鈥淭echnology advancements are a great thing, but the Metaverse combined with Web 3.0 allows people to be more anonymous than ever,鈥� says Jim Lee, chief of the Internal Revenue Service Criminal Investigations unit (IRS-CI). 鈥淎s a result, we all know that the criminal element is going to come out somewhere, somehow.鈥�

Is prevention possible?

Lee spoke recently at the recent听21^st听Annual Anti-Money Laundering & Anti-Financial Crime Conference, held by听,听where the challenge of preventing Web 3.0 from becoming a safe haven for criminals was discussed in a number of forums.

ACAMS is attended primarily by bank regulators and other defenders of the traditional financial system, and the consensus opinion among this crowd is that anticipating how criminals could exploit Web 3.0 is the key to preventing it. Mistakes made building the current internet should have taught us that addressing content problems after the fact is a losing game, many experts say, so it鈥檚 essential to build controls and safeguards into Web 3.0 before criminals even have the opportunity to commit a crime.

Or so the thinking goes.

There are several holes in that proposition, however. Among them: i) regulators and Web 3.0 technologists would need to find a way to work together somehow; ii) not everyone agrees on the nature of the problem or how to prevent it; iii) lawmakers have a dismal record when it comes to recognizing and addressing issues involving technology before they happen; and iv) is already on the rise, so the clock is ticking.

What is Web 3.0?

Though the terms are sometimes used interchangeably, Web 3.0 and the Metaverse are not the same thing. Web 3.0 is the underlying architecture of the Metaverse, which itself is the immersive, three-dimensional digital world that proponents of the technology (such as Meta CEO Mark Zuckerberg) claim is the future of the internet.

Though the Metaverse is still in the early stages of development, elements of Web 3.0 are already being used today in the world of cryptocurrencies and other digital assets (such as with non-fungible tokens and stablecoins), all of which are based on blockchain technology. One of the key differences between today鈥檚 internet (Web 2.0) and Web 3.0, however, is that the latter is built entirely on blockchain smart-ledger technology-driven by machine learning and artificial intelligence.

The key features of Web 3.0 that most concern government officials and law enforcement are decentralization and anonymity. Not coincidentally, these are the same features that make crypto-based crimes and crypto-enabled criminal networks so hard to thwart.

The core idea of Web 3.0 and hence the Metaverse, however, is that it is entirely decentralized, meaning that no central power or government controls it. And for many Web 3.0 evangelists, that鈥檚 the central selling point of Web 3.0: Freedom from governmental control.

From a government regulator鈥檚 perspective, however, total decentralization is a huge problem. What it essentially means is that anyone can do anything, anonymously, and with no accountability, and there鈥檚 very little that conventional law enforcement can do to stop it.

Virtual crime, real-world victims

That鈥檚 not all. The trouble really starts when criminal activity in the Metaverse leaks over into the real world. At ACAMS, Lee asked his audience to imagine strapping on some virtual-reality (VR) goggles and walking into a building in the Metaverse: 鈥淔loor 1 is the ID theft room, where you exchange some sort of digital asset and they instantly give you a driver鈥檚 license, a date of birth 鈥� Personal Identifiable Information (PII) 鈥� that you can then go use for credit-card fraud, bank fraud, or whatever crime you can think of using PII.鈥�

Floor 2 is the firearms floor in Lee鈥檚 digital dystopia. There, you can purchase the location of a gun in the real world, with no background check, 鈥渁nd now you鈥檝e got a person who shouldn鈥檛 have a weapon,鈥� Lee says. Floor 3 is devoted to human trafficking. Floor 4 to money laundering. Floor 5 to terrorism. And so on.

鈥淚t鈥檚 an ugly picture,鈥� Lee warns.

