7° Chapter: Metaverse and Blockchain

 

How Blockchain Technology Works; Blockchain: Definition; How Does the Blockchain Works; Blockchain Technology: Advantages; Blockchain Technology: Disadvantages; Bitcoin and Blockchain: A Native Digital Combination.

 

 

The first technology that comes to mind when talking about creating commercially interoperable virtual realities is blockchain, as it seems the most suitable for the purpose. The reason lies in the fact that it allows all digital assets such as clothes, artwork, cars and real estate, as well as avatar characteristics, to be stored in a decentralized ledger.

In a blockchain-based metaverse, there is room not only for cryptocurrencies but also for NFTs, which allow for the virtual transport of purchased goods such as works of art. Suffice it to say that the turnover involving Non-Fungible Tokens exceeded $700 million in September 2021 alone, which gives an idea of the market's potential. Some metaverse based on blockchain have already been created such as Decentraland and The Sandbox.

Since this book is also aimed at those who may have a still basic level of preparation in the cryptocurrency industry, I think it is useful and interesting to give a brief introduction on how the world of blockchain works, what is a wallet, what is meant by NFT and what is Cryptoart, to get an even clearer and more complete view on the topic. 

 

How Blockchain Technology Works

Probably everyone has already heard of blockchain, since it is one of the most cutting-edge technologies in the field of databases, but perhaps not many have delved into the topic. The underlying concept is that of a data collection structured in an innovative way: we are talking about data units, called blocks, containing complete information about each transaction, sorted in chronological order and classified with a unique identification code. This process creates a digital chain that explains the blockchain what it is. What we would like to investigate now, is how it works in detail and why it may be interesting to learn more about it.

 

Blockchain: Definition

The meaning of blockchain may seem complicated. In reality, analyzing it from a less technical perspective, it is nothing more than a special type of database, i.e. a digital ledger that collects information. The characteristics of this 'ledger', organized into blocks, are: decentralization and invariability, two aspects that we will address in detail in the next chapters. It is therefore an open source technology (like a Google document to which anyone with a link can contribute), but without exclusive ownership and as contributors make changes, each copy is updated.

The initial goal of the two designers, Stuart Haber and W. Scott Stornetta, who theorized the blockchain in 1991, was the implementation of a secure system that would not allow unauthorized changes to timestamps, which would be the sequence of characters that represents the actual occurrence of a certain digital event.

 

How does the blockchain work?

To recap, the blockchain is a collection of digital information stored in blocks. These blocks have a limited storage capacity and once filled they go to join the previous block, forming a new link in the chain.

To summarize, this is the process of how blockchain technology works:

• Data recording in the block: it is implemented at each transaction, and the data can be related to various types of information, for example, by whom the transaction was performed, when (date and time), place etc.
• Ring creation: each block is securely linked to the one that precedes and the one that follows it, through electronic records, to avoid 'fraud' such as, for example, the insertion of an unauthorized block between two existing blocks.
• Chain fixing: transactions are locked together in an irreversible, tamper-proof chain by hackers and malicious parties. In practice, each block reinforces the entire chain, verifying the previous block and forming a collectively controlled digital ledger.

 

Blockchain Technology: Advantages

• Security: each block of the chain has a string created by a mathematical algorithm (hash function) that binds to the previous one and secures the sequence from possible manipulation.
• Decentralization: the blockchain is not managed by a central server, but relies on a widespread network of computers. In this way, when a new block is added to the chain, each computer in the network updates its own blockchain. This is also an advantage in terms of security, because if a copy of the blockchain were the subject of a hacker attack, that copy would be compromised, and not the entire network.

 

Blockchain Technology: Disadvantages

• Sustainability of the technology: the cost of blockchain technology, in economic and environmental terms, is still difficult to sustain on a large scale. The process of 'mining cryptocurrencies', for example, requires complex computing power, and the energy requirements for the Bitcoin network are estimated to be equal to the annual consumption of the whole of Denmark.
• Inefficiency in speed: Staying on the subject of cryptocurrencies, the application for which blockchain is primarily known, it is estimated that it takes almost 10 minutes for each individual block to be added to the Bitcoin chain. In practice, there are barely seven transactions per second (TPS) that can be handled at that rate.

 

 

Bitcoin and Blockchain: A Native Digital Combination

Although in theory blockchain can be used to record any kind of information related to goods and services, in practice it is inextricably linked to the world of cryptocurrencies. The reason is quickly explained: many digital currencies use this technology as a transparent 'ledger' of payments and transactions. In essence, the blockchain is the verification and exchange medium for cryptocurrencies like Bitcoin and beyond. This technology, based on a diffuse network of computers (nodes) differentiates bitcoins from fiat currencies like EUR or USD: no central authority or government has any power to control them.

By untethering cryptocurrencies from banks and institutions, the blockchain eliminates the risk of inflation linked to the instability of governments in certain countries. At the same time, thanks to the digital network, geographic limits of circulation are broken down and people can have almost total security in national and international transactions. A utopian vision that, between light and dark, still has much to reveal to us.