By Nicole Ryu
After more than two years of Zoom meetings and family Facetimes, the idea of living in a virtual universe seems more realistic and, for many years, companies have been working to make this a reality. The metaverse platforms that use blockchain technology are in their early stages.[1] Users can now be fully immersed with their avatars walking around, attending concerts, and buying digital clothes and art in a virtual universe that mimics features of the real world.[2] As virtual reality gains popularity, investors see an opportunity to become the landlords of these new digital spaces.
In 2021, two of the blockchain metaverse platforms, The Sandbox and Decentraland had $460 million in virtual land transactions.[3] Even more traditional investors are getting into the action with mainstream players like J.P. Morgan opening a lounge in Decentraland’s Metajuku Mall, which was developed by Everyrealm.[4] Investors are eager to get in on this new frontier. It is estimated that virtual property investments in the metaverse could reach $1 billion by the end of 2022. [5]
In these very early stages of the metaverse, there have not been any digital estate disputes. Virtual property, like all goods on the blockchain virtual platforms, are purchased with cryptocurrencies as nonfungible tokens (NFTs), which have a unique code that connects to the digital plot of land.[6] The transactions occur over the decentralized blockchain and cannot be changed, which, in theory, should easily settle ownership disputes.[7]
However, like with any new technology, especially one that plans to be as transformative as the internet, the virtual contract issues may not be straightforward. Currently, the metaverse is comprised of different platforms, like The Sandbox and Decentraland, that are not connected. As with many technology platforms, users are bound by the terms and conditions of the metaverse they enter. Though users have power to develop their land, they are still controlled by policy makers that run the platform.[8] These terms, often modeled after real estate law, are still complex and leave a lot of control in the hands of the platform creators.[9] Investors could have their unique NFT delinked from the asset that they purchased because even if the buyer can prove the transaction occurred and it can be verified on the blockchain, that code has nothing specific linking it to the actual digital property and further the features of the property cannot be recognized on other platforms.[10]
With the increasing popularity of digital property investing, there is also a growing need for digital property financing and mortgages and questions about the safety or lack of safety in these investments. In the evolution of the metaverse, analogous real-world contract and property law may not apply or be complicated by the terms of service of these platforms. For now, in the hopes of becoming successful landlords of the metaverse, investors are speculating not only about the popularity of these metaverses, but also about their property rights.
[1] Robert Koonin et al., Real Estate in the Metaverse: What Is Digital Real Estate? Why Does it Matter?, Nat’l L. Rev. (May 2, 2022), https://www.natlawreview.com/article/real-estate-metaverse-what-digital-real-estate-why-does-it-matter.
[2] Tom Ara et. al., Exploring the Metaverse: What Laws Will Apply?, DLA Piper: Intell. Prop. and Tech. News (June 22, 2022), https://www.dlapiper.com/en/us/insights/publications/2022/06/exploring-the-metaverse-ipt-news-june-2022/.
[3] Geraldine Pigot & Stuart Irvin, The Metaverse Real Estate Market: Freehold, Leasehold, No Holds Barred?, Bloomberg L. (May 17, 2022, 4:00 AM), https://news.bloomberglaw.com/tech-and-telecom-law/the-metaverse-real-estate-market-freehold-leasehold-no-holds-barred.
[4] Yvonne Lau, JPMorgan Bets Metaverse is a $1 Trillion Opportunity Yearly as it Becomes First Bank to Open in Virtual World, Yahoo! Life (Feb. 16, 2022),https://www.yahoo.com/lifestyle/jpmorgan-bets-metaverse-1-trillion-173504211.html.
[5] Robert Frank, Metaverse Real Estate Sales Top $500 Million and Are Projected to Double this Year, CNBC (Feb. 1, 2022, 8:12 AM), https://www.cnbc.com/2022/02/01/metaverse-real-estate-sales-top-500-million-metametric-solutions-says.html#:~:text=There%20are%20a%20total%20of,platforms%2C%20all%20of%20varying%20sizes.
[6] Koonin, supra note 1.
[7] João Marinotti, Can you Truly Own Anything in the Metaverse? A Law Professor Explains How Blockchains and NFTs Don’t Protect Virtual Property, The Conversation (Apr. 21, 2022, 8:19 AM), https://theconversation.com/can-you-truly-own-anything-in-the-metaverse-a-law-professor-explains-how-blockchains-and-nfts-dont-protect-virtual-property-179067.
[8] Rahul, Your Ownership of Metaverse Land is not Legal Under Property Law: Here’s Why, Indus. Wired https://industrywired.com/your-ownership-of-metaverse-land-is-not-legal-under-property-law-heres-why/.
[9] Pigot, supra note 3.
[10] Rahul, supra note 8.