# Problem Statement

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## The First Wave

The concept of owning digital assets took the world by storm in late 2017, when Cryptokitties collapsed Ethereum. This event triggered widespread experimentation about the opportunities for on-chain digital ownership.

However, lack of blockchain scalability failed to meet industry requirements to propel its mainstream adoption <mark style="color:orange;">(\*)</mark>. As an example of poor throughput's consequences, Ethereum consumed nearly <mark style="color:green;">**$1Bn in gas fees during 2022 in NFT minting alone**</mark>, leaving room only for use cases based on extreme <mark style="color:green;">**scarcity**</mark>, premium selling prices, and purchasers <mark style="color:green;">**speculating**</mark> on the possibility of reselling the same item for a greater profit.

{% hint style="info" %}
<mark style="color:orange;">(\*)</mark> Cryptokitties collapse arrived at peaks of \~10K DAU in 2017, while Sunflower Land collapsed Polygon, a scaling solution for Ethereum, in 2022, with roughly 5x more DAU.
{% endhint %}

The 2023 NFT bubble burst prompted builders to explore scaling solutions like Layer-2s and new Layer-1s to enable utility over speculation. However, these solutions have downsides, such as the hassle for <mark style="color:green;">**users to bridge currencies**</mark>, the need for <mark style="color:green;">**centralized**</mark> components like Data Availability Committees, or proof generating parties, or the migration to less mature, often non-EVM compatible ecosystems.

Centralization further impacts bridges, often targeted by hacks, and NFT metadata storage. When assets are mutable, their attributes are typically <mark style="color:green;">**stored on private company servers**</mark>, preventing users from querying a decentralized system about what they own. Legislation is catching up, potentially deeming [centrally-managed NFTs as securities](https://www.coindesk.com/consensus-magazine/2023/02/28/dapper-labs-nft-ruling-dunks-on-private-networks/).

Besides scaling and cross-chain connectivity, other important aspects keep preventing mainstream adoption, including the need for users to acquire crypto and execute TXs themselves, lack of incentives for DApps to push asset interoperability, and risks related to legislation compliance.
