Ownership In The Metaverse – A (Virtual) Reality Or A Real Fiction? – Fin Tech

A look at whether you own and control what you buy in the
space.

First things first, let’s define the metaverse

The metaverse can be described as a network of virtual reality
worlds where users can interact online through real world-like
activities such as to work, learn, shop and socialise through their
“avatars”. It is a 3D version of the internet, or as it
has grandly been described “a virtual extension of the real
world”.

There are various platforms making up the metaverse network.
Some of the major platforms on the metaverse right now are The
Sandbox, Decentraland, Cryptovoxels and Somnium Space but it is a
growing network, so there is scope for many more to join. Existing
entities such as the gaming platforms Fortnite and Roblox are
evolving as part of the metaverse network.

Metaverse merch – what can you buy?

Some estimates state that more than $80 billion is spent on
buying virtual goods each year, more than that spent on purchasing
music. Much of this to date has been on in-game purchases, but
there is a rapidly growing market for purchase of virtual goods
outside of the computer games environment that may have more real
world resale value.

Big names are getting involved. Nike recently teamed up with the
Roblox gaming platform to create Nikeland, a virtual world where
you can play sport and dress your avatars in Nike-branded trainers
and clothes.

In other examples, Arianne Grande held a concert on Fortnite and
Hyundai has a metaverse mobility experience on Roblox highlighting
future mobility solutions.

The first Virtual Fashion Week took place on the metaverse
platform Decentraland earlier this year with Dolce & Gabbana,
DKNY and Tommy Hilfiger featuring their brands. The event included
the opening of Selfridge’s digital flagship store in
Decentraland, a digital iteration of its real world Birmingham
store, displaying art NFTs for purchase.

In the Virtual Fashion Week space you could also collect NFT
artwork featuring logos of fashion brands, buy and wear virtual
shoes to use on a gaming platform or buy an AR version of the shoes
for you to “wear” via your mobile phone.

As well as merchandise and luxury items, there are a vast number
of products that can be purchased in the metaverse. A huge boom
area is purchase of property and plots are being snapped up and
investors are paying millions for virtual land in the
metaverse.

It’s not yet clear how use of online “buildings”
will evolve. It may be likened to the real world equivalent of
buying advertising space or a billboard. For example,
PricewaterhouseCooopers has bought a plot in The Sandbox that will
be “a web 3 advisory hub”. Musician Snoop Dogg is
building a Snoopverse in The Sandbox platform and reportedly, a
buyer paid $450,000 to be Snoop’s neighbour.

The Sandbox

The mechanics

How does it work? For metaverse property sales, each item of
metaverse real estate is created as a virtual plot or
“parcel”. Each parcel exists as a NFT, a
non-interchangeable asset recorded on the blockchain. Linking the
property parcel to the NFT is the equivalent of a digital property
deed.

For other metaverse purchases such as artwork and video clips,
the NFT represents the receipt or proof of purchase in the same way
that in the real world you may get a paper receipt from a store
when you buy goods. What is really key to note is the NFT
doesn’t represent the digital asset itself, it is only the
record of ownership and the image file will be hosted somewhere
else, off the blockchain. The actual content of the NFT is not
typically stored on the blockchain because of the size and
computational cost of storing the content on the blockchain (the
.JPG, MP3, Gif) so it is stored on the web. The NFT will generally
contain a link pointing to the location of the digital asset.

Can you actually own anything?

In May this year, in the case of Osborne vs Ozone Networks
Inc. t/a Opensea, the UK High Court found that NFTs are
private property. The case involved theft of two Boss Beauties
artwork NFTs from the Claimant’s digital wallet. The NFTs as
images had artistic value but also other value enabling access to
events, free goods and licensing fees and they had a commercial
value of around $4000. The location of the stolen NFTs was swiftly
traced (thanks to the transparent auditing potential of the
blockchain), but the identity of the wallet holders of the
transferred stolen NFTs is unknown and so the Court ordered a
freezing injunction against “persons unknown” prohibiting
the further transfer of the NFTs.

One of the stolen NFTs

What the case did not look at, as it was outside of the scope of
the remedy requested, is the link between the NFT and the
underlying content that the NFT represents. The case confirms and
reassures that NFTs are property, but the status and safety of the
asset itself, held away from the blockchain is a different
question.

In the case of metaverse use, the visual or audio elements of
the virtual assets that you have bought are stored away from the
blockchain and are under the control of the metaverse platforms.
Under common terms of service of metaverse platforms they can
potentially delink your assets from the NFT.

So as well as the risk of devaluation of a digital purchase,
there are arguably risks around your ability to access the digital
goods. For example, the platform The Sandbox retains the right to
delete your NFT’s images from its platform if you are in breach
of their terms and states “We reserve the right to remove
Assets and Games from the Services, in whole or in part, without
prior notice, for any reason or for no reason at all”. So
while the NFT “receipt” on the blockchain is
incontrovertible proof of your asset purchase, the asset itself is
not so secured. In a constantly evolving environment, changes to a
metaverse platform’s terms and conditions after purchase of an
asset may make your purchase vulnerable.

Buyer beware

Is it a risk worth taking? Arguably purchase of any asset real
or virtual involves an element of risk. Somnium Space’s founder
and CEO, Artur Sychov has said “Real monetary value should
only be attached to virtual goods that provide real utility for
their owners, otherwise there is a huge risk of creating a
speculative bubble that will hurt consumers and
companies.”

Buying virtual property in the metaverse has been likened to the
dotcom goldrush. Despite some risks, interest is growing and to
quote a Snoop Dogg Tweet from the end of last year::

“We on the cusp of a digital revolution. Wake up n get
it.”

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.