What’s Next for the Blockchain Space Once Vitalik Buterin’s Trilemma is Resolved?
The blockchain community faces a significant challenge known as the trilemma, which posits that proof-of-work blockchains can achieve security, decentralization, and scalability, but only two of these three attributes at a time. This limitation has been cited as a major barrier to wider cryptocurrency adoption, with established platforms like Bitcoin and Ethereum prioritizing security and decentralization, which has resulted in slower transaction speeds compared to traditional payment systems.
Fortunately, advancements in proof-of-stake protocols have accelerated blockchain performance significantly. However, merely inviting users from traditional finance platforms like Visa and PayPal to switch to crypto by highlighting these improvements may not be enough to attract them.
Gaming as a Gateway to Crypto
Interestingly, there is potential to attract different user demographics, such as gamers. The Worldwide Asset eXchange (WAX), which ranks as the second-largest blockchain site globally in terms of daily users, appears to resonate well with this audience. WAX processes an impressive 15 million transactions daily, primarily driven by gaming activities, including popular titles like Farmers World and Alien Worlds. Recent data from the ranking site CryptoSlam indicates that WAX has recently overtaken Solana and Flow, becoming the third-most popular chain for non-fungible token (NFT) sales.
This growth can be partially attributed to WAX’s appealing pricing model. While financial investors may overlook transaction fees due to their affluence and the relative low cost compared to traditional financial institutions, gamers are more sensitive to these costs. WAX addresses this by eliminating gas, gifting, and minting fees.
Missed Opportunities in Early Blockchain Development
The gaming industry boasts a larger audience than the finance sector, raising questions about whether early decentralized application (dApp) projects missed a significant opportunity by not focusing on this market. WAX co-founder William Quigley asserts that many blockchains lacked the capacity to handle the high user volumes typical of gaming. Initially, dApps wisely targeted niche markets with fewer users but higher financial activity. However, the emergence of scalable blockchains like WAX now allows for the development of dApps that cater to a broader audience of gamers.
While the integration of gaming with blockchain technology may not guarantee increased adoption of other digital assets, it does have the potential to serve as an effective entry point. Quigley emphasizes that gaming can help familiarize individuals with digital assets and blockchain technology in their everyday lives. He points out a notable correlation between WAXP token transaction activity and NFT sales within gaming.
The Distinction Between NFTs and Cryptocurrencies
WAX primarily focuses on promoting the NFTs and games hosted on its platform rather than merely boosting its own cryptocurrency. While NFTs are distinct from cryptocurrencies—where each WAXP token is identical to another, unlike ether tokens—there is a critical distinction between in-game currencies and traditional cryptocurrencies.
In play-to-earn (P2E) games, a decentralized and democratized in-game economy emerges, allowing players to acquire items and currencies through peer-to-peer exchanges rather than through direct purchases from developers, which are common in traditional gaming. This shift creates genuine demand for in-game currencies and items, a phenomenon less frequently seen in the broader crypto market, where the drivers for organic demand are limited. Quigley notes that WAXP can be utilized to purchase game-related items and currencies, which can then be reintegrated into the gaming experience.
The Future of Gaming Tokens
Although the line between in-game currencies and exchange tokens is becoming increasingly nuanced, it remains a relevant distinction. This could lead to innovative ways in which gaming tokens are utilized in the future. Quigley points out that gaming tokens are still in their early stages, with the first major titles attracting over 100,000 daily players emerging only recently. Many games have only been active for a few months.
As gaming tokens evolve, they are beginning to be used for customer engagement, community building, and marketing strategies. This trend hints at future advancements in how these tokens might be employed. Titles hosted on WAX, such as HodlGod and Blockchain Brawlers, could serve as a bridge connecting the gaming community with the cryptocurrency world, encouraging a new generation of users to engage with tokens not only for trading but for purchasing goods and services or storing them within decentralized finance (DeFi) platforms.
One aspect that could impact the gaming and collecting communities is the blockchain space’s reputation concerning environmental sustainability. Unlike traditional proof-of-work systems that require substantial energy for mining, WAX employs a delegated proof-of-stake algorithm, which allows blocks to be created by a single computer. This method consumes less than 1/100,000 of the energy required for an Ethereum transaction, making it a more eco-friendly alternative.
