Metaverse, along with blockchain and crypto, is one of the key digital trends of 2022. So much so that Facebook recently rebranded into “Meta” in October 2021 to reflect its focus on this key trend.
The term metaverse has no clear meaning but it is often used to talk about the convergence of various technologies (e.g. AR/VR and games), in the future, to create digitally immersive experiences, which may or may not involve the use of decentralized technologies such as blockchains.
Meanwhile, blockchain and crypto enthusiasts have rebranded the term blockchain and crypto to the term “Web 3.0” in order to explain the increasing number of use cases for blockchain technologies beyond cryptocurrencies (e.g. non-fungible tokens (NFTs), being blockchain-based tokens that provide digital identification of an asset associated with the NFT).
The Sandbox (a play-to-earn game, with blockchain elements) is arguably an example of this combination of digital immersive experiences, Web 3.0 and blockchains.
What is The Sandbox?
Pixowl launched The Sandbox in 2011 as a gaming platform aimed to rival Minecraft. Users design their own avatar which they then use to explore different environments and games on The Sandbox metaverse.
The Sandbox platform is a software-as-a-service (SaaS) platform hosted on Amazon Web Services. In 2020, The Sandbox platform was adapted to use the Ethereum blockchain: users can now create their own digital items for use on The Sandbox platform and blockchain technology is used to create NFTs that constitute immutable and trusted digital certificates confirming ownership of these digital items so the ecosystem has clarity on which users own what digital items used on the platform. These items can then be traded between users with the NFTs updating the digital certificate included in them to reflect the new owner. This decentralized creative model helps to create an enhanced user experience as users now can develop their own games and experiences on The Sandbox and monetize these games and experiences by packaging them as NFTs and selling them on marketplaces for use on The Sandbox.
In late 2021, a group of investors led by Softbank helped The Sandbox raise over $92 million in funding and has attracted a number of high-profile partnerships which include, Atari, CryptoKitties, and hip-hop legend Snoop Dogg.
What is LAND, ASSETS and SAND?
There are three key components to The Sandbox platform: LAND, ASSETS and SAND.
LAND
The Sandbox metaverse is made up of 166,464 digital pieces of real estate (“LAND”) that users can buy. The digital content comprising the LAND forms part of the Sandbox platform. The LAND is then associated with NFTs implemented on Ethereum.
The NFTs relating to the LAND can be purchased via the Sandbox platform or via third-party NFT exchanges like OpenSea
ASSETS
Once a user has acquired LAND s/he can create games, experiences, or objects for use on their LAND. For example, a concert hosted on the LAND or characters that exist on the LAND. These games, experiences or objects are called “ASSETS”.
Users can charge other users to access any games or experiences hosted on their LAND and can sell their ASSETS via the Sandbox Marketplace.
If an ASSET is made available via the Sandbox Marketplace then it becomes associated with NFTs implemented on Ethereum and then it can be sold to other users for them to use on The Sandbox platform.
The main difference between The Sandbox and other games that give the players possibility of creating own items in the game is that instead of storing the game items in the database managed by the producer of the game, all players’ game assets can be represented by a token (using the NFT standard ERC-721 or ERC-1155) in the Ethereum blockchain.
SAND
In order to participate in the game users need to integrate their blockchain wallet with The Sandbox platform and buy the SAND token (a blockchain-based token that can be earned by users in-game or purchased via crypto exchanges such as Binance or Kraken). SAND operates as an utility token (i.e. its ownership gives the right to use various functionalities of The Sandbox).
Users use SAND to buy LAND, to buy or make ASSETs, to play certain games on LAND where the user charges for entry. SAND also acts as a governance token allowing SAND owners to vote on changes to the Sandbox platform.
Issues to consider
Lots of brands are considering buying LAND and/or otherwise participating in The Sandbox platform. This includes licensing of their IP (e.g. trademark) to other users so that such other users can create ASSETs associated with such trademark. It can be done e.g. to enhance LAND with alternative creative content. When doing so the licensor should consider whether the ASSET associated with the trademark will merely be used by the licensee for use with the relevant LAND (as set out in the licence agreement) or whether the ASSET associated with the trademark can also be uploaded to the Sandbox Marketplace for selling to other users.
If the latter occurs then this means that an NFT will be implemented on the Ethereum blockchain.
Every NFT includes the address of the smart contract used to mint the NFT and a TokenID. This pair of data must be globally unique and is recorded in an immutable way in the blockchain. The Sandbox platform gives the possibility to add additional information (metadata) that can be edited by a user. Such metadata can include some extra information about the NFT and a graphic representation of the ASSET.
The licensor should check that the trademark itself is not permanently recorded in the data included in the NFT. Otherwise the risk is the trademark becomes linked to the ASSET in perpetuity and then the licensor may have difficulties removing the trade associated with the NFT/ASSET in circumstances where the underlying licence agreement is terminated.
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For further information, please contact:
Tomasz Zalewski, Partner, Bird & Bird
tomasz.zalewski@twobirds.com
