Top four blockchain and metaverse challenges and opportunities for telco

Last month’s companion blog “Blockchains, 5G and the metaverse: Is there a web3.0 internet revolution on the horizon?” has outlined an exciting future towards a truly immersive internet powered by 5G, emerging XR devices and novel applications.

In this blog, we will deep-dive into the many challenges we need to address to make such immersive internet a reality. These include not only technical, but also regulatory and economic, challenges which need to be overcome in due time. Once solved, there will be ample opportunities which we will also explore in some detail.

1. Technical challenges to enable a 5G-powered metaverse

Important technical challenges still need to be overcome; some are central to the entire metaverse proposition whilst others are of importance to the telco ecosystem. To this end, let’s examine security, energy efficiency and interoperability.

Cybersecurity is paramount in ensuring the viability of a web3.0 metaverse. While we’d hoped for a provenly secure solution portfolio, security incidents continue to happen. Solutions are urgently needed to build confidence with users, developers and investors. Cybersecurity challenges come in many forms:

• Design weaknesses in blockchain software need to be addressed and systems need to be properly tested.
• Inconsistencies in smart contracts need to be addressed to ensure that funds cannot be withdrawn by unauthorized participants, thus calling for rigorous testing approaches in the future.
• Social exploits need to be prevented where passwords to hot or cold crypto wallets are being obtained through direct human outreach (e.g. sending a phishing email).

Energy consumption of blockchains is coming into the limelight as of late. This is particularly important to our telco ecosystem since 5G systems are geared towards utmost energy efficiency. Supporting an energy inefficient application over energy-efficient 5G is counterintuitive and against our current charter of work. Luckily, the blockchain community is undergoing massive changes towards a significantly more efficient technology solution. Notably, most legacy blockchains required Proof-of-Work (PoW, a.k.a. “mining”) to validate transactions across millions of end nodes. This is now being superseded by Proof-of-Stake (PoS), a validation methodology which is 99.99% more energy efficient. Ethereum, for instance, which is one of the most important blockchains underpinning popular web3.0 metaverse applications, has transited this year from PoW to PoS. However, more work needs to be done since non-PoW blockchains still suffer from massive duplication of effort for transaction and block processing.

Interoperability remains one of the most important challenges for our community. In the early days of the metaverse, we will probably have several (smaller) metaverses – similar to the many local area networks (LANs) that existed at the dawn of the internet. However, over the years, we should strive towards an interoperable metaverse ecosystem to ensure it yields the benefits we see from the internet today.

That, however, requires interoperability at all layers, i.e. connectivity, headsets, data, orchestration, graphics, financial, access, security, APIs, etc. Standards for financial exchanges are clearly not enough. Over the coming years, we should develop telco standards geared towards XR to ensure a homogeneous connectivity experience for users around the world. We need to ensure that parts of the metaverse still based on web2.0 is interoperable with newer versions based on web3.0. We ought to ensure interoperability between public and private blockchains, public and public, private and private (with blockchains being the backbone of web3.0 metaverses). The importance of standards and alliances, such as the Corda Foundation Network, 3GPP, and the metaverse alliances, should not be underestimated. We are all in it together!

2. Regulatory challenges protecting human rights

Among the many regulatory challenges in the metaverse era, three stand out: regulation on privacy; laws and regulation on copyright; and mechanisms to enforce regulatory regimes. While these are not specifically linked to 5G, they have a direct impact. Let’s explore each in more detail.

In terms of privacy, an important yet often overlooked fact of public blockchains is that they are indeed public, i.e. all transaction histories are visible to all. Whilst transactions can be hidden (through cryptographic hashes), the electronic addresses of assets, tokens and wallets remain visible. As soon as a specific address is purposefully, accidentally or otherwise linked to a specific person, the entire previous transaction history can be made visible. Therefore, privacy for ongoing or past transactions cannot be guaranteed! Despite this, transparency remains an invaluable asset in the metaverse as it increases trust between all actors, and a good trade-off with privacy should be found.

In addition, it is technically not possible to erase specific transactions from the public blockchain records as blockchains are – by design – immutable. The typical “right to be forgotten” enshrined in various leading privacy regulations, such as Europe’s GDPR or California’s CCPA, cannot be upheld. For both problems, new and innovative technical solutions need to be engineered that solve the problem without creating new challenges at the same time.

