The metaverse is usually referred to as a virtual and intangible world in which the human elements of the tangible world are reproduced as well as the relationships between individuals, potentially in all the planes of their existence. An illusory reality similar to that afforded by the Veil of Maya. Even so, the metaverse has a great attractive power: on one hand it offers individuals the opportunity and expectation of a second life in which they can rehearse the success or the social status that they do not achieve in the “tangible” world (we will not say “real” given that it is presumptuous to define this word in terms of human existence), through the acquisition of a digital personality; and on the other hand, the possibilities of enrichment, which, if realised, the fruit thereof may be used in the tangible world. In this dimension, each of the actions of the digital individual in the metaverse shall have consequences and will generate an individual and social profile, with the advantage that theoretically it allows one to enjoy various lives, so that failure in one life does not prevent one from reinventing oneself in this or another metaverse, given that it is possible to exist in more than one of them.
It is being proven that the construction of this intangible world is fundamentally based on the pattern of the tangible world, and as such a market, economic laws, social relationships, one or various hard currencies (virtual) and certain codes of conduct exist. Technically, the metaverse is composed of layers, the first and fundamental layer being the blockchain, whose data base is distributed instead of being centralised, so as to prevent the manipulation thereof; and successive layers and elements such as fungible cryptoassets (cryptocurrencies) or non-fungible cryptoassets (known as NFT) are superimposed and chained on top of it, generating real assets, each of which are equipped with characteristics which make them distinguishable and unique from each other, although they belong to the same genre, as happens in the tangible world. For example: art collectibles, property, moveable property of all types, such as clothing, vehicles and any other imaginable kind, all of which are interactionable. In this way, a certain operator may create virtual land, which is divided into plots, and on each plot a building, an office etc. is constructed, which subsequently may be filled with digital assets, as well as all those assets which are susceptible to economic operations, such as purchase, sale, rent, lien or swap. A theoretic starting value is assigned to each asset when they are launched onto the market via the Mint, at which time their final traits and characteristics are unknown, although we attribute to them an abstract power value, which will determine their true or exchange value once their attributes are revealed and the law of supply and demand come into play. In this exchange, the digital platforms which host these creations shall act as moderators and intermediaries in the transactions, applying fixed technological rules. Thus, an exchange market appears which creates value, wherein the currency with which the transfer of the property is compensated is generally digital. The specialised platforms, such as the renowned OpenSea, facilitate the structure within which digital assets can be created and transferred, namely, a market place for non-fungible assets, which constitute the bulk of the digital assets in a metaverse.
Taking into account the above, we could say that when talking about the metaverse, we are referring to a digital reality, which is three-dimensional and immersive wherein individuals (human or cybernetic) interact among themselves and transpose economic and social phenomena of the tangible world. But in reality, it is an undefined and changing concept, so its existence in a proper sense cannot be affirmed; its creation is progressive and it is built as layers of digital reality and multiverses (different universes which operate autonomously, such as Twitch, Fortnite or Instagram) are added; the integration of these layers and combined elements will give rise to the metaverse as a digital universe. We may compare today’s situation with that of the pioneers of the American West at the start of the nineteenth century and the fight for subsistence and power in a non-regulated setting.
It should be acknowledged that as the metaverse is a reflection of the tangible world, there will also exist therein unfairness and conflicts of interest among individuals, which begs the question on how the regulations of operation and coexistence shall be articulated. In virtual reality, the assets are intelligible representations of software programme lines. The DAOs (decentralised autonomous organizations) are entities that, similar to conventional businesses, are engaged in writing computer codes which constitute operating conditions for the creation and processing of cryptoassets, which can perform from within or outside of the metaverse; these software programme lines constitute within themselves the law or regulations which coordinate the operation of this activity. Nevertheless, this approach to individualised regulation may result in the existence of a multitude of regulatory frameworks, maybe as many as there are DAOs, thus it does not offer a solution for equipping the virtual world with a generalised legal framework.
We have already said that the metaverse is under construction, and it should be noted that its constructors are not States or conventional authorities, but companies. In the metaverse there is no State, and as such, there are no imperative regulations beyond the law of technology, artificial intelligence or algorithms. Nvida, Microsoft, Tencent, Facebook (renamed “Meta”), Amazon, act as architects of the virtual future by providing successive layers or elements that can be integrated in the metaverse, which necessarily requires time to allow its evolution, among other reasons, because in order for the metaverse to be a universal and complex space like the tangible world, the software that makes it possible must evolve; and at the same time, universally accessible hardware must be created that does not require vast quantities of computer capacity and energy resources (perhaps the solution lies in quantum technology). In this process of construction, the computer creations which represent the new layers, have to be interoperable so that they can progressively fit into the expansive environment of the metaverse, but at the same time they incorporate rules of use that may be contradictory to those of other layers.
In the following we shall see how all of the above contributes to a possible legal framework for this digital reality.
Given that the metaverse does not have a territorial location, its participants do not have a national identity, but instead a universal identity; likewise, the platforms which impulse and construct the metaverse are companies and not States. For this reason, it is impossible to apply the law of a certain country or countries to the metaverse and the same may be said in respect of the applicable jurisdiction in the event of a conflict.
Faced with this problem, two main approaches are possible:
(a) the generation of a universal rule specifically applicable to the metaverse, which would be equivalent to legislating through the consensus of its contributors and participants using a hybrid formula combining the implicit technological rules for the software (objective regulations) and human regulations agreed between the promotors and participants (subjective rules based upon ethical and moral aspects);
(b) the literal transposition of the individuality of a natural person or legal entity participating in the metaverse, bringing with it all of the legal framework applicable in the tangible world. The difficulty of this formula lies in that its application challenges the purpose of the metaverse, which is universal inclusion; in other words, in applying this solution, the reality of the metaverse shall have the same problems and difficulties as the tangible world, which operates against the objective and expectation of a second life for any human being in the virtual world.
In conclusion, we might say that it is possible to predict a future with a tangible reality (as we know it) in coexistence with another virtual reality, to a certain degree subject to different or diverging rules. If the order of the metaverse revolves around the willingness and liberty of the creators and participants, and the technological base responds to a decentralised data system, without being subject to deductive principles or the imperative rules of the States, -which only have a territorial scope and thus are limited thereto- it is perfectly plausible that this digital reality may be governed by fledgling rules, within a system which is different to the conventional system, created and moderated from the base, that is to say, from its participants, who with their direct intervention backed by the technology, will generate the necessary force to counteract the abuses of power in the metaverse, and will contribute to regulatory initiatives which will move along in line with the developments, and not lag behind, as in the tangible world. The result will be something like a self-regulating stateless social and economic ecosystem.
Eduardo Vilá
Vilá Abogados
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5th of November 2021
