Emerging technology
Alien Worlds is a space-based Metaverse game based on digital assets, and one of the largest play-to-earn products on the market. Unlike games offering more interactive reality experiences, it is targeted at game card collectors and aims to move them on from the simple real-world trading experience to something more interesting. Players have the opportunity to own cards as unique digital assets; NFTs instead of cards. They gain influence and control through the performance of the characters they own with their tokens earning a share of the game’s currency, Trillium. The tokens can be held both within the game and outside it in the Metaverse where they can be traded with other people. Where most Metaverse games replicate experience of the real world – offering the chance to meet, travel etc. without leaving your room – Alien World is more of a fantasy-style product. That said, it does translate into real-world value based on the principle that, if you can exchange something, it can acquire value. It has some of the characteristics of gambling, namely something of value at stake, with an uncertain outcome, depending on the results of a game, but it is set up not to require regulation or to stray into the world of gambling. To expect such a product to avoid regulation entirely may be naïve, however. Human nature being almost infinitely unpredictable, it is difficult to foresee everything that may happen when the creators relinquish control to players. They have built in certain democratic principles, but that carries risks too, as we see all too often in the real world. Trillium translates into votes in the game’s ecosystem but can be diluted by the creation of more. The creator’s ultimate sanction is to cut off the flow of Trillium to individuals who are abusing their influence, but it is a fine line to tread and highlights the challenges of freedom versus control in an environment which could become quite lawless. Frontrunner is a peer-to-peer sports betting platform which took its inspiration from the many investment products that have proliferated in the market. It sits, unashamedly, in a world where gaming is becoming more like investing and vice versa, giving individuals who are members of the platform the opportunity to buy into binary options on the outcomes of a sporting event. They can bid up to 99 cents on win, lose or draw. Its users trade with cryptocurrency but the company stresses that this was just a solution to challenges which arose in the development of the product. Players can hold as many shares of the given value as they want, and these can be sold at any point during the game with the price going
up or down as the game play develops. As there is no house, the ability to offload shares depends on the liquidity in the market and the willingness of a reciprocal partner to trade. Whilst this may give rise to an issue of confidence, crypto, where each transaction is shown on a public distributed ledger, should improve this. It introduces the concept of trustlessness whereby players are not required simply to trust that their counterparty will complete on the deal, although they do need to have confidence that the system will work. Money within the system is held in stablecoin, and is not the property at any time of Frontrunner itself. By placing a bet, players enter into a contract with their counterparty until the outcome is realised, at which point the contract redistributes the money to the account of the winner. How such a platform will ultimately be regulated is currently an open question. The contracts that the system develops for sports betting are not very different from a weather or commodity option. Aa such, they are not likely to be of any real concern to the Securities and Exchange Commission. There is however, a legal limbo where it is unclear whether they will view a football bet as a futures contract and regulate it as such. The alternative could be to allow the gambling industry to regulate and provide solutions for no resolution relief in case of disputes. When it comes to AML and KYC, the platform has the ability to whitelist participants and carry out sufficient checks on players to be compliant with prevailing rules in the jurisdictions it operates. With all contracts sitting on a public blockchain, Frontrunner does not have ultimate control: individuals could simply trade those contracts away from your platform. Where users are dependent on proprietary technology, the developer is seen as an intermediary and so subject to regulation. This was one reason to go down the cryptocurrency route and perhaps a good reason why crypto sports betting may come to dominate the space. REGULATORY CHALLENGES IN THE METAVERSE Proponents of the Metaverse and the development of more- advanced and immersive, 3D online worlds say its rapid evolution is likely to benefit all aspects of society – education, healthcare, social and civic life, as well as gaming and entertainment. As with all digital tech, these benefits have to be set alongside concerns about the health, safety, security,
IMGL Magazine • November 2022 • 25
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