Scaling up for the Metaverse

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In a previous article I discussed How Bitcoin Scales. But in light of recent events, I felt it would be important to discuss how other blockchains are scaling up to meet the growing demands of the metaverse.

 First of all, let’s discuss the problem. In order for the metaverse to succeed, we’ll need to onboard something like a billion people over the next ten years. Each person will probably create many transactions per day, and right now that amount of volume cannot be processed by the existing blockchain infrastructure. For example, consider the following chart with the total number of transactions processed by the top five blockchains by market capitalization.

 

What you’ll see is that we’ve only crossed the 5-million mark once so far. So how do we scale that up by 200x or more?

Second, there’s the issue of fees. Right now most smart contracts are running on Ethereum, but the fee for a single transaction has been between $16 and $400 dollars over the last couple months. It’s hard to imagine microtransactions being possible under these circumstances.

 

As you can see in this image, this process is working so far. Over 120 million transactions have been processed by 4.7 million unique entities. The layout of the Ronin Explorer is shown here, which is similar to other Ethereum explorers like etherscan.io etherchain.org.

When someone wants to get their money back out of the Axie ecosystem, they can use the handy Ronin Bridge to send their WETH back to the Ethereum main chain and receive ETH again. Interestingly, assets such as SLP and AXS can also be sent across the Ronin Bridge because they too have digital equivalents on the Ronin Sidechain and the Ethereum main chain.

The two other leading alternatives to using side chains are using layer 2 solutions or simply accepting transactions from multiple blockchains. Layer 2 solutions are more dependent on the base chain for their security, but operate in much the same way as side chains.

Other metaverse games, such as League of Kingdoms have opted to use the Polygon ecosystem in order to facilitate lower transaction costs ($0.002 - $0.046). Platforms such as Gala Games have opted for their own node registry and announced plans to launch their own blockchain network. Then you have projects like Star Atlas which is going with Solana from the start which means they will benefit from massive transaction throughput but they will be on a younger ecosystem.

And of course there are many other solutions being used and even more than that in the planning stages. At the end of the day, what it means is that developers and users have more choices than they used to have but of course each one comes with trade-offs.

To sum up, the challenges of scaling the metaverse are real and should not be taken for granted. However, developers are well aware of these challenges and are taking steps to ensure that bottlenecks are ameliorated as well as they can be. If we think back to the early days of the internet, it didn’t seem possible that we’d be able to do the kind of things that we can do today like streaming an HD video to a mobile phone. But here we are and we take it for granted. I see the metaverse unfolding like that too, and I’m excited to see where we go next.

Thank you,

Hans Hauge

Head of Quantitative Strategy

Ikigai Asset Management