In terms of copyright, web 3.0 promises to enable the creator economy by guarding fair use of assets. However, a rather unexpected development related to NFTs has reopened the debate around content rights in the metaverse. Notably, blockchains were seen as an ideal solution to prove provenance to digital assets where a creator could trace any use or sales of her/his artistic assets through unique addresses and cryptographic signatures. However, anybody who has derived cryptographic signatures knows that changing a single bit in a huge file completely changes the hash. Therefore, an invisible pixel change to a famous NFT would technically result in a completely different asset. Judgements around originality thus come back to subjective interpretation, something we had hoped to avoid with blockchains. For this, an urgent solution is needed!

Last but not least, the enforceability of regulatory frameworks is an open issue. In the web2.0 era, infringements to regulation are simple to address: the regulator would put out a notice against the infringing party, e.g. a specific company. In the web3.0 era, however, there is no such company since the metaverse is run on a blockchain which is, in itself, a distributed compute infrastructure owned by millions of people. Who should the regulator contact, and how? Technical solutions are thus needed to address this issue of enforceability. An idea is the introduction of self-enforcing systems where the technology framework excludes noncompliant variations, developer submissions or blocks developer or user credentials as a result of infringement. Without enforceability, there remains the danger that the burden of governmental enforcement moves closer to the individual consumer through collective liabilities.

3. Economic challenges for a prosperous metaverse

For the metaverse to succeed, economic models must be solid! Let’s explore challenges related to the stability of the token/currency system, monetizable business models and the (often overlooked) issue of business impartiality.

In terms of the stability of tokens, currency and blockchain systems, it is difficult to grow a loyal creator economy if underlying financial systems are too volatile. As some people have painfully discovered over the last months, one token earned today might be worth nothing tomorrow. While Stablecoins try to mitigate this, it also brings a new set of challenges such as deciding on the reference they are pegged to. Another issue is whether physical goods can be bought or redeemed against loyalty tokens that are listed on general crypto-exchanges: malicious actors could exchange the loyalty token against another token, then tank the value of the value token, and then exchange back – allowing them to potentially empty the entire store of physical goods!

Without stability, the financial system running on top of blockchains will not contribute to the general value creation. Interestingly, a solution to volatility are tokens held on private blockchains which can be stabilized and thus offer the advantages of a fiat currency whilst running over distributed infrastructure.

Let’s talk business model now! To this end, it is important to understand that creating wealth through web3.0 and monetizing web3.0 are two different things. An open challenge is how to sustainably monetize the web3.0 metaverse. In our previous blog, we laid out some creative approaches; however, technical solutions are needed which would enable such novel business models to take hold in an ARPU-centric telco ecosystem.

Last but not least, an important yet overlooked issue is the high concentration of metaverse wealth among very few financial players/institutions. On one hand, capital is needed to bootstrap many of the untested metaverse solutions and value propositions; VCs would typically hold a large amount of tokens acquired before or after an ICO (initial coin offering; the crypto IPO equivalent). On the other hand, one of the founding principles of a blockchain-based metaverse is that there is no central form of ownership. However, owning a large amount of tokens allows for financial manipulation and thus exerts a form of “centralized” control. Technical, and ideally regulatory, solutions should be found to ensure that the metaverse remains a technically and operationally decentralized proposition.

4. Ethical challenges ensuring a human-centric metaverse

While the above challenges will eventually be solved by engineers and regulators, we also need to address a set of overarching challenges. These include challenges that are related to the very essence of humanity: what will the ethical norms and boundaries be in this new cyber-physical metaverse where regulatory oversight will be thin and identity fluid?

What are the norms of engagement we will accept as society and have peace of mind with our children mingling in the cyber space? Remember that immersion will be much stronger in the metaverse than in today’s internet; haptic feedback and “internet of senses” will further augment experiences. What will the new boundaries be?

We are morphing from an era of passport to an era of password: How will identity change over the years to come, and what is the impact on humanity’s prosperity? Identity is the root of all conflicts. The metaverse, where we will have many possible identities, will thus pose fertile ground to new forms of conflicts which we have not encountered yet.

Maybe it is a good time to establish an international body at par or within the UN that oversees these larger societal problems. Such (GDO) ought to be an internationally chartered body with advisory and legislative oversight. It could sit along the incumbent G20, UN, etc., as well as the recently established CCGAI (coordinating committee for the governance of artificial intelligence).

