Debunking the Interoperability Myth Powered by NFTs

The idea of ​​having a cross-functional, interconnected and interoperable network has been emphasized a lot in the Web3 ecosystem. This popular rhetoric (mainly spread by the crypto people) began to invade the internet, promoting concepts such as “transferability of value outside a (gaming) ecosystem”, the ability to buy an asset in one ecosystem, which can later be used in another, driving community empowerment (not sure in what ways).

In fact, many have concluded that we may have to “move all of our internet infrastructure onto the blockchain” entirely and “build everything from scratch” if we ever, in the future, want to get to something close to what some claim technology can do Today.

In addition to the things listed above and getting rid of third parties and centralized systems, not to mention big tech owning our data, it turns out that most Web3 “solutions” to these problems are quite incoherent.

And the interoperability of data and assets using NFTs… is one of the things on the list.

But still, using “Web3” logic, this piece will critically explore why blockchain does not solve any (so-called) interoperability problems and how NFTs are invalid in this sense.

Let’s start with the basics. If you already know this, feel free to skip the next 3 paragraphs.

The basics are important to understand where the misunderstanding has arisen from.

The Non-Fungible Token (NFT) is a record of ownership stored on a blockchain and linked to the assets it represents. These assets are usually stored on IPFS (decentralized cloud storage) or anywhere online or offline.

The most popular blockchain for these tokens is Ethereum. As you may already know, Ethereum became the go-to network, since it is programmable, it allows smart contract deployment so that developers can create their own decentralized applications (dApps) on it.

Given that there are currently so many applications populating this blockchain, the Ethereum Foundation set up a series of mandatory “standards” that tokens distributed on it must meet. This means that their smart contracts (the bit of the program that issues these tokens) follow some consistent rules and cover the same functions (functions as in eg balanceOf(owner) ownerOf(tokenId) etc, not functionalities). There are no standards for metadata or purpose of tokens.

We all love consistency and industry standards, don’t we?

There are a number of other blockchains that allow transactions of non-fungible tokens and have created their own standards (eg Solana), but this topic is beyond the scope of this article. We will only focus on Ethereum as a case study.

A quick overview of the ecosystem

There are so many blockchains out there that cross-chain communication became a headache in the “Web3” movement itself (no need to address anything about interoperability…or the entire internet).

The chaotic (and sometimes rapid) development in space leads to the formation of “layers” that act as a twisted web of blockchains.

To quickly review some of them:

• layer 0 example is PolkaDot (aims to be the main link between other networks and developed a system of parachains to achieve this),
• layer 1s are classic OGs like Ethereum, Solana, Cardano (unencumbered blockchains) and
• layer 2, such as Polygon, Cradano Hydra (worried about scalability).

Speaking of Ethereum’s layer 2s, they are (in theory) compatible with the Ethereum Virtual Machine (EVM) and able to communicate with this network to facilitate traffic. However, no one seems to be talking about the extent to which these blockchains are actually compatible.

Here are some examples:

Moonbeam, which is a PolkaDot parachain, can execute Ethereum Virtual Machine contracts and it supports ERC721, ERC1155 and ERC20 standards. Moonriver, a Kusama parachain is also supposedly fully EC compatible. However, PolkaDot and Kusama blockchains do not inherently support ERC tokens and they have their own standards (not suggesting they should, just the way it is).

Milkomeda, an EVM sidechain from Cardano, supports ERC 20 but is not compatible with ERC721 and 1155.

Polygon (known Ethereum layer 2) is not ERC20 compatible.

All in all, very cute, easy to wrap your mind around, and user-friendly, right?

Now let’s just ignore what we’ve discussed and imagine that all blockchains are interconnected, the internet runs on blockchain and all the apps we use are decentralized so we can get back to our NFTs.

Why are NFTs believed to drive interoperable assets?

Interoperability is seen as a property that enables other software to exchange information without restrictions.

So if the networks that allow these data transfers are interconnected and compatible, or if multiple environments (metaverses) are built on top of the same network, this should mean that these assets can be used in the same way across multiple dApps, right?

And that consumers of brands like Nike (and other brands entering “the metaverse” to leverage NFTs for digital fashion) will be able to acquire an item in a digital world and sell it in another metaverse – something that makes it easier for brands to sell more. Right?

Error!

