Please enjoy this ILTA Q&A Session posted on behalf of Ken Falcon, Managing Partner of Falcon Rappaport & Berkman LLP and Mike Ertel, Practice Innovation & Knowledge Attorney, Paul Hastings LLP.
Mike Ertel
What is the Metaverse?
Ken Falcon
Broadly speaking, the Metaverse is an immersive online environment where users can interact with that environment and with one another. While people frequently speak colloquially about “the Metaverse,” it is more accurate to refer to multiple “Metaverses”—online environments that serve a variety of purposes.
Recent attention has been focused on ‘blockchain-based Metaverses’ including Decentraland, the Sandbox, and many others. Numerous Metaverses that have nothing to do with blockchain have existed in a variety of contexts for some time—the first example being the video game Second Life, and relatively newer video games like Roblox and Minecraft.
Mike Ertel
What do people do in a Metaverse?
Ken Falcon
People do anything they can imagine in the Metaverse. Presently, most of the functionality centers on gaming. However, many of these companies have developed avenues to monetize their platforms, including Second Life Marketplace and the Roblox market. Blockchain-based Metaverses have robust ecosystems for buying and selling real and virtual goods through web3 marketplaces, including Opensea.
There is also a significant social component that is growing in popularity with younger generations. A recent survey of the age cohort 12-17 revealed that more than half of people in that age group prefer online interaction to in-person interaction with their friends. That is a sea of change in human interaction and preferences that is going to have a ripple effect in all areas of our lives.
With the recent advent of blockchain-based Metaverses and advances in VR and AR technology, brick-and-mortar businesses have focused their attention on building a presence in the most popular of these Metaverses. These businesses see a brand-new avenue to create and expand product and service offerings. Media companies especially see this as an opportunity to utilize existing intellectual property in new ways. We have a client that recently produced a music festival in the Decentraland Metaverse—there were ‘gated’ events, branded ‘wearables,’ and ‘tickets’ to exclusive areas of the festival. In one area, you could listen to an artist’s new release—but only if you had the digital ‘ticket,’ which in this case was ‘wearable’ for your avatar. Use cases will only expand as technology improves.
Mike Ertel
Why (and how) did your firm start an office in the Metaverse?
Ken Falcon
We started an office in the Metaverse first and foremost because we were curious and thought it was interesting and potentially valuable. My partner Moish and I have been advising crypto businesses since 2014, which makes us relative veterans in this space. We watched the nascent NFT market take root in 2020. When ‘digital land’ and development started to take shape, we decided to participate in the market.
This involved first purchasing cryptocurrency via an exchange—in this case, Coinbase. We transferred funds to our Coinbase “USD Wallet” and converted those funds to ETH. We transferred those funds off of the exchange to a MetaMask wallet. We then converted the ETH into the native token of Decentraland—MANA. We connected our wallet and purchased the NFT which represents ownership of our parcel of land through the NFT exchange—Opensea.io. We then transferred our NFT to our “hardware wallet” and hired a developer (paid in ETH) to build our office building on the parcel.
Mike Ertel
What are the benefits of having a firm on the Metaverse?
Ken Falcon
The primary benefit of having our office in the Metaverse has been client engagement and business development with clients who are trying to bring their traditional business to the web3 space. Seeing our proactivity and familiarity with the technology drew a fair number of established business clients to us when they decided to try their hand at business in the Metaverse. One of the primary concerns of these established brands is trademark protection, which has been a significant issue in the Metaverse (see e.g. the MetaBirkins case). At the same time, demonstrating a facility with the technology signals to crypto-native businesses that we are in this market together and that we understand them.
Mike Ertel
What are the drawbacks of having a firm on the Metaverse?
Ken Falcon
There are no drawbacks of having a firm in the Metaverse that I can think of. There are no significant ongoing costs. There is the risk that the particular platform we selected becomes obsolete and we have to move onto a different one. As with any dealings in the web3 space there are also reputational risks, both externally and within the community. We have found that it is important to connect with the space in a genuine way.
Mike Ertel
Ken, Thank you for explaining what it means to be a law firm in the Metaverse. I know that many of our colleagues will find this very useful.
Ken Falcon
Thank you Mike. It was my pleasure.
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