5G networking opportunities

Let’s commence with the obvious one: the metaverse will need 5G! Here’s a quick recap on how 5G will address the most important needs of the metaverse:

• Immersion: An integral part of the new 3D internet will be the ability to offer immersion at a level of detail which is convincing and exciting. It also needs to understand spatial context and be able to anchor digital objects in the physical space. All that requires high data rates over the air which can be offered by 5G. Furthermore, since XR headsets are unlikely to render all content locally, split or remote rendering edge-cloud architectures need to be natively supported which can also be offered by 5G.
• Immediacy: Related to the immersive experience but fundamentally different is the notion of immediacy, i.e. the ability to connect two people in the metaverse with latencies of less than a few dozen milliseconds. It enables a much higher degree of interaction and emotional bond. 5G is ideally suited to address this need since schedulers allow for millisecond over-the-air transport and edge-cloud architectures allow for local processing.
• Consistency: Also, the metaverse requires consistence to prevent consumers from turning their backs on the experience. Consistence is achieved with solid coverage, reliable architecture solutions for horizontal and vertical handovers, and SLA capabilities. Again, 5G is able to offer all of that on a global scale.
• API-first: Last but not least, the metaverse will thrive on an empowered developer community. To this end, 5G offers a significantly improved relationship between the network and the application through APIs. This enables applications to become first-class citizens of the 5G ecosystem rather than distant end-users, thus allowing them to get some control over the required networking resources.

Investments will be needed to beef up the infrastructure, and possibly acquire more spectrum at national auctions. Once deployed, however, 5G SA will be able to address the first generation of the metaverse.

Blockchain 5G monitoring, orchestration and service opportunities

Telco standards have evolved significantly over past years, with 3GPP advocating for more and more disaggregated solutions in the radio access network (RAN) as well as core network (CN). For instance, the RAN offers fully cloudified distributed unit (DU) and centralized unit (CU) operations; the CN has a fully micro-serviced architecture with CN functions communicating with each other over standardized data bus APIs.

The number of companies as well as teams within larger companies providing RAN and CN capabilities will thus increase over coming years. Management of such a large number of heterogeneous components, as well their monitoring and orchestration, will be an important challenge.

Along come blockchains! They are ideal to provide the needed trust between a priori non-trusting parties. For instance, it can be used to:

• Monitor the infrastructure performance and help to keep track of the exact root of failures.
• Orchestrate interaction between components using smart contracts to optimize performance and/or minimize energy consumption.
• Manage shared licensed (and license-exempt) spectrum.
• Provide a telco marketplace where applications or even data plans can be traded.

A lot of academic work has been proposed over past years, such as Ericsson’s work on Blockchain-Based Telecommunication Services Marketplaces, a (data-centric) Transparent Logging with Hyperledger Fabric or a (infra-centric) Blockchain-Enabled Accountable and Transparent Infrastructure Sharing in 6G and Beyond. Companies have also emerged in the field, such as spectrum/infra-sharing blockchain company Helium.

In a pioneering move, Ericsson has argued that dedicated blockchain enterprise platforms have the potential to change how businesses operate globally, with the ability to create bridges based on transparency, security and trust with other companies, industries and economies across the globe.

Importantly, however, the standards defining organization ETSI has launched a working group on permissioned distributed ledgers. As part of that working group, architecture propositions were made which natively weave blockchains capabilities into the future telco networking infrastructure. 3GPP is also receiving first contributions towards the evolution of future releases.

Blockchain-as-a-service and API opportunities

Public and private blockchains require a large, distributed infrastructure to function properly. Telco systems are some of the largest digital infrastructures and thus naturally lend themselves to be used as anchor points for blockchains. Therefore, 5G could offer blockchain-as-a-service for any company and developer in the future.

Along the same lines, the entire 5G blockchain offering ought to be made accessible via APIs and SDKs, similar to what has been done in the non-5G ecosystem today. That would allow millions of developers to reap the advantages of using 5G infrastructure as well as blockchain capabilities discussed above. Whilst API single point of failures still need to be addressed, the advantage of anchoring it in a standardized 5G system is that it becomes available globally.

Join us in designing the next generation wireless telco systems based on secure and transparent blockchain technologies. We need support in overcoming challenges and addressing opportunities, and in standardizing proposed solutions so they become a tangible engineering proposition for future generations to come.

Explore our other metaverse posts

Read our earlier post, where we explore the opportunities of blockchain and Web 3.0 in the context of the 5G metaverse.

Take a tour of the top twelve metaverse use cases, one use place at a time!

Find out why the metaverse needs 5G to bring disruptive VR, XR, and Web 3.0 to life.

Will metaverse universities be a thing of the future? Learn how XR can transform education through the metaverse.

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Will blockchain upend traditional finance? Explore some early mover technologies in the enterprise blockchain space!

Learn more about blockchain and the future of connected industries.