Technology

Interoperability: Unleashing the True Benefits of Web3 and the Metaverse

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Credit: Blue Planet Studio / stock.adobe.com

Imagine yourself stranded on an island, unable to communicate with anyone. Would you embrace this isolation, or try to find ways to communicate with the outside world? It seems that most of us do not favor isolation on any scale. Any movie about stranded people on an island – from “Robinson Crusoe” to “Cast Away” – always depict a situation where stranded people long for the moment they will be able to communicate with the world outside of the island.

So why would we wish to be on a platform, a virtual space, or metaverse that is essentially an island?

In the age of the internet, we have learned to appreciate accessibility, mobility and connectivity on a global scale, and the experience of the latest pandemic has enhanced our demand for more mobility and connectivity.

Let’s look at the case of the online game Ghost Recon Breakpoint, developed by Ubisoft. Early this year, Ubisoft launched non-fungible tokens (NFTs) for the game, with a promise for future NFT drops to come. On its Quartz digits site, it said: “Thank you to all Ghost Recon® Breakpoint players who claimed their first Digits! You own a piece of the game and have left your mark in its history. As the last Digit for Ghost Recon® Breakpoint was released on 3/17/2022, stay tuned for more updates with features to the platform and future drops coming with other games!”

But then in early April, it announced that they will no longer support NFTs in its game. What can those who purchased the NFTs do? Can they be used in other games or resold?

As the events unfold, we see two broken promises of the concept of NFTs in games.

First, it’s been claimed that if you don’t want to play a game anymore, you can cash out your NFTs and earn something for your time or loyalty. In the case of Ghost Recon Breakpoint, what exactly would be the market for these NFTs? When a game ends support and everyone would be looking to cash out, there’s simply no one to buy; it's a classic case of "liquidity risk."

Second, another claim was that NFT loot would be able to be used across games, any game. Does this mean that Ghost Recon Breakpoint NFTs loot can be used in Rainbow Six Siege or Far Cry 6, or any other game? Not really. That was never on the table for Ubisoft’s Breakpoint NFTs, as they are contained within this game. In other words, these NFTs can only be used in this island. They cannot be used in other games or platforms or be repurposed for other functions (e.g., collectibles) to be sold elsewhere. When Ubisoft pulled the plug, they became worthless, and whoever purchased them are left with no recourse.

Ghost Recon Breakpoint is an online game, built on a Web2 version of the internet, where platforms are built as contained silos, not able to transfer assets or communicate with other platforms.

Web3, on the other hand, represents a decentralized internet – a shift from centralized platforms controlled by companies to decentralized platforms where users can participate in the governance and operation of the protocols themselves. But decentralization is not enough. These platforms should also be interoperable to allow for ease of mobility and connectivity between different applications and platforms.

Currently, decentralized platforms such as Ethereum or Solana or Bitcoin are built on a legacy infrastructure, where assets and data are contained on its platform and cannot be transferred or used on other platforms. When platforms and projects can send assets and data across networks, the value of those assets increases, mitigating the risks seen in Ghost Recon Breakpoint.

There are some projects that are trying to address the problem of interoperability, called blockchain bridges, which are a second layer to a blockchain and connecting between two distinct networks. These bridges may not be as secure as the networks themselves and may be vulnerable to hacks, such as in the case of Wormhole bridge, the second largest blockchain bridge, which was hacked in February. The hacker exploited a bug (an error in the source code) on the bridge between Solana and Ethereum and stole $320 million worth of ether. Although the networks themselves – Solana and Ethereum – were not damaged or hacked, only the bridge was exploited, it raises questions for the security of transfer of assets and data between networks.

Developers should devote more diligence and rigor to the code before launching any application. I also advocate for technology assurance tools and code auditing mechanism to be implemented before launch of the application and for continued monitoring of its activity and code as it operates. The best solution would be that the platforms inherently embed interoperability across networks, and unleash the true benefits of blockchain and Web3.

Interoperability will become extremely critical as we transition to virtual spaces and the metaverse. For example, how could you transfer funds from a JPMorgan virtual lounge built on Decentraland, a siloed virtual real-estate platform, to an HSBC virtual branch built on another siloed virtual real-estate platform, Sandbox?

In our traditional system, in the physical space, we can transfer funds between different financial institutions; we should expect the same in the virtual world. If JPMorgan claims that a virtual bank can operate much like a traditional bank, then interoperability is imperative.

Asset mobility between virtual spaces needs to go beyond simply transferring funds. For example, suppose you go to a Nike store in the metaverse and purchase virtual sneakers, and later that day, you go to a metaverse fashion show and purchase a virtual Gucci bag. The next day you go to your metaverse workplace, and you would like to dress your avatar with the sneakers and the bag you purchased the day before. Can you do that? Currently, this is not possible. These metaverses are currently built as self-contained silos. This is, needless to say, a major obstacle that will need to be overcome.

Meta (FB) claims it will build the one (and only) metaverse that we will ever use. Meta’s aspiration is not feasible. One virtual space cannot contain all the things we have or do in life. We are used to moving between different spaces, for different purposes and activities in our daily life, and we would expect that same mobility in our virtual experience.

We do not want to be stranded on an island, whether physical or digital/virtual. We need mobility and connectivity, which means that interoperability is vital if Web3 platforms and the metaverse is to gain mass adaption and become mainstream.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Merav Ozair, PhD

Dr. Merav Ozair is a global leading expert on Web3 technologies, with a background of a data scientist and a quant strategist. She has in-depth knowledge and experience in global financial markets and their market microstructure.

Read Merav's Bio