Ownership of Metaverse? Here’s the law that explains why blockchain and NFTs fail to protect virtual assets.

In 2022, the investment company bought 2,000 acres of real estate for about $ 4 million. Normally this is not a headline, but in this case, the country was virtual. It only existed on the Metaverse platform called the Sandbox. The company ownership of Metaverse then is equivalent to 1,200 blocks by purchasing 792 irreplaceable tokens on the Ethereum blockchain.

But did it? After all, the legal ownership of the Metaverse is not that simple. 

A popular but legally problematic story among cryptocurrency enthusiasts is that NFTs enable true ownership of Metaverse digital objects for two reasons: decentralization and interoperability. With these two technical features, some argue that tokens provide clear evidence of ownership that can be used in a variety of Metaverse apps, environments, and games. Due to this decentralization, some argue that buying and selling virtual items on the blockchain itself can be done at any desired price without the permission of an individual or group.

Despite these claims, the legal status of a virtual "owner" is much more complex. The current ownership of Metaverse assets is governed by contractual law, not property law. As a legal scholar studying property law, technology policy, and legal ownership, what many Metaverse companies call "ownership" is not the same as real-world ownership, and consumers risk fraud.

Purchasing in the metaverse

When you purchase an item in the Metaverse, it will be recorded in a transaction on the blockchain. This is a digital ledger that no one can control and cannot delete or modify transaction records. Upon purchase, you will be assigned ownership of the NFT. This is simply a unique bit string. NFTs are stored in crypto wallets that only you can open and "carry" throughout the Metaverse. Each NFT is associated with a particular virtual item.

Believe that no one can rob your NFT-lined virtual house, outfit, or wand without accessing your wallet's private key because your NFT is in your cryptocurrency wallet. For this reason, many consider NFTs and digital elements to be the same. Even professionals are integrating NFTs with their digital assets. Keep in mind that NFTs are personal property, so you will be able to own digital assets in a virtual world.

Interoperability and portability are important features of the Metaverse. In other words, you should be able to carry virtual non-real estate (avatars, digital art, wands) from one virtual world to another. However, today's virtual worlds are not interconnected, and NFTs themselves have nothing called magic wands, for example. Currently, each platform needs to connect NFTs to its digital assets.

Virtual fine print

According to the Terms of Service, it is unlikely that the NFT you purchased will be the same as the digital product you received. NFTs are on the blockchain. Metaverse lands, goods, and characters, on the other hand, reside on private servers running their code with a secure and inaccessible database.

This means that all the visual and functional aspects of digital assets (the very characteristics that add value to them) are completely absent on the blockchain. These features are fully controlled and under unilateral control by the private Metaverse platform.

The platform may also legally remove or transfer an item by unlinking the digital asset from the original NFT identification code under the Terms of Service. Even if you own the NFT that came with your digital purchase, you will not ultimately own the digital asset itself. Instead, the platform grants access to digital assets for as long as desired.

For example, one day you might own a $ 200,000 digital painting for your Metaverse apartment, and the next day you might be banned from the Metaverse platform and delete the painting that was originally stored in your database. You're owning an NFT on the blockchain using the original identification code, but it's functionally useless and economically worthless.

Legally binding

Many Metaverse platforms reserve the right to change their Terms of Service at any time without notice as if these provisions were not sufficiently vigilant. This means that users should constantly update and reread their Terms of Service to ensure that their "purchased" assets and their entire account are not involved in recently prohibited acts that may be deleted.

Technology alone cannot pave the way for actual ownership of digital assets in the Metaverse. NFTs cannot circumvent the centralized control that the Metaverse platform currently has and will continue to have it under contractual terms of use. Ultimately, legislation will need to be revised along with innovation before the Metaverse matures as promised.