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The metaverse has been a burgeoning concept arguably since the dawn of the digital age itself. The idea of having different virtual realities online where users can interact with each other and purchase assets to upgrade to higher levels is something that many of us have grown up with – remember Club Penguin? Moshi Monsters?
For the more gaming-inclined among us, playing in virtual realities through a remote control from the comfort of your own home is the norm. Is it really any different if we replace the controller with a virtual reality headset, give assets tangible value and start to shift our daily lives online? Working from home has shown us that the business world can be run online and can even aid business development as large conferences with hundreds of attendees can be held at a far reduced cost than pre-pandemic.
The metaverse has been gathering a lot of pace recently. Arguably we can put this down to Mark Zuckerberg’s spin-doctors doing the most by deflecting bad attention from the press on Facebook’s practices and channelling it into shiny new ideas. However, Facebook changing its entire brand name to Meta is likely to be more than a PR stunt, especially considering they aim to hire more than 10,000 people in the next five years to help develop the metaverse.
What is it?
The metaverse is a host of various platforms that you can access synchronously from one headset and one avatar while interacting with others. From this you can build your life on the metaverse; there are currently multiple companies working to produce products and create an online economy, recently real estate sold in the metaverse for $2.4 million which is one of the biggest purchases to date.
How was this done? Enter everyone’s favourite commercial awareness topics: blockchain and non-fungible tokens (NFTs).
Have a read of this LCN Blog: ‘The laws of music: the rise of fan-crazed NFTs’ for an insight into how NFTs have transformed the music industry.
A quick run-down
Blockchain is essentially a distributed data network that benefits from immutability (unalterable) and decentralisation (every party holds the same information). Blockchain differs from normal databases whereby data is structed in tables and instead is formed of these immutable, blocks of data that are linked together and become viewable to all, essentially getting rid of the need for a centralised authority to keep them and those who use it in check. It follows that blockchain is now the basis for many cryptocurrencies.
NFTs are assets built on a blockchain that are therefore entirely unique. It is in this way that they differ from cryptocurrency as each token is different and cannot be replicated. This is why we have seen a rise in the use of NFTs especially in the art world because the digital asset gains value as the it is completely unique and irreplaceable. What NFTs can be used for is completely limitless, it’s possible that NFTs could be used to represent individual rights and freedoms.
The metaverse is thus a fast-growing hub of commercial activity that not only poses huge opportunities for clients but also huge risks in unchartered legal territories.
Read this Commercial Question: ‘NFTs and copyright infringement: Miramax versus Tarantino’ to find out if NFTs are exempt from IP restrictions placed on tangible goods.
Why do lawyers care?
The role of a lawyer is becoming increasingly more digital, with multi-disciplinary practice area groups emerging in large commercial firms. The ‘Digital Law Group’ at Herbert Smith Freehills LLP is an example of this – it’s clear that the firm is starting to brace themselves for a digital future. Reed Smith also published a 76-page white paper on navigating the metaverse last year. This is a huge trend in the industry.
As I said, the metaverse as it stands is currently underregulated, which could pose a problem for clients if they want to start investing in the companies that are running it and the digital assets it produces. Two of the key issues we can pick out are cyber security and the role of intellectual property (IP) rights.
New technologies that are adopted too quickly can be perfect breeding grounds for cyber attacks. Lawyers need to be able to understand these technologies and anticipate the potential problems their clients may have and help to implement mitigation strategies.
Data protection laws and IP rights are going to need to be stronger than ever. Especially with NFTs flourishing right now, there seems to be the need to re-consider the concept of ownership and the ownership of assets and how we build value, consent and privacy rights in a new virtual reality.
These are just a few of the issues I’ve picked out and there is loads more information out there to get your teeth into. What we can gather, however, is that there has been a fundamental shift in the types of problems clients are coming to lawyers about. Maybe the types of problems have not changed: IP and copyright infringement, data breaches and fraud but the circumstances surrounding these issues is very different.
To find out more about NFTs, read this LCN Blog: ‘Commercial awareness series: NFT and Blockchain.’