Anjana Rajan is the Chief Technology Officer for Polaris, the largest anti-human trafficking NGO in the United States. At ACAMS, she explained that Congress should be concerned about the rise of Web 3.0 because of the 鈥減hilosophy鈥� of institutional distrust behind it. 鈥淚t鈥檚 really about society and the future of our political system,鈥� Rajan explains. 鈥淚n its best form, this technology can create economic inclusion and a more secure internet, but in its worst form it can also drive the same thing that happened on January 6.鈥�

Proponents of Web 3.0 have a distressing amount in common with anti-government violent extremists, namely, that 鈥渢hey don鈥檛 trust US institutions, they don鈥檛 trust the US dollar, and they don鈥檛 trust the corporations and oligarchs who run the economy,鈥� she adds.

The difference is that Web 3.0 and the Metaverse are being built by some of the richest, most powerful people 鈥� and the largest tech companies (such as Meta, Google, and Microsoft) 鈥� in the world.

Re-thinking trust

A lawless, entirely unregulated Metaverse is not inevitable, these experts say, but it will require a re-thinking of some of the basic concepts upon which financial institutions and society at large are currently based, such as identity and trust. For example, our concept of identity in the real world revolves around a person鈥檚 PII, such as date of birth, social-security number, driver鈥檚 license number, address, etc. However, it may be time for the government 鈥渢o start moving away from normal concepts of identity-based trust and instead move to concepts of trust within the ecosystem,鈥� notes Frederick Reynolds, Chief Compliance Officer for the fin-tech start-up Brex.

In the ecosystem of the Metaverse, one鈥檚 identity is defined by the metadata on their blockchain, and trust within the ecosystem is built through blockchain activity that is independently verified by a decentralized network of fellow users. So in a sense, blockchains build trust by eliminating the need for it.

For better or worse, this is how the Metaverse works. Yet, if we鈥檙e not careful, these experts warn, criminals will figure out how to make it work for themselves before law enforcement can figure out how to stop them.

From there, Schwerdtfeger spoke on technologies of the future, from blockchain to Web 3.0, from solar batteries to the metaverse. Just about every industry is changing in some radical way, he explained, and legal is no exception.

However, there was one crucial detail that he may have forgotten: Schwerdtfeger was speaking to a room filled with veterans of the legal industry. The legal industry is built on precedent mixed with a healthy dose of risk aversion, after all, and the industry has received a well-earned reputation over the years of never even trying to explore use cases for next-generation technologies. So, of course, it鈥檚 reasonable to believe that the legal industry would be dragged kicking and screaming into the third generation of web technologies like the metaverse and blockchain, rather than trying to capitalize on those opportunities.

Some innovators in legal have envisioned blockchain as a way to explore more business-oriented applications of distributed ledger technology.

Along the way, however, a funny thing has happened. In recent years: Law firms and corporate law departments alike have gotten more intelligent about both being a part of the conversation surrounding these technologies鈥� development, and exploring novel ways to separate themselves from their peers. In doing so, many within the legal industry have started to take a proactive stance on innovations like blockchain and metaverse, with not only technologists but leading attorneys themselves jumping on board. Here鈥檚 what the ILTA conference revealed about how today鈥檚 legal industry is taking a practical approach to next-gen technology.

Blockchain by blockchain

Blockchain has received a lot of attention for being the underlying technology behind digital assets such as cryptocurrency and non-fungible tokens (NFTs). Some innovators in legal have envisioned blockchain as a way to explore more business-oriented applications of distributed ledger technology.

Law firm Hogan Lovells, for instance, sees blockchain technology as an opportunity to reform its real estate processes. The firm has developed DriveChain, a collaboration between the firm, banking company BNP Paribas and blockchain technology provider Integra Ledger, to automate parts of the real estate process. DriveChain looks to eliminate manual data entry or multiple layers of approvals by automatically coding deal details such as parties, sale price or amount for rent, and more into the document, which generates a unique deal ID. The data is then given a unique code called a hash, through which all parties are notified if any details of the deal are changed, with an automatically generated ledger of all changes and approvals for the document living on the blockchain.

