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  • Writer's pictureFroese Law

Understanding the Metaverse in the Creative Industries

Updated: Apr 17, 2023

A by product of the series of global lockdowns stemming from Covid-19 mitigation strategies has been the explosion of e-commerce. Brands have doubled down on the digital economy and ventured into the metaverse, including block chain and non-fungible tokens (“NFTs”). The creative world is no exception. This article serves to break down how these digital mechanisms can be used in the creative world.

What is Block Chain?

Block chain is a technology that facilitates the transfer of data online. Essentially a blockchain is a form of database that stores information in blocks. New data is verified and added to that block of data. Each block of data is encrypted, provided an identifier and time stamped. The data that is added to the blockchain remains there indefinitely and cannot be changed, deleted or modified. Authenticity of the data depends upon the integrity of the raw data and the transparency of the supply chain participants. Blockchains can be applied to real life products (i.e. handbags), which would be connected to the QR codes, for example, that are attached to the products. The blockchain/QR code combination essentially acts like a digital ledger containing key data associated with the product, such as the product’s source, manufacturing chain, ownership history, etc. Once scanned, the QR code contains data that may impact the consumer’s purchasing behaviour, such as responsible supply chain and manufacturing practices.

What is a NFT?

A non-fungible token is a verifiable, one of a kind and non-interchangeable digital asset. By its very design, a NFT is unique. A NFT cannot be exchanged for another asset of the same type and can, instead, only be transferred in exchange for a different type of currency. NFTs have emerged as a type of good themselves, generating their own value in the metaverse. The novelty of the NFT has gained significant economic traction with some NFTs being valued in the millions. In application to the creative industries, digital artwork is emerging as a new and potentially robust marketplace. The benefit of NFTs in the artworld is that the authenticity of work can be immediately verified. Notable art auction house, Christies, has added NFTs to its roster of artwork available for sale. In addition, the NBA has created sports cards in the digital era based on videos of memorable on-court moments. The series has already generated $250 million in sales. The consumer’s rights to the intellectual property associated with the NFT may be precarious, leading to confusion in how the NFT can be used. Already we have seen Hermes file a lawsuit against a collection of MetaBirkin NFTs and another lawsuit launched by Nike over the use of Nike footwear in digital artwork, without its authorization.

What are the Considerations?

As we know, the metaverse is new and evolving. The veracity of the information/creativity upon which the blockchain and/or NFT are based upon may be dubious. The protocols and systems that house the block chain and NFTs are without uniformity and/or standardization. As such, implementing effective supply chain controls, strong intellectual property protections, developing online monitoring systems and identifying trolls and counterfeiters are key measures that need to be adopted. The metaverse will continue to evolve, as will the legal considerations.

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