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The risk of losing millions of dollars in the metaverse

Many people spend millions of dollars owning virtual assets, but they could lose it all if the metaverse platform deletes their accounts.

At the end of 2021, a company buys 809 hectares of land for more than 4 million USD. This information is inherently insignificant, but it becomes an interesting topic because that land is completely virtual, existing only in the form of NFT on The Sandbox platform.

NFT (non-fungible token) is a unique digital certificate registered in a blockchain, used to record ownership of an asset such as artwork or collectibles. It is highly appreciated in the metaverse for two factors: decentralization and interoperability between multiple platforms. Many believe tokens provide undisputed proof of ownership, which can then be used across multiple applications and metaverse environments.

However, according to João Marinotti, an associate professor of law at Indiana University, property ownership on the metaverse is not so simple. What is called “property” in the virtual universe is not the same as real-life ownership, leaving buyers at risk of being scammed.

An empty piece of land on the Decentaland foundation.  Photo: Business Insider.

An empty piece of land on the Decentaland foundation. Image: Business Insider.

In terms of metaverse platforms, the NFT and the product in the metaverse that the user buys have different mechanisms. NFT exists on the blockchain, while the lands, characters and assets in the metaverse are located on private servers, operated with closed source code and inaccessible databases.

That is, every image and feature of digital assets, the factors that give them value, are not on the blockchain. They are controlled by the metaverse platform and are subject to their unilateral management.

User Terms allow platforms to remove assets by disconnecting them from the native NFT token. Even when owning NFTs comes with digital assets, users do not get hold of these assets, but are only granted access to them by the metaverse platform.

For example, a person can own a $200,000 NFT painting in a virtual apartment on a metaverse platform, said Mr. Marinotti. But they may have their accounts locked and banned from using the platform. They still own that NFT on the blockchain, but their assets have become useless.

According to law experts, this is not a far-fetched scenario. There is no law yet prohibiting metaverse companies from doing so. The Sandbox has the right to block users from using or even accessing properties they pay for, like the aforementioned $4 million virtual land. If the platform believes a user is in violation, they can immediately lock their account and all associated assets without notice. Households can also confiscate any NFT purchased by users if they believe it was derived from illegal activity of the platform.

Mr. Duong Tran Phuong Dong, CEO of game project NFT Atlantis Universe, said the metaverse world currently has many inadequacies and risks. If a project fails, the user does not lose ownership of the NFT. However, the use value of that NFT is almost gone, which means their asset value also declines. “Neutral NFT exchanges need to develop technology and solutions to support risk management for participants. Users also need to research carefully before trading NFTs, choose reputable projects with long-term potential. term, have a strategy and plan for sustainable development,” he said.

Law experts say that technology alone will not pave the way for real property ownership in the metaverse. Nor can NFT pass centralized control in the hands of metaverse platforms based on a user-acceptable agreement upon participation. To become a reality, technology needs to be accompanied by changes to the law before the metaverse can become the vision it was intended to be.

Diep Anh (according to The Next Web)

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