to join. These problems are further exacerbated when users of the network cannot statically price their usage.
Penguins and pes are expensive
It can be a problem that fees for NFT marketplaces are often hidden costs. Projects often impose these costs on users with unrealistic expectations of their profit-making potential. An easy look at Etherscan will reveal the staggeringly high transaction fees per project. Users of smart contracts such as Pudgy Penguins and Bored Ape Yacht Club have been charged 106.7 Ether (ETH) respectively. These two projects combined have cost nearly $1 million in transaction fees!
xie Infinity: Is it really NFT-based?
Here’s the truth: These projects are not NFT-based. Because they are NFT-based, AxieInfinity allows players to create and battle little creatures that can be sold or leased out to other players. AxieInfinity is a great example game that is NFT-based. Problem is, users will have to pay more ETH fees if a game leverages NFTs or reaps the benefits of a Blockchain-based asset.
Transaction fees are charged on the Ethereum blockchain for both the breeding and trading aspects of these games. AxieInfinity has paid more than 15,000 Ethereum in transaction fees. This roughly amounts to $60,000,000 This is money developers could have used to improve their product, but more importantly, it’s money users could have spent on digital assets purchased from Axie Inc. and other game developers.
New users and publishers are in for a surprise
OpenSea is a marketplace that allows users to list their NFTs. Many of these new users are attracted to the NFT craze. This would be an excellent opportunity to add another blockchain enthusiast to the ranks and provide a great user experience. Unfortunately, the transaction fee for listing an item on OpenSea costs around 0.1ETH (or about $400). This is not the type of user experience that would make people believe they are using futuristic technology.
These ridiculous fees are not only harmful to new users trying to understand the blockchain craze, but also discourage larger business entities from building on top blockchain platforms. If the consumer of their product has to pay up to $100 to trade in-game weapons skins, why would large video game publishers want NFT interoperability built into their games? No consumer would be thrilled to trade in-game NFT assets for more than the base game.
Even if a big video game publisher wanted to pay these transaction fees, it would be prohibitively costly and increase proportionally to the game’s lifespan. This would effectively mean that the game publisher would be penalized for increasing replay value. These are the shortcomings of the current blockchain transaction pricing system. It is not surprising that neither publisher nor game developer has jumped headfirst into digitization of in-game assets using Blockchain.
Blockchains that are fee-free
There are significant issues with NFT-based NFT-based games that run on legacy blockchains. This is largely due to the transaction pricing mechanism that prevents new users from adopting them and discourages video game publishers form incorporating NFT assets in their games. We aren’t yet close to triple-A video games that use blockchain to track the ownership of in-game assets. Transacting on a fee-based Blockchain would be too expensive for publishers or consumers.
There is hope. It is possible to remove fees from the user experience for a blockchain. Since its inception, the Steem blockchain has operated with a feeless model. This includes Justin Sun’s famous fork into Steem to stop him from taking over Hive. Splinterlands is a blockchain-based game that has had great success using the fee-free properties of Steem and Hive to their advantage.
Related: Blockchain adoption can only be made fee-free
That blockchain solution contains the essence of the solution. A token derivative, or “property”, is used to “pay” transaction fees. It can also be “delegated” between users (like developers) and another user (like players).
Token derivatives are used to pay for transactions. This allows game developers to price their network usage over time. Don’t be confused if this seems confusing. I will clarify.
For a moment, consider what Axie Infinity would look like if it had been built on top a fee-free blockchain that leverages such token derivatives instead of forcing users to reduce their balance. This would have allowed developers to buy a certain amount of native currency in proportion to their game’s network bandwidth, then delegate network resources to other users.
It would allow new users to swap their Axies with existing players and to interact with smart contracts in-game for zero transaction fees. The game would be able to grow naturally as the cost of the game would not deter players. This would lower the barrier of entry, funneling new players into the ecosystem, and driving demand for ingame assets.
This fee structure would allow game developers and publishers to pay a fixed, one-time cost for their network usage. You pay per transaction on Ethereum. This is a problem for games such as Axie Infinity. What happens if the token derivative runs out? They would be right back at their original point! It regenerates over time, but it won’t be!
Similar: Navigating NFT’s minefield: This should be easy for first-time buyers
It is possible to program it in any way you want, as long as the token property is not used. This will have no economic impact. This property can be programmed to encourage network usage and not exchange value. To avoid users being forced to buy more tokens, we can have the token property regenerated over time. This would allow us to maintain the static pricing and allow for unlimited transactions for our users. A game like AxieInfinity would only need to make one-time purchases and never pay transaction fees again.
The publisher or developer could delegate resources continuously to active players or users, thereby giving them free smart contract interactions. This would solve the $60,000,000 inefficiency in the NFT gaming industry.
The current fee-based transaction system is a threat to widespread adoption. Koinos Group has created the first consumer-friendly Blockchain. We are currently working on a solution to allow large companies to lower the cost of adopting this innovative technology.
This article is not intended to provide investment advice. Every trade and investment involves risk. Readers should do their research before making any decision.
These views, thoughts, and opinions are solely the author’s and do not necessarily reflect the views or opinions of Cointelegraph.
Thomas Clement is a Blockchain Analyst at Koinos Group. This company specializes in helping people use blockchain to their benefit.
Eileen Wilson –Technology and Energy
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