Metaverse Series II: Why is NFT technology the basis for the development of the Metaverse?

New York Times columnist Ezra Klein once put forward such a point of view: what is especially lacking in the current Internet is the verification of “identity”, “ownership” and “authenticity”.

It’s these things that make it possible for creators to get paid for their work.

In 2017, climbing to the top with the CryptoKitties craze, the NFT space pioneered a whole new approach. By 2021, NFTs will become even more popular all over the world. An avatar is sold for sky-high prices. From giant companies to celebrities at home and abroad, they have entered the NFT industry to participate in investment and financing activities. The primary market for domestic NFT digital collections has also been opened one after another. With the rise of the Metaverse and the hype of the Metaverse real estate, the NFT’s real right attribute needs to play a greater value in the Metaverse.

Let’s explore the properties of NFT’s confirmation, the need to clarify the ownership of virtual assets in the Metaverse, and the legal issues and risk performance of NFTs.

NFT confirmation attribute

NFT (Non-fungible tokens), that is, non-fungible tokens, usually refers to tokens issued by developers on the Ethereum platform according to the ERC721 standard/protocol. FT corresponding to NFT, that is, homogenized tokens, most of the tokens in the virtual currency are homogenized tokens, and there is no difference between similar tokens, they are interchangeable, just like the same piece Like money without any difference in value, it is similar to a kind in property law.NFTs, non-fungible tokens, are similar to specific things in the property law. The characteristics of NFTs are mainly unique, traceable, and indivisible.

It is precisely because of these characteristics of NFT that its main function is to issue specific numbers and certificates to digital assets through blockchain technology, which is used to represent the unique encrypted token of digital assets, which is similar to the ownership of digital assets in the virtual world. Certificates and identity proofs to prove the unique ownership of the digital asset. At present, it is mainly used in games, artworks, collectibles, virtual assets, identity features, digital music, digital certificates and other fields.

Metaverse Series II: Why is NFT technology the basis for the development of the Metaverse?

Figure 1: NFT works Source: OpenSea

The virtual assets of the Metaverse need to be clearly owned

The current Metaverse is a common digital virtual world built using multiple technologies. Compliance issues for the Metaverse as part of the internet world.

The Metaverse first needs to abide by all the laws in force in the country in which it operates on the Internet.

Secondly, the Metaverse needs to be fully compliant in terms of the application of digital assets in the Metaverse, the application of civil and criminal laws, and financial compliance. In terms of the application of digital assets, for digital assets with commodity attributes, once they have financial investment attributes, they may violate relevant financial control policies. For example, the payment function of digital currency may form that only the legal currency issued by the central bank uses currency attributes, such as Investing in tokens as evidence of tenure may be subject to the securities laws of certain countries. Therefore, in the design of Metaverse’s business model, it is necessary to consider the commercialization and financialization of its products, and the de-financialization model may be more in line with compliance requirements.

Regarding the application of civil and criminal laws, it is still a question whether the behaviors in the Metaverse can be regulated by the Civil Code. The legal nature of the digital assets generated in the Metaverse has not yet been clarified. Jurisdiction and whether the judiciary can resolve disputes in the virtual world may depend on each Metaverse operator formulating its own set of “legal rules” for the virtual world.

The NFT confirmation technology is crucial to the development of the Metaverse. As a distributed data voucher technology, NFT will be the best underlying technology to represent all assets and events in the Metaverse. Generally speaking, NFT is born on a front-end, open and co-governed blockchain, which has greater interoperability and transparency than a closed database in the background. NFT determines the ownership of digital assets through a unique encrypted token, and can allow different Metaverse systems to access, cross-platform flow and associate third-party data according to multi-authority settings. Selling art assets through NFT can prevent infringement, including asset on-chain and digitization of assets, which can be confirmed through NFT, and the transaction flow of digital assets is convenient.

All kinds of digital platforms and private virtual assets built in the Metaverse require reliable technology to solidify their ownership. Just like property law in the real world, NFT technology brings “Code is law” in the virtual world. The sustainability of the Metaverse can only be possible if the power of NFTs is fully utilized.

Legal Issues and Risk Performance

The certificate of rights corresponding to NFT is not a kind of thing, and usually does not assume the function of currency.The development of NFTs in my country is still mostly in the primary market. This is also to prevent the speculation and speculation risks brought by the secondary trading market and reduce the risk that it may evolve from criminal issues to financial risk spillovers.

However, the current development of NFT still faces some legal issues and risks, which are embodied in the following aspects:

First, on the issue of intellectual property infringement. In theory, anyone who has mastered NFT technology can mint NFT products in the open network, but this will lead to serious misappropriation of money. Without the permission of the original owner, the unauthorized issuance of NFT is more likely to constitute an infringement of the owner of the original work.

Second, about the counterfeiting of NFT products. Any emerging thing may face some problems of plagiarism and copycats at the beginning of its development, and NFT is no exception. For example, the “Bored Ape Yacht Club” (“BAYC”), which is very popular in the NFT market, when it exploded, two outrageous counterfeits quickly appeared on OpenSea: PHAYC and PAYC. How this kind of counterfeit goods can be solved legally is an issue that needs to be considered in the development of the NFT industry.

Metaverse Series II: Why is NFT technology the basis for the development of the Metaverse?

Figure 2: BAYC works, source: OpenSea

Third, NFT is a non-fungible token, indivisible, but there are many protocols on the blockchain, the decentralized ERC20 protocol corresponds to famous paintings, catering to small investors to buy fragments, non-fungible tokens become homogeneous It seems that there is no difference between homogenized tokens such as Bitcoin and Bitcoin. Financial supervision will have concerns about it, and this phenomenon may also lead to ICO illegal fundraising, speculation risks, etc. Although large platforms such as Ali only sell NFT products on the alliance chain, there are also many investors who sell JPG texts. From the alliance chain to the public chain, how to avoid the transition from non-homogenization to homogenization is also a problem that needs to be considered by practitioners and legal professionals.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

Like (0)
Donate Buy me a coffee Buy me a coffee
Previous 2022-03-26 09:44
Next 2022-03-26 09:46

Related articles