鈥淲hat we are doing with blockchain is validat[ing] that the document they received, that the metadata within the document, is still validated,鈥� said Bob Shaeffer, senior manager of architecture and integrations at Hogan Lovells, during a panel on the use of blockchain in professional services firms.

Shaeffer was quick to add that DriveChain is not a piece of blockchain technology itself, but rather the name for the new real estate-centric workflow. Blockchain technology simply functions as a piece of the overall puzzle, and only the hash and the unique ID for the data actually sit within the blockchain architecture. This way, the firm still holds crucial deal details inside its own walls for the protection of clients, but still utilizes the new technology to cut time out of the process for approvals.

鈥淭he primary focus on DriveChain is not the blockchain, but the blockchain is an integral part of what we鈥檙e doing,鈥� Shaeffer explained.

It鈥檚 this type of practical application that more and more firms are exploring on the blockchain, added Joseph Raczynski, a technologist and futurist with 成人VR视频 and author of the website JoeTechnologist.com. At a separate ILTACON session, Raczynski explored a number of business use cases for blockchain technology, from 鈥渟mart鈥� contracts that are automatically executed once specifically coded parameters are hit, to decentralized finance (DeFi) marketplaces that are increasingly becoming a hub for business transactions. He even pointed to one firm, Rose Law Group, that executed a legal wedding online, with both a prenuptial agreement and a marriage license coded as a legally binding NFT.

鈥淭hey moved down the road of taking documents that are unique and making them an NFT, which is what we鈥檙e going to see in the not too distant future,鈥� Raczynski explained.

Into the Metaverse

However, it鈥檚 not just business applications that have those in the legal industry excited about future technologies. Some see tech innovations, such as the metaverse and blockchain, as the platforms around which daily life will soon be centered 鈥� and thus, around which legal practices will also be centered.

Alejandro Vallellanes, knowledge services manager at law firm Baker McKenzie, has seen a lot of confusion about what the metaverse actually is, leading some to discount it entirely. Vallellanes, who spoke on a panel about the use of the metaverse in legal, said not to think of the metaverse as a place, but instead as a concept, a moment in time where things are beginning to change. 鈥淚t鈥檚 a tipping point where our digital self is more valuable than our physical life,鈥� he explained.

Attorneys are now beginning to sort through the natural issues 鈥� who owns digital assets; what rights do human representations have in a digital world; does attorney-client privilege carry over; who owns digital likenesses; how to preserve, collect and analyze metaverse data; and more.

That tipping point may already be approaching. Indeed, between explosive cryptocurrency holdings, the value of social media advertising and an increasing emphasis on digital holdings like NFTs or virtual real estate, that point already may be here. 鈥淔or some people, that asset class is more valuable than their physical assets,鈥� Vallellanes added. 鈥淲hen that happens across the board, we can already consider ourselves living in some sort of metaverse.鈥�

For legal and professional services organizations, then, the metaverse is quickly becoming not the realm of first movers, but simply where clients hold their own valuable assets. Cat Casey, chief growth officer at legal technology company Reveal, who spoke on the same metaverse panel, likens the current shift to the advent of the Internet and email 鈥� a curiosity at first, but one that quickly transformed into a daily necessity. 鈥淎fter a while, it became so ubiquitous that you couldn鈥檛 opt out,鈥� she said.

Naturally, there is skepticism about whether the metaverse could truly become that pervasive. Are people really going to be holding all of their assets online? Yet, almost half (48%) of consumer respondents said they would be very interested or somewhat interested in shopping within the metaverse within the next five years, according to a McKinsey & Co. survey from February. More than 40% of respondents said they would be interested in using the metaverse to attend a telehealth appointment, attend a live learning course or even meet with friends and family, the survey showed.

Plus, where people are, money follows. Jerry Bui, a managing director at FTI Consulting who spoke on the metaverse panel as well, notes that Goldman Sachs has estimated the metaverse鈥檚 ultimate market size to be somewhere between a $2 trillion and $12 trillion opportunity. Even now, Bui added, virtual gaming has become a $200 billion business, dwarfing many other forms of media. 鈥淚f you don鈥檛 think there鈥檚 momentum towards that end, just look at the money that鈥檚 flowing into this space,鈥� Bui explained.

