Can You Own Anything In Metaverse? A Law Professor Explains How Blockchains And NFTs Can’t Protect Virtual Property

In 2021, an investment firm purchased 2,000 acres of real estate for an estimated US $ 4 million. Usually these will not be titles, but in this case the land is virtual. It only exists on a metaverse platform called The Sandbox. By purchasing 792 non-fungible tokens on the Ethereum blockchain, the company then owns the equivalent of 1,200 city blocks.

But is he? It turns out that legal ownership of the metaverse is not as easy.

The dominant but legal problem accounted by crypto enthusiasts is that NFTs can actually own digital assets in the metaverse for two reasons: decentralization and interoperability. These two technological features have led some to claim that tokens provide irrefutable proof of ownership, which can be used in a variety of applications, environments and metaverse games. Because of this decentralization, some also claim that the buying and selling of virtual objects can be done on the blockchain itself at any cost, without the consent of anyone or company.

Despite these claims, the legal status of virtual “owners” is even more complicated. In fact, the actual ownership of metaverse properties is not governed by property law, but by contract law. As a legal scholar studying property law, technology policy, and legal property, I believe that what many companies call “property” in the metaverse is not the same as property in the physical world, and consumers are at risk. to be deceived.

Metaverse Purchases

If you purchase an item on Metaverse, your purchase is recorded in a transaction on a blockchain, which is a digital ledger without anyone’s control over which transaction records cannot be deleted or modified. Your purchase gives you ownership of an NFT, which is just a set of pieces. You store NFT in a crypto wallet that only you can open and “carry” with you wherever you go in the metaverse. Each NFT is associated with a specific virtual element.

It’s easy to think that because your NFT is in your crypto wallet, no one can steal your virtual apartment, your outfit or your magic wand without access to the private key in your wallet. For this reason, many people think that NFT and the digital element are one and the same thing. Although experts confuse NFTs with their individual digital assets, noting that because NFTs are personal assets, they allow you to own digital assets in a virtual world.

NFTs and the hype around the metaverse have sparked a virtual rush on the ground.

However, if you join a metaverse platform, you must first agree to the terms of service, terms of service or license agreement with the end user of the platform. These are legally binding documents that define the rights and responsibilities of users and the metaverse platform. Unfortunately and not surprisingly, almost no one reads the terms of service. In one study, only 1.7% of users found and questioned a “child attribution clause” attached to a term in the service document. Everyone inadvertently gave their firstborn to the fictional online service provider.

It is here in these long and sometimes incomprehensible documents that metaverse platforms outline the legal nuances of virtual property. Unlike the blockchain itself, the terms of service for each metaverse platform are centralized and under the complete control of one company. This is especially problematic for legal ownership.

Interoperability and portability are the defining features of Metaverse, meaning you need to transport your non -real estate virtual property – your avatar, your digital art, your magic wand – from one virtual world to another. But today’s virtual worlds aren’t connected to each other, and there’s nothing in an NFT itself that qualifies that it’s, say, a magic wand. As it stands, each platform should tie NFTs to their own proprietary digital assets.

Little virtual characters

According to the terms of service, NFTs purchased and digital items received are almost identical. NFTs are on the blockchain. Metaverse land, objects, and characters, on the other hand, are on private servers running proprietary code with secure and inaccessible databases.

This means that all the visual and functional aspects of digital assets – the attributes that give them value – are not in the blockchain at all. These features are fully controlled by private metaverse platforms and under their unilateral control.

Due to their terms of service, platforms can legally remove or donate your items by disassociating digital assets from their original NFT ID codes. Finally, while you can own the NFT that accompanies your digital purchase, you do not legally own or own the digital assets themselves. However, the platforms only give you access to digital assets and only for the desired duration.

For example, one day you may own a $ 200,000 digital painting for your metaverse apartment, and the next day you may find yourself banned from the metaverse platform, and your painting, originally stored in its proprietary databases, deleted. Strictly speaking, you can still own the NFT on the blockchain with the original identification code, but it is now useless and has no financial value.

Virtual objects like this avatar are sold in the NFT markets.
Nescolet/Flickr, CC BY-NC-ND

Truly shocking, this is not a distant scenario. It may not be a wise business decision for the platform company, but there is nothing in the law that prevents it. Under the NFT Premium Terms of Service and Terms of Service Governing $ 4 Million in Virtual Real Estate Purchased by The Sandbox, Metaverse Company – like other NFT and Metaverse platforms – reserves the right, in its sole discretion, to terminate your ability to use or even access your purchased digital assets.

If Sandbox “reasonably believes” that you are engaging in any activities prohibited by the Platform, requiring subjective judgments as to whether you have interfered with the “enjoyment” of others on the Platform, it may immediately suspend or terminate your user account and delete. your NFT images and descriptions from its platform. This may be done without notice or liability to you.

In fact, The Sandbox even claims the right in these cases, to immediately recover any NFT deemed you have obtained as a result of prohibited activities. How he handled the confiscation of blockchain -based NFTs is a technological mystery, but raises further questions about the validity of his so -called virtual property.

Conversation contacted The Sandbox for comment, but did not receive a response.

Legally binding

As if these clauses are not alarming enough, many metaverse platforms reserve the right to change their terms of service at any time with little or no actual notice. This means that users should constantly update and re-read the terms to ensure that they are not engaging in any new prohibited behavior that could result in the removal of their “purchased” assets or even their entire accounts.

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Technology alone will not pave the way for real ownership of digital assets in the metaverse. NFTs cannot escape the centralized control currently available on metaverse platforms and will continue to have under their contractual terms of service. Finally, legal reform along with technological innovation is needed before Metaverse can be what it promises.

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