Everything you wanted to know about the metaverse

Possession may be nine-tenths of the law, but the unique qualities of digital assets mean they do not easily fit into the age-old legal concept of ownership

Jaded observers dismiss it as marketing, little more than an evocative buzzword to lure investors. The initiated say it is our shared digital future: a virtual world of abundant possibilities that exists in parallel to our physical world. Most find themselves in the middle – unsure, confused… or awaiting an explanation. Welcome to the metaverse!

In essence, the metaverse is generally characterised as a growing 3D virtual universe where individuals can live their digital life as an avatar – working, playing, shopping, or just hanging out. This is not the result of any single technology, but the coming together of a number of them.

Virtual reality (VR) headsets and blockchain technology are exciting developments that each offer their own opportunities to enterprising organisations, but when put together, they open a door to an environment so immersive that it can rival our physical world. Or so the story goes.

Because this is evolution, rather than revolution, we can expect the metaverse to face many of the same legal issues as we see in the internet today. There may be nuances in their application, but our laws of data privacy, intellectual property and competition will apply in much the same way. But if that sounds reassuringly clear, then think again. The metaverse is full of new challenges.

Owning virtual items

Some of these arise from its reliance on emerging technologies to deliver a seamless, interconnected digital experience that is akin to what we experience in our physical lives. Consider blockchain technology. Many see this as vital to delivering a unified digital economy for the metaverse.

Being able to exclusively possess and control virtual items – such as the clothes your avatar wears or the house it lives in – is fundamental to any real world-like digital universe. Blockchain technology gives us the ability to do this technologically through the use of non-fungible tokens (NFTs). But, while possession may be nine-tenths of the law, the unique qualities of digital assets mean they do not easily fit into the age-old legal concept of ownership.

Enforcing rights over virtual items may mean turning to the courts, but the outcome could be uncertain because rules to ascertain legal ownership of this type of asset are, in most cases, not yet fully settled. The Law Commission of England & Wales has a consultation paper out about this right now, which you can input into until 4 November. Its eventual advice to the government is expected to identify several key areas that require law reform to recognise and protect the rights of owners of digital assets.

Turn on, tune in   

While blockchain technology is a crucial part of the infrastructure underpinning the metaverse network, a combination of powerful 3D rendering engines and physical hardware transports us to the metaverse. The preferred choice is VR because it is fully immersive – once your headset is on, the virtual world completely replaces your physical surroundings.

Herein lies another frontier of technological development, and another major hurdle. As one of my colleagues recently put it, there are three main obstacles: interface, interface, interface. His point was that people are unlikely to be wearing bulky goggles for hours on end.

An issue that may be less “in your face”, though, relates to the personal data many of these devices use to see when you are most engaged, and what with. Significant volumes of data are generated, including particularly sensitive biometric information in the form of heart rate, facial tics, and even pupil size. This will likely be shared widely given the size and complexity of the metaverse ecosystem, driving home the need to comply with data privacy laws.

While a few major technology companies are investing heavily in creating VR headsets that are actually comfortable, others point to our own 3D holograms as the answer to spatial experiences of the future. Which will arrive first?

Content is king

For the time being, those who are able to bear the headsets (and figure out how to use a crypto wallet) are rewarded with an immersive virtual world full of exciting experiences. Metaverse platforms provide environments in which large numbers of people can gather and interact, discovering and enjoying a wide variety of engaging content.

By dematerialising space, objects and distance, any experiences that might be scarce in the physical world become infinitely more abundant and accessible in the metaverse. The ability to access a music concert in the physical world – and your experience when you get there – is limited by factors such as location, cost, and the number of tickets on sale. In the metaverse, content creators can sell unlimited tickets to virtual shows that are universally accessible, where everyone enjoys the best seat in the house.

Much like in the physical world, this wealth of content can give rise to a broad range of legal issues, especially when it is generated by users. Employees may choose protected characteristics for their avatars, and even though they do not possess them in the physical world, employers may still find themselves open to discrimination claims.

Influencers or “content creators” who advertise content must follow rules of fairness and transparency set out by regulators, including making themselves obviously identifiable when advertising products. Users may infringe the intellectual property rights of owners of popular brands by generating content that references their trademarks.

The sheer scale of the metaverse may hamper detection and enforcement of problematic content. The volume of social interactions and creator content will likely make the task of identifying and censoring malicious content all but impossible for a human workforce. Leaders in this space are investigating the use of self-supervised AI to do the job, which learns without human oversight or input, but these are notoriously hard to rid of biases that disproportionately target particular demographics. As well as obvious ethical issues, this may give rise to a range of data privacy and broader human rights challenges.   

New world, new opportunities?

If this all sounds a bit negative, that is not the intention. There is a long road ahead for the metaverse, but there are already numerous examples of enterprising businesses reaping the benefits. Yuga Labs, the creator of famed Bored Ape Yacht Club NFTs, generated around $300m earlier this year by selling NFT “deeds” for up to 55,000 plots of virtual land in Otherside, its upcoming metaverse platform.

Dolce & Gabbana similarly turned to NFTs to sell a separate nine-look collection of clothing and accessories, four of which were only in the metaverse, and the rest of which included a real-world garment, for a total of $5.7m.

For many businesses, it is simply a case of dipping a toe in early and testing the water; learning from experience, rather than listening to speculation. This helps inform longer-term strategies not just for the metaverse, but also for the individual technologies it comprises. And it puts those businesses in prime position to evolve if – or, perhaps, when – the time comes.

So, what is the metaverse? An evocative branding opportunity? Absolutely. Airless slogan? Certainly not. While we wait to see whether it stays true to its Panglossian pitch, at least for now the concept encapsulates how billions of people will live more of their lives – and spend money – in the virtual realm. And business is sure to follow.

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