With any big business opportunity, legal problems will follow, and the panelists noted many attorneys are now beginning to sort through the natural issues 鈥� who owns digital assets; what rights do human representations have in a digital world; does attorney-client privilege carry over; who owns digital likenesses; how to preserve, collect and analyze metaverse data; and more.

However, for attorneys and their organizations, these open questions present a golden opportunity to drive the technology鈥檚 development with an eye toward risk management and proper legal reasoning, Bui said.

In a session titled, Approaching the Verge: Opportunity and Reward in Web 3.0 Technologies, panelist Amy ter Haar, legal counsel at Global University System and board member of Ocean Falls Blockchain Group, began by exploring the positives of the metaverse, noting that the metaverse is not just one technology, but rather 鈥渢he ability to interface with technology in a whole new way.鈥�

In a typical transaction, for example, there is one party (often an intermediary, such as a bank) in charge of recordkeeping and information. But when parties in the metaverse enter into a transaction using the blockchain, both parties can access and change information as needed, with a secure record of those changes verified by all parties. In that way, ter Haar said, the metaverse is 鈥渄isempowering intermediaries and gatekeepers and empowering people.鈥�

Still, the metaverse can be tough to define for those not engaged in the space, she added. 鈥淚f you engage in the exercise of replacing the word metaverse in a sentence with the word cyberspace, you鈥檒l find that 90% of the time the meaning doesn鈥檛 change.鈥�

To better envision how the metaverse paradigm can change interactions, panelist Matthew Rappard, chief technology officer at security company Vaultie, said to think of how most people interact with the internet on a daily basis. Generally, he said, 鈥渢here is this loss of the concept of privacy.鈥� Every person has equipment to record video, apps that track location, easier access to secure information like bank accounts, and more. On the other end, the metaverse can provide users with another path via the ability to present as a different self. Video content creators called Vtubers present as online avatars that are wholly disassociated, where viewers never see their actual identities.

鈥淵ou鈥檙e ending with this kind of switchover where in the public world you鈥檙e seeing less privacy, but in the digital world you鈥檙e seeing something different,鈥� Rappard explained, adding that the switch comes with a virtual world that provides more control. 鈥淲hen we鈥檙e talking about the metaverse, it鈥檚 the ability to control your identity and how that identity interacts with smart contracts.鈥�

Where the Metaverse and law intersect

When legal disputes arise, however, the metaverse鈥檚 nascent nature and increased focus on privacy can be a hindrance as much as a boon. While panelist Yinka Oyelowo, principal lawyer at Toronto-based Yinka Law, believes that the metaverse and associated blockchain technology 鈥渟implifies a lot of the processes that we see in real estate,鈥� for instance, she acknowledged that resolving metaverse-related disputes remains 鈥渧ery hypothetical.鈥�

Consider the case of trust and estate issues: Who would take ownership of a piece of metaverse property if the original owner passes away? While smart contracts encoded within the blockchain are very good at executing the specific terms of a contract, they may also need to take into account how a transfer of property would be executed and the rules in any jurisdiction that may apply.

鈥淚t鈥檚 quite complex, because the jurisdictional requirements for British Columbia are going to be completely different from the requirements in New Hampshire in the US,鈥� Oyelowo noted. Law firms helping with this type of dispute would need lawyers that not only vet jurisdictional issues, but also understand the technology and are versed in the laws around trusts and estates.

Further, a regular issue when it comes to physical real estate is airspace: Who owns the three-dimensional area above or below a piece of property? However, real estate in the metaverse does not function in the same way, and determining airspace rights becomes difficult. Assumptions about the physical world 鈥渁ren鈥檛 easily transferred over to the metaverse. It takes quite some time to understand the issues,鈥� Oyelowo said, adding, however, that also means opportunity. 鈥淭here鈥檚 a lot of fertile legal ground for those involved in trusts and estates, for commercial real estate.鈥�

Indeed, all panelists pointed to the opportunity for legal professionals to provide clarity to emerging metaverse risks. The Digital ID & Authentication Council of Canada (DIACC) has been investigating ways to authenticate online identities while still maintaining confidentiality and privacy, Rappard noted. Oyelowo also pointed to startups that have been linking face IDs with cryptocurrency wallets, where a wallet holding crypto funds is opened through dual-factor authentication that includes both the facial scan and a unique code.

But even as these opportunities emerge, those in the legal world still need to look out for risks 鈥� and make sure they abide by ethical guidelines. Even those Vtubers who don鈥檛 show their offline identity present a legal and ethical challenge, Oyelowo said. 鈥淲hile most potential clients will be forthcoming with their identity while engaging in the metaverse setting, some clients鈥� may prefer anonymity.鈥� But in a province such as Ontario, this can be a problem: Before giving advice, attorneys are ethically bound to verify the client鈥檚 identity. And especially if the two parties are only conversing in a virtual world, clients may physically be in a jurisdiction with different or less stringent ethical boundaries.

That means that although the virtual world is emerging, physical considerations are still necessary. Therefore, attorneys should take care to 鈥渙btain identity documents that you are satisfied are valid鈥� from the person behind the avatar, not just the metaverse avatar itself, Oyelowo explained.

Ultimately, the experts agreed that the metaverse will continue to evolve, with new opportunities and potential pitfalls both emerging in the coming weeks and months. Regardless of how it develops, what remains certain is that the metaverse will be an engaging space to watch going forward.

However, there was one crucial detail he may have forgotten: Schwerdtfeger was speaking to a room filled with veterans of the legal industry, which of course, is built on precedent, mixed with a healthy dose of risk aversion. Indeed, an industry that has earned a reputation over the years of never even trying to explore use cases for next-generation technologies.

Recently, however, a funny thing happened: Law firms and corporate law departments alike have gotten more intelligent about both being a part of the conversation surrounding these technologies鈥� development, and exploring novel ways to separate themselves from their peers. In doing so, as ILTACON revealed, many within the legal industry have started to take a proactive stance on innovations like the blockchain and the metaverse, with not just technologists but leading attorneys themselves jumping on board.

Blockchain by blockchain

Blockchain has received a lot of attention for being the underlying technology behind digital assets such as cryptocurrency and non-fungible tokens (NFTs). Some innovators in legal envision blockchain being used to explore more business-oriented applications of distributed ledger technology.

Law firm Hogan Lovells, for example, sees blockchain technology as an opportunity to reform its real estate processes. The firm has developed DriveChain, a collaboration between the firm, banking company BNP Paribas, and blockchain technology provider Integra Ledger, to automate parts of the real estate process. DriveChain looks to eliminate manual data entry or multiple layers of approvals by automatically coding deal details such as parties, sale price or amount for rent, and more, into the document. That generates a unique deal ID, which is put on the blockchain. The data is then given a unique code called a hash, through which all parties are notified if any details of the deal are changed.

鈥淲hat we are doing with blockchain is validat[ing] that the document they received, that the metadata within the document, is still validated,鈥� says Bob Shaeffer, senior manager of architecture and integrations at Hogan Lovells, during a panel on the use of blockchain in professional services firms.

Shaeffer is quick to add that DriveChain is not a piece of blockchain technology itself, but rather the name for the new real estate-centric workflow. Blockchain technology simply functions as a piece of the overall puzzle, and only the hash and the unique ID for the data actually sit within the blockchain architecture. This way, the firm still holds crucial deal details inside its own walls for the protection of clients, but it still utilizes the new technology to cut time out of the process for approvals.

It鈥檚 this type of practical application that more and more firms are exploring on the blockchain, adds , a technologist and futurist with 成人VR视频, from 鈥渟mart鈥� contracts that are automatically executed once specifically-coded parameters are hit, to decentralized finance (DeFi) marketplaces that are increasingly becoming a hub for business transactions. Raczynski even pointed to one firm, Rose Law Group, that executed a legal wedding online, with both a pre-nuptial agreement and a marriage license coded as a legally-binding NFT.

鈥淭hey moved down the road of taking documents that are unique and making them an NFT, which is what we鈥檙e going to see in the not too distant future,鈥� Raczynski explains.

Into the metaverse

It鈥檚 not just business applications that have those in the legal industry excited about future technologies, however. For legal and professional services organizations, the metaverse is quickly becoming not the realm of first movers, but simply where clients hold their value.

Alejandro Vallellanes, knowledge services manager at law firm Baker McKenzie, says that between explosive cryptocurrency holdings, the value of social media advertising, and an increasing emphasis on digital holdings like NFTs or virtual real estate, 鈥渇or some people, that asset class is more valuable than their physical assets.鈥� Vallellanes, who spoke on a panel about the use of the metaverse in legal, adds that 鈥渨hen that happens across the board, we can already consider ourselves living in some sort of metaverse.鈥�

Naturally, there is skepticism about whether the metaverse could truly become that pervasive.

Yet, almost half (48%) of consumer respondents said they would be very interested or somewhat interested in shopping within the metaverse within the next five years, according to a McKinsey & Co. survey from February 2022. More than 40% of respondents indicated they would be interested in using the metaverse to attend a telehealth appointment, attend a live learning course, or even meet with friends and family.

And where people are, money follows. Jerry Bui, a managing director at FTI Consulting who spoke on the same panel, notes that Goldman Sachs has estimated the metaverse鈥檚 ultimate market size to be somewhere between a $2 trillion to 12 trillion opportunity. Even now, Bui says, virtual gaming has become a $200 billion business, dwarfing many other forms of media and sports. 鈥淚f you don鈥檛 think there鈥檚 momentum towards that end, just look at the money that鈥檚 flowing into this space,鈥� Bui explains.

Asian Legal Business: 驰辞耻鈥檝别 written previously about the Metaverse and the preparedness of lawyers. How widespread do you think the use of this will be in the near future, and how can lawyers make sure they are sufficiently prepared?

Joseph Raczynski:听If by the near future we are saying three to five years, I would say 100% that the Metaverse will be used in various forms by the majority of the population in the industrialized world. It has already started. There are two forces at play that are enabling the Metaverse: One, blockchain, which is a unique way to store information in a provable, unalterable way. Second, the emerging hardware is key. When Apple releases its Virtual Reality (VR) or Mixed Reality (MR) headset in the coming year or so, it will force all of us to head into the Metaverse. Just for perspective, VR is fully immersive, while MR allows you to see the physical world and places digital imagery on top of that.

I have likely spoken to thousands of lawyers over the last several years. They are extraordinarily bright, but with one limiting factor 鈥� their dedication to their craft. This means that they do not have the time to lift their heads to see what is coming. All these emerging technologies will impact their practices in some way, as well as the business of law. At a minimum, lawyers need the opportunity to focus on the big four: AI, blockchain, workflow, and the grab bag of general emerging technology. There are a multitude of places to learn about these things, but I would include some of the classics such as Google Alerts, Twitter threads on these topics, and magazines like Wired, which should be a staple for everyone.

Asian Legal Business: What kind of opportunities could the Metaverse bring to lawyers?

Joseph Raczynski:听Imagine a world, much like what we have now, but only digital. It is nearly as immersive and interactive. Then, extrapolate all the problems, issues, benefits, and challenges we have currently in real life, and think about where lawyers play a role. It will be similar. In the beginning, much of the involvement of lawyers will be around intellectual property (IP) issues and copyright.

Soon thereafter, insurance and contractual disagreements will ensue, but these contract issues could be interesting because of the nature of the platform a Metaverse will be built upon. Since it should rely on blockchain and smart contracts