Uses of Metadata
Describes the importance of metadata in Web 3 space and it's typical use cases
… there are two components of a transaction: the mechanism to send and record the flow of tokens and the reasons as well as conditions behind moving tokens. The latter can be arbitrarily complex and involve terabytes of data, multiple signatures and special events occurring” - Charles Hoskinson, Founder of Cardano
Metadata can describe the context of a transaction or the properties of NFT, which Charles Hoskinson correctly points out in the above quote can be arbitrarily complex. Some potential use cases of metadata are:
- Proof of value
- Data for smart contracts
We believe that as the Web3 space matures, it will be regulated in some ways just on a mere fact that with any sense of freedom should also come a sense of responsibility and certain aspects of our society. Such as law enforcement and moral or ethical conducts can’t be left to smart contracts and AI agents, it doesn’t matter how “smart” these will become. Even if the illicit activities on the blockchain can’t be stopped, there should be a possibility to prove the legality of transactions by providing the required metadata about it. And it should be trustworthy and verifiable. The metadata will play a crucial role in this process.
Once NFT use cases progress, metadata will be required to describe and classify transactions/NFTs in order to prove their value. One good example to illustrate this point is the sale of CryptoPunk #7523 at Sotheby’s auction for $11.8 million. How does one justify such a price for a 16x16 pixel art? Crypto veterans may know the story behind it, but for anyone else it is required to do some reading on what CryptoPunks are, why this particular CryptoPunk is so rare, what is the history of similar sales in the past, etc. Being sold by Sotheby’s adds a certain level of reputation to this transaction, since Sotheby’s is one of the oldest and most reputable auction houses in the world. However, this was a widely publicized case and the information surrounding it was easy to find. What about a general case when a value of a particular NFT needs to be justified? Wouldn’t it be useful to have publicly available metadata always available and attached to the NFT itself that allows us to make these types of judgements? It also would be great if this metadata comes from a variety of sources, such as social media and expert blogs,.
Smart contracts often need to decide based on external data, such as exchange rates and stock prices, and they rely on oracles to provide this information from the outside world. The type of data that oracles provide is publicly available with a high degree of redundancy, so it could be obtained from multiple sources where most of these sources agree on a certain value with a high probability that this value can be considered truthful. What if the data required for smart contracts doesn’t have redundant sources and the only place where we get it is a centralized database of some provider? How can we be sure that this data is truthful if our goal is to function is a zero-trust environment of Web3? The different mechanisms should be in play when we can verify the origin of the metadata and conclude that it’s reliable with a high degree of provenance and not been tampered with? One solution that comes to mind is that we should treat metadata the same way as transactions on blockchain, and many L1 chains support metadata to be embedded alongside the transaction, but is L1 a good place to store potentially large descriptive sets of metadata? Probably not, as we should be concerned about the size of the L1 ledger and allow it to do what it does best: secure transfer of value between “alices” and “bobs”.