2.2. From Virtual Worlds to the Metaverse
Similarly to the Internet back then, the absence of a common standard to denote virtual items has spurred “metaverse” projects to resort to a “Walled Garden” approach — a siloed virtual world in which they are in the driving seat. In due course, the propagation of multiple virtual worlds of this elk means it does not come as a surprise that the prevailing general perception on “metaverse” is beginning to skew towards “siloed social virtual worlds” (like Roblox or The Sandbox) instead of it being a “network of interoperable virtual worlds”.
The realization of the Internet unfolds in three stages: 1) adoption of Intranets; 2) transition from private Intranets to the public Internet; 3) commercialization of Internet applications. Likewise, the realization of the Metaverse will also unfold in three successive stages: 1) adoption of virtual worlds; 2) transition from siloed virtual worlds to the open Metaverse; 3) commercialization of Metaverse virtual assets.
Nevertheless, there are certain obstacles to get past before the Metaverse is no longer an elusive dream:

2.2.1. Slow UGC Proliferation

User-generated content (UGC) is the lifeblood of all networked services. Without imbuing users with a free rein to create their own webpages, the World Wide Web would not grow to the degree that it is at right now. The same fact applies to social media platforms, in which the main reason why users flock to a platform in the first place is to see and participate in user-generated posts.
Virtual worlds are not an exception, especially social virtual worlds like Roblox or The Sandbox for which its main value proposition is to host user-generated experiences. Just like how people will not use Facebook or Twitter if their friends or favourite content creators are not there, people will also not visit a virtual world if there isn’t any UGC inside it that piques their interest.
However, the current landscape of the Metaverse does not help in lowering the barriers-of-entry towards UGC creation and dissemination. The “Walled Garden” approach employed by existing virtual world projects means that users will need to master each of the virtual world’s dedicated 3D asset editor software in order to generate UGCs for that virtual world.
For instance, creating a 3D asset for The Sandbox requires becoming proficient in VoxEdit, while creating a 3D asset for Decentraland requires importing gITF files created out of a third-party fully-fledged editor like Blender or Maya to its native Builder.
When this status quo is extrapolated further, one could see the number of proprietary softwares that the future 3D asset creator is expected to master. This would significantly limit UGC participation to only 3D ‘experts’, locking out most of the Metaverse’s populace from the creative process.
As with any other networked service, a thriving UGC base is of paramount importance in order for each constituent virtual world of the Metaverse to become widely adopted. Imbuing everyone with the ability to participate in UGC creation would exponentially increase the number of UGCs across the Metaverse, resulting in higher UGC variability and innovation in which it would only attract more users in the process.

2.2.2. Archaic NFT Standards

The importance of NFT standards to dictate the state of virtual items across the Metaverse cannot be overstated. What TCP/IP is for the Internet, is what NFT standards will be for the Metaverse. Without TCP/IP, the Internet would essentially be a collection of Intranets. Likewise, without NFT standards, the Metaverse will remain a wasteland of siloed virtual worlds.
With that being said, current NFT standards are unfortunately not advanced enough to facilitate the Metaverse’s transition from siloed virtual worlds. While web3-native virtual worlds such as The Sandbox or Decentraland have made full use of the blockchain to serve as the “trustless” layer for the “instances” of their virtual items, in truth its underlying resources and dependencies are still stored off-chain — to be exact, on each virtual world’s central database.
This is because current NFT standards are not able to represent even the most foundational game logic — one example being nested ownership (ex: a sword equipped with a skin) — leaving current virtual world projects with no choice but to resort to their own closed-off central database in order to facilitate their virtual world’s mechanics. In short, NFTs on current standards are merely “containers” pointing to an off-chain data source.
Indeed, judging from the sole perspective of facilitating “single-world interactions”, the need to put all the resources and dependencies of an “instance” straight within the NFT itself might not be apparent, if not an overkill altogether. In the end, the “execution” of a virtual item’s underlying logic depends on the front-end client of the virtual world itself — looking through this lens, one might even question the fact that it should be irrelevant whether an instance’s resources and dependencies are put on-chain via NFTs or off-chain via siloed central databases, since eventually its actual “execution” is in the hands of the virtual world’s developers.
This is precisely the train of thought exhibited back when Intranets are still prevalent — the perfect embodiment of the “local maxima” trap. Simply put, people foresee the future by extrapolating from what they know in the present, and at that time, the thought of coordinating a global unified standard just to facilitate email exchanges between computer geeks is unfathomable, if not highly impractical. Fast forward to the present, the TCP/IP framework is the undisputed standard to route packets across several billion devices worldwide, providing the entire foundation for Internet behemoths like Google or Amazon to flourish. It is safe to say that without the TCP/IP framework, the Internet today will simply not exist.
While not exactly an apples-to-apples comparison, a fully-fledged NFT standard that is able to store all the resources and dependencies of an “instance” is poised to cause the same level of paradigm shift that the TCP/IP is able to bring forth to the Internet. It enables interoperability at an unprecedented scale, allowing any party to ‘permissionless-ly’ participate and collaborate on top of any “instance” NFT, since the underlying logic itself will now be “out in the open” for anyone to iterate on — just like how DeFi protocols can openly iterate on top of each other (ex: Abracadabra-Anchor’s “Degenbox”, Curve-Convex’s “Governance Wars”, etc.).
Some examples include, but not limited to:
  • Dynamic metadata: An NFT can change its ‘stats’ based on predefined on-chain or off-chain event triggers (ex: a ‘hero’ NFT increases its “strength” attribute by a certain amount upon beating a particular dungeon; a player NFT in a fantasy football game is given a 1 point increase on its “shooting” stat for every goal that associated player scores in the real-world).
  • On-chain “emotes”: An NFT can denote emotes, likes, or any form of ‘points’ given by another on-chain party (ex: ‘likes’ for an avatar skin NFT; social points for a ‘hero’ NFT).
  • Nested ownership: An NFT can ‘own’ other NFTs (ex: a sword NFT equipped with a skin NFT).
  • Multi-resource, conditional rendering: A front-end can choose which resource of the NFT to display (ex: a sword in world A, but becomes a gun in world B). Very powerful when paired with conditionals (ex: a common sword evolves into a powerful sword upon ‘infusion’ of 5 curse scroll NFTs; a static skin in world A can unlock a rare animated skin in world B if it manages to accumulate 50 ‘likes’ from players in world A).
To illustrate, imagine a new virtual world wants to bootstrap its user base. Empowered by interoperable NFTs, instead of solely relying on “traditional” marketing channels, the new virtual world (say, world A) can just tap into the existing user base of a more mature virtual world (say, world B), with no repercussions whatsoever to world B (ex: world B imbues players with a level 50 mount in world A the ability to redeem a rare level 1 gun in world B).
Interoperable NFTs could even allow a virtual item to be used on a DApp, with terms depending on the nature of the partnership between the virtual world and the DApp protocol (ex: tiered trading fee discounts based on the evolution stage of the NFT weapon). In essence, its possibilities are endless.
But all in all, current NFT standards are still highly lacking — a fully-fledged NFT standard advanced and versatile enough to facilitate any game logic demanded out of an “instance” is a prerequisite towards the realization of the Metaverse. Once this happens, expect novel cross-world dynamics to emerge as a byproduct of the more interactive gameplay mechanics and the collaborative monetization models enabled by interoperable NFTs, those that would have been unthinkable in prior.
Nonetheless, just like how widespread acceptance of Intranets must first occur before the TCP/IP framework can even be put into the spotlight, adoption of virtual worlds must also first reach the “tipping point” [9] before interoperable virtual items could become an immediate concern.

2.2.3. Fragmented NFT Liquidity

Smart contract blockchains has gone a long way since Ethereum’s first release back in 2015. The rapid pace of innovation showcased during these past few years meant that demand for block space has consistently outpaced Ethereum’s available throughput, causing astronomically high gas fees in the process.
This has spurred various projects towards developing a more scalable “layer-1” chains without sacrificing decentralization or security (to quote Vitalik, solving the “Scalability Trilemma” [10]), and along with the rise of formidable “alternative layer-1” ecosystems like Solana or Avalanche, it has become clear to everyone in the space that the future of web3 will be multi-chain: there will not be a single chain to “rule them all”.
As a consequence, the aggregate liquidity from market participants would inevitably get segregated across chains. In other words, protocols hosted on say, Ethereum, would be unable to gain access to liquidity from protocols on other chains like Solana or Avalanche (and vice versa). To make matters worse, since most NFTs are highly illiquid by nature, liquidity fragmentation is an especially pressing concern for them as compared to fungible tokens or cryptocurrencies.
Therefore, a solution that is able to facilitate interchain smart contract communications would be vastly needed in order to de-fragment NFT liquidity across chains — an “interchain layer” of sorts that could call upon or trigger certain functions of a smart contract via commands originating from a different chain.
For example, users will be able to interact with say, an Ethereum-hosted NFT straight from a Solana-based DApp via this “interchain layer”, empowering them with the ability to buy or sell, stake, and execute just about any other interaction without ever touching that NFT’s underlying chain irrespective of its virtual machine or scripting language (ex: EVM vs non-EVM). As the solution matures, users wouldn’t even know on which chain a specific NFT is hosted on — they would only know what virtual item(s) that specific NFT represents, and on which virtual world is each virtual item configured for (ex: a spear in world A).
In any event, just like how Internet applications can only be conceived after the establishment of the TCP/IP framework, the discussion for chain-agnostic commercialization of virtual assets across the Metaverse could only enter the fray once interoperable virtual items (enabled via fully-fledged NFT standards) have already gone mainstream in the first place.
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2.2.1. Slow UGC Proliferation
2.2.2. Archaic NFT Standards
2.2.3. Fragmented NFT Liquidity