Nonfungible token-based ventures such as Loot and The N Project have contributed to rekindling interest in the Metaverse, rekindling expectations that blockchain will finally reach the public. Will it succeed, or will history repeat itself? The difficulty is that the very things that pique the public’s interest are also the precise things that impair the underlying platforms’ performance and raise entry barriers higher than before. In this post, We’ll look at the basic flaws that contribute to this dynamic, with the goal of resolving them once and for all.

The basic issue is that traditional blockchain technology — notably Ethereum — creates significant entry barriers, limiting the Metaverse’s capacity to onboard new users. These problems are worsened by the network’s failure to allow consumers to set fixed pricing for their consumption.

Penguins and Apes Are Expensive

Fees for using popular NFT markets can be a sneaky problem because projects frequently impose these costs on users with excessive expectations of their profit-making potential. A short glance with Etherscan reveals the absurdly high value of transaction fees paid for each project.

Users of projects like Bored Ape Yacht Club and Pudgy Penguins paid 106.7 and 111.4 Ether (ETH) to interact with their smart contracts, respectively. In transaction fees alone, consumers of these two projects have had to spend approximately $1 million!

Axie Infinity Is A Truly NFT-Based

But here’s the catch: those projects aren’t NFT-based games at all! Because NFTs are introduced in Axie Infinity, players can battle and breed small creatures that can subsequently be sold or leased to other players. This is what makes Axie Infinity such a superb example of a true NFT-based game. The issue is that the more a game uses NFTs and the advantages of a blockchain-based asset, the more ETH fees customers must pay.

The Ethereum network charges transaction fees for both the trade and breeding parts of these games. Axie Infinity has paid out over 15,000 ETH in transaction fees, which is nearly $60 million! That’s money that Axie Infinity and other game producers could have used to improve their product, but it’s also money that customers could have used to buy more digital assets from Axie Infinity and other game developers.

The Catch-22 For New Publishers And Users

Many new users who have been drawn in by the NFT craze immediately head to an online marketplace like OpenSea to list their own NFT. This would be an excellent opportunity to recruit another blockchain supporter by providing an excellent user experience in an ideal world.

Unfortunately, the transaction cost for simply placing an item for sale on OpenSea is currently roughly 0.1 ETH ($400). That is hardly the type of user experience that leads consumers to believe they are using cutting-edge technology!

These exorbitant fees not only impact new users who are trying to figure out what all the fuss is about with blockchain, but they also discourage larger businesses from building on top of blockchain platforms. Why would major video game publishers include NFT interoperability in their titles if end users would have to pay upwards of $100 to exchange in-game weapon skins? Consumers are unlikely to 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 fees for their player base, the fees would be prohibitively expensive and would rise in lockstep with the game’s lifespan. In effect, as the replay value of their game rises, this game publisher will be penalized!

Given these flaws in the present transaction price of blockchains, it’s no surprise that video game creators and publishers have been slow to embrace blockchain for the digitization of in-game assets.

No Fee Blockchains

Clearly, current NFT-based games on legacy blockchains have significant flaws. This is largely due to their transaction pricing model, making it difficult for new users to embrace NFT assets and discouraging video game publishers from using them in their games.

Unfortunately, triple-A video game titles aren’t likely to use blockchain to track ownership of in-game assets anytime soon. Consumers and publishers would simply be unable to afford the costs of transacting on a fee-based blockchain.

There is, however, reason to be optimistic. It is feasible to remove costs from a blockchain’s user experience. Since its debut in 2016, the Steem blockchain (which famously forked into Hive to foil Justin Sun’s aggressive takeover) has operated on a fee-free paradigm. Splinterlands, one of the most popular blockchain-based games, has taken advantage of Steem’s and now Hive’s fee-free properties to great benefit.

The essence of the solution contained inside those blockchains is the inclusion of a token derivative or “property” that is used to “pay” for transaction fees, rather than Ethereum’s gas, and that may be “delegated” from one user (such as a developer) to another user (like a player).

The adoption of a token derivation to cover transaction costs enables game makers to price their network usage statically over time.