Newsroom / News / Media / Info Magazine LGP NEWS 02/2022 / Metaverse and NFTs – the digital world in Web 3.0

Metaverse and NFTs – the digital world in Web 3.0

Metaverse and NFTs – the digital world in Web 3.0

The tech giant Facebook attracted world-wide attention when it rebranded around a new concept and changed its well-known name to “Meta”. However, Facebook is not alone – Microsoft & Co are paving a new digital path that countless project developers from the Web 3.0 scene are beginning to follow. 

The term metaverse is very broad. In general, the metaverse can be described as an online space designed to allow people to interact in a more immersive way than, say, a regular website. While the metaverse is more than virtual reality, it can also be used for easier visualisation. In this world, various activities take place, such as interacting with people as well as objects – almost like playing the game of life. You can also own and acquire things within the metaverse, such as digital properties or buildings. For basic understanding and analysis of the metaverse, however, we need to draw on major technological developments around Web 3.0. 

Web 3.0 is the basis for the metaverse and the third generation of the internet. From the everyday perspective of an average user, the internet has developed as follows in recent years: Web 1.0 was the original internet of static HTML websites with which users could not exchange data. In our current model, Web 2.0, data and information are mostly stored selectively or centrally within individual internet applications, so that it is not possible to use the information universally. Web 3.0 is about exactly this – connecting data in a decentralised way so that internet applications can process information in an intelligent way through new technologies – similar to a kind of artificial intelligence. The goal is to generate better user experience. 

The global pandemic has played an important role in enabling emotionally authentic online interaction between people without the need for their physical presence. This provided the starting signal for the implementation of the metaverse in the future Web 3.0, which should be able to offer digital alternatives as well as new extraordinary experiences in these extraordinary times. Specifically, a digital parallel universe is to be created on the basis of Web 3.0, with the use of blockchain technology serving to complement this system. 

This should allow digitisation to take place on a decentralised level, where users can work, play, relax or otherwise interact with the world. Well-known video games such as “Fortnite” or “Roblox” are often cited as examples. They have their own in-game currency with which users can purchase items such as equipment and clothing. Use of the items and interaction between users is only possible in the corresponding game. 

In contrast to the current status quo, in the metaverse the items acquired in-game will actually be owned by the user in the form of an NFT (non-fungible token) and can therefore also be used across games. In connection with the gaming element, “play to earn” is an enticing factor of the metaverse. Here, rewards with real value – for example in the form of coins or tokens – can be earned through gaming or other activities. The purchase of digital properties on metaverse platforms has made headlines in recent months. The purchase price of the plots varies depending on their size and location in the virtual world and can amount to several hundreds of thousands of euros. The digital properties are NFTs that the respective buyer keeps as tokens in his digital wallet. This also applies to advertising space in the metaverse and other digital items such as clothing or accessories. 

Adidas and Nike, for example, have already presented NFT collections and in some cases acquired virtual real estate in which to establish digital stores. However, one should not lose sight of the regulatory provisions for the issue of tokens and the operation of trading platforms behind such NFT projects. Depending on the design of the token issued, this may require a prospectus, registration with the Financial Market Authority or even a licence under the Securities Supervision Act or the Banking Act. 

“Decentraland”, “Sandbox” and “Bloktopia” are examples of metaverse platforms that already exist. Most platforms are designed as DAOs (decentralised autonomous organisations), i.e. as digital associations of several participants – based on the blockchain. In particular, users are granted voting rights when they acquire tokens (e.g. MANA, SAND or BLOK), which allows them to participate in key decisions of the platform. Votes and resulting changes in the DAO are virtualised and implemented via smart contracts. 

In the absence of specific legal regulations for the DAO, a high degree of responsibility and liability of its users is conceivable, at least from the perspective of Austrian law. Therefore specific contractual regulation of the relationships of the DAO or its participants with other market participants is required, especially with regard to any liability exclusions. 

Summary: The metaverse clearly offers new opportunities for companies in the digital space. However, it is recommended that a comprehensive review of any applicable concession law and regulatory provisions is carried out before implementing an innovative metaverse business model. 

Contractual bases adapted to the respective project are also essential in order to create legal certainty in the corresponding implementation. 


AUTHOR:

Mag. Ronald Frankl, Attorney-at-Law and Managing Partner at LGP

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