Metaverse is the hot topic of discussion in today’s technological domain. Be it its immersive experience or unique discovery channels, it is in the limelight for a reason or the other. Another key feature that lays down the foundation of metaverse is its layer of decentralization that makes it a great competitor amidst other forces to dominate the future. With its fast growing market size, it is taking over the technological world by storm and is expected to grow at a CAGR OF 43.3% by 2028.

Source: PWC

Needless to say, many metaverse capabilities swing on the hinges of decentralization. In particular, blockchain technology that forms the core of metaverse, allows everyone to exchange value on their own terms without depending on third parties or infrastructure. Furthermore, it enables the kinds of microtransactions that underpin many gaming and metaverse experiences.

What is decentralization?

Blockchain is a pivotal part of the metaverse as it enables users to protect their digital assets in virtual reality and also have digital proof of ownership.

In blockchain, decentralization is the transfer of control and decision-making from a centralized entity (individual, organization, or group) to a distributed network. A decentralized network strives to reduce the level of trust that participants must place in one another, and deters their ability to exert authority or control over one another in ways that might degrade the functionality of the network. 

This domain of innovation is called Web3, which sets the financial assets free from the shackles of centralized control and custody. Also, with decentralization thought to be at the core of the Metaverse, the promise of a better user experience, security and control for consumers is what’s driving its growth.

Another good example of decentralization is – Domain Name System (DNS), which connects individual IP addresses to names, thus saving the hassle of entering a number each time one wants to go somewhere online.

Why does decentralization matter?

Decentralization is not a novice concept. While building a technology-based solution, three primary network architectures are typically considered:

  • Centralized
  • Distributed
  • Decentralized

Majority of the blockchain technologies often make use of decentralized networks but a blockchain application itself cannot be categorized simply as decentralized. Instead, decentralization is a sliding scale and must be applied to all aspects of a blockchain application. 

Decentralization of management and access to resources in an application enables greater and fairer service to all the participants. It does have some trade offs like lower transaction throughput, but they are worth the improved stability and service levels in the long run. 

Benefits of Decentralization

  1. Provides a trustless environment

A decentralized blockchain network obviates the need for everyone to know or trust anyone else. Every member in the network has an individual copy of the exact same data as a distributed ledger. If a member’s ledger is changed or corrupted in any way, it will be rejected by the majority of the members in the network.

  1. Improves data reconciliation

Majority of the companies often exchange data with their partners, which is typically transformed and stored in each party’s data silos, only to resurface when it needs to be passed downstream.

Every time the data is transformed, it increases the chances for data loss or incorrect data to enter the workstream. On the contrary, a decentralized data store enables every entity to have access to a real-time, shared view of the data.

  1. Reduces points of weakness

Decentralization is capable of reducing points of weakness in systems where there may be too much reliance on particular factors. These weak points could anytime cause systemic failures, including failure to provide promised services or incompetent service due to exhaustion of resources, periodic outages, bottlenecks, lack of sufficient incentives for good service, or corruption.

  1. Optimizes resource distribution

Decentralization also helps optimize the distribution of resources to ensure that the promised services are provided with better performance and consistency, and also reduce the likelihood of catastrophic failure.

Is decentralization an all-time solution?

Having skimmed through numerous benefits of decentralization, one must take it with a pinch of salt. Wondering why? 

Because it should be applied only where it makes sense and just because it’s a blockchain application doesn’t mean it needs to be 100% decentralized. 

The goal of developing a blockchain solution is to deliver what the users of that solution exactly need, and this may or may not include certain levels of decentralization. To get a better understanding of decentralized networks, check out the table below to understand how decentralized networks compare to the more common centralized and distributed networks.

Each network architecture has its pros and cons. For example, decentralized blockchain systems prioritize security over performance. So, when a blockchain network scales up, the network tends to get more secure, but performance slows down as each member node must validate all data being added to the ledger. Simply put, adding members to a decentralized network can make it safer, but not necessarily faster.

Is a decentralized metaverse just a facade over a centralized network?

Regardless of the specific shape that it will take, the concept of the metaverse will play an impactful role in the future. 

Major tech giants will play a huge role in the evolution of the metaverse, which leads to the same old question: Will they introduce the same privacy and data-protection problems that plague the current internet?

Keeping in mind the current buzz around the metaverse,  some of the biggest tech players are entering the space to a large extent:

  • Microsoft is bringing new tools to create immersive spaces with augmented and virtual reality.
  • Apple is preparing to launch its first virtual reality (VR) headset followed by their first augmented reality (AR) wearable.
  • Nvidia, the graphics processing unit designer, is of the view that metaverse will be a huge opportunity for the company’s hardware and software business

A Meta-controlled metaverse combining virtual reality experiences like Horizon Worlds, Venues, and Workrooms accessible via Meta’s Oculus Quest headsets would give numerous opportunities to analyze all user activity, including what kind of virtual content users interact with and the time duration. The company could then use the data to improve its metaverse for the long haul benefit of advertisers and its business partners.

If the same old habit of user interaction data being stored in a centralized fashion is followed, it would be difficult for independent third parties or regular end-users to verify who has access to it. Such practices would simply nullify the key proposition of mataverse – its decentralization.

The Decentralized Metaverse Is Growing

With decentralized finance (DeFi) coming around, we already see numerous use cases of connecting financial legos to form novel applications. DeFi wallets like MetaMask and Trust Wallet are openly available for anyone to use and skip the hassle of going through middlemen such as banks or brokerages.

The use of NFTs and blockchains optimized for microtransactions in games and metaverse experiences have sparked a wave of innovation around decentralized markets and applications for game assets as well.

Some of the most prominent examples of the decentralized metaverse are:

  • Decentraland – a unique world built on the Ethereum blockchain. It is controlled by a Decentralized Autonomous Organization (DAO) composed of individual players who can vote to change the policies that determine how the world behaves.

This world also has its own cryptocurrency, MANA, which can be freely exchanged on cryptocurrency exchanges for other currencies.

Along with Decentraland, these virtual reality universes tokenize in-game assets and land parcels to give players the ultimate control over the world they inhabit and help create the same power they enjoy over their real-world possessions.


Conclusion

With almost a divided house on numerous decentralized metaverses and the onset of yet another centralized nexus by tech giants, it is safe to say that at this point, the metaverse can be built on two different cornerstones:

  • Centralized and controlled by big shots like Meta
  • Controlled and decentralized controlled by the people who inhabit the metaverse

This present phase of the next evolution of the internet, known as the metaverse, is already booming past borders and might as well give birth to the next generation of technology giants that take over established industries in ways no one can currently predict. We at Rising Capital look forward to collaborating with people that have the potential to trigger the wide domain of metaverse with their unique ideas and innovation. If you are looking for a backing in terms of resources or funding, we’ve got you covered.

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