What You Need to Know About Ethereum's Role in Web 3.0 and the Metaverse
This now-seven-year-old decentralized and open-source blockchain has taken center stage in the growing metaverse.
Opinions expressed by Entrepreneur contributors are their own.
It seems that in 2022, you can't escape from the "metaverse." From Facebook to Microsoft, seemingly every centralized tech firm is clambering on the bandwagon of this emerging virtual reality. For purists, though, the metaverse promises a decentralized, cohesive and persistent virtual world that amalgamates various verticals, including gaming, finance and social media under one singular and composable umbrella.
While this is certainly a grand vision, no infrastructure currently exists — centralized or decentralized — that could adequately house the sum of all processes required to form it. Nevertheless, with its high-security specifications and strong developer base, Ethereum — an open-source and decentralized blockchain, complete with smart contract functionality — represents the strongest contender to build the metaverse upon. First released in 2015, it was "stable released" in the late summer of 2021.
The "world computer" is already home to the vast majority of decentralized protocols and embodies the type of structure necessary for decentralization and user self-sovereignty.
Complicating matters, however, are the centralized contenders vying for control over the future metaverse landscape, the most prominent perhaps being Facebook's Meta pivot — a move that threatens the transparency and autonomy that users want for this reimagining of the internet.
Fortunately, layer-2 blockchain networks offer a solution. Working alongside Ethereum, these scaling solutions stand to create a viable global medium that is closer to the ideal envisaged by metaverse proponents, and far less dystopian than that offered by big tech incumbents.
Related: 6 Ways to Get Your Small Business Ready for the Metaverse
Ethereum and the metaverse
In the quintessential concept of the metaverse, anyone will be able to seamlessly transfer data and value across any platform securely and transparently. Much of this vision is already being built on platforms like Ethereum. But there's a hitch: Currently, Ethereum cannot scale to meet the demands of a global metaverse, not yet at least. At current estimates, it can only process 30 transactions per second (TPS). With the rise of decentralized finance (DeFi) and the ongoing non-fungible token (NFT) frenzy, this sluggish throughput has caused significant network congestion and prohibitively high gas fees.
Fortunately, projects such as Polygon, Arbitrum and Optimism are all working to provide faster, cheaper transaction layers for Ethereum while still leveraging the security and solidity of the base layer. All of these solutions can support cross-chain transactions and full Ethereum Virtual Machine (EVM) compatibility — not only providing load-bearing support for Ethereum but also opening inroads for interoperability. With support for EVM compatible ZK-rollups — a solution described by Ethereum founder Vitalik Buterin as a plausible "endgame" for Ethereum scaling — transaction figures will expand exponentially.
Attempting to bring this endgame to fruition, Polygon has committed $1 billion to various ZK-related scaling efforts, including Polygon Zero, Nightfall, Hermes and Miden — all of which work to lighten Ethereum's load by processing multiple transfers outside of the main chain and generating proofs to authenticate transaction data.
EVM compatibility is critical to these scaling solutions, as it ensures that developers can easily migrate existing projects without needing to rewrite code. This is just one of the reasons why over 1000 Dapps, including DeFi bluechips such as Sushiswap, Curve, Aave, Balancer and Kyber are already deployed on the Polygon chain.
Related: It Takes a Village: How Blockchain, Crypto and NFTs Ensure Digital Trust
Taking a similar approach, Arbitrum leverages optimistic rollups — which, akin to ZK-rollups, authenticate transaction data but without generating proof. Due to their simplicity and ease of deployment, optimistic rollups offer a dependable short-term solution, but fail to match the longevity of ZK-rollups and their greater finality and robust security.
These layer-2 solutions also act as a bridge between Ethereum and other chains, improving all connected networks and allowing for liquidity to pass between blockchains. For example, a cross-chain bridge to decentralized storage network, Filecoin, was recently launched, further enhancing connectivity and aiding the development of the metaverse between Ethereum and its sidechains.
The projects already building the metaverse
Layer-2 tech sets the stage for a safe, functional and accessible metaverse. And this isn't just theoretical: Already, countless projects and companies are beginning to turn to Ethereum and its layer-2 solutions to make their metaverse machinations take form.
Take "The Sandbox" as an example. This open-source virtual reality platform is a vibrant and active 3D world powered by Ethereum which is already utilizing Polygon to improve transaction speeds and reduce gas fees. This helps the users of this world create games, art, houses — even casinos — all underpinned by cryptocurrency and NFTs.
Related: Inside Ethereum's Internet of Blockchains
Polygon isn't alone either; sidechains like Arbitrum have already seen migration from the most popular Ethereum-based DeFi platforms like Sushiswap, 1Inch and Aave. There's even been attention coming from established game developers like Ubisoft, Zynga and Atari, all of which are keen to pioneer metaverse offerings but understand the importance of scaling Ethereum first.
Fortunately for them, Ethereum and its layer-2 solutions are fast making the metaverse a reality.