Why do NFTs not actually do any of these things?

Simply put: it’s not about the token or its blockchain, it’s about the assets to which the token is attached.

The most common “use case” where you hear about the interoperability of NFTs is with games.

There are many types of game engines and iterations used in the industry, meaning that most games have different development environments that require and use different tools, specialized elements, and custom software components.

Assets are designed to fit a specific narrative and purpose

Issues like whether an asset fits into the new landscape from another game (from things like proportions to the aesthetic) and more complex issues like how useful this asset can be in the other game, how it can be used, how it interacts with the rest of the assets and so on, must be answered. And in an ecosystem of tens (maybe hundreds in the future) of blockchain games, this will be extremely extremely difficult to achieve. That is if you care about user experience at all.

Think of it this way: If you want to photoshop yourself on a beach, you don’t just paste your photo onto another photo of a beach. You need to use more advanced editing to create a realistic image and make sure all the elements blend well. Another way to look at this is:

would a NFT yacht from another game make sense in Need for Speed?

Other than that, depending on the complexity of the game, we can talk about thousands or tens of thousands of files that make up an asset – including images, sounds, animations and effects and any kind of functional code that provides the entire gaming experience created by said asset. This is due to the fact that everything must be optimized for the best experience in the specific game.

Now you can probably guess that there are big fat files with gigabytes of data. Where should all that information be stored? On slow IPFS?

Not so fun fact:

The Interplanetary File System (the holy grail of NFT storage used by countless projects and businesses) is just a distributed ledger, not a blockchain. Data here is not immutable. The address pointing to the respective file location remains permanent, but the files themselves may actually be lost as they are passed around the distributed hash table.

Assets stored “off-chain” can certainly be deleted, lost or destroyed, so good luck with that. In fact, nothing is permanent because ultimately the data has to be stored on someone’s hardware. If it gets damaged, say goodbye to your “permanent” NFTs.

Decentralized games at the moment

If “interoperability” was that easy, the “metaverses” we have should have mastered it already.

But they didn’t.

And if they didn’t, but asset interoperability in games is a problem solved by NFTs and blockchain, one can only wonder what stopped Web3 people from doing what they preach…

Let’s take a little more in-depth look at 2 of the most popular blockchain games on the market, namely Decentraland and Sandbox. They don’t even allow the same file types for distributing 3D assets.

Decentraland’s requirements

Sandbox, using VoxEdit for NFT creation (VXM file type)

To solve all these “problems”, you would probably need a regulatory body/authority to impose the same rules on all developers while enforcing these standards across the board. But this would defy the idea of ​​decentralization.

So if industry-wide standards in gaming are willingly and unanimously created, along with a working software architecture, you don’t actually need a blockchain or NFTs to power this up.

The contradiction between the blockchain and the user experience

Returning to the example from the LinkedIn screenshot at the beginning of this article, NFTs and blockchain will essentially not solve any of the problems listed by the individual (his assets become obsolete with the game upgrade) or improve his game experience. Because no one can dictate to the game developers, or the board responsible for business operations, which assets to continue to support, what to discontinue and what new things to encourage users to buy, regardless of whether they come in the form of an NFT . The packaging is irrelevant.

So, if the developers decide to allow their old assets in the new game iteration, they can easily do this without NFTs. The “so-called” value added by blockchain in this equation is 0. In fact, it will add some additional hurdles to setting up wallets, managing keys, transferring funds to cover gas fees, etc.

Conclusions?

Don’t believe everything you read (especially articles that are essentially marketing material) and take a moment to think. What would x implementation assume? What will it look like in practice? what added value will it bring to existing systems and ways of doing things? and ultimately who will benefit the most?

The most important tips from this very long article will be:

• The narrative surrounding “token standards” and blockchain layers may mislead some people into thinking that because NFTs conform to these standards, digital assets must be easily transferable across the games built (mainly) on the Ethereum blockchain

• NFT is not the asset itself, it is just an entry on the blockchain that is linked to said asset

• The security of your actual assets depends on where and how they are stored

• Interoperability issues within the gaming industry arise from the uniqueness of each gaming environment and the specifications of an asset built to perform a particular function in a given context

• Despite the Web3 movement spreading around such ideas, none of the existing web3 games come close to achieving what they preach

• NFTs and blockchain simply do not bring any technological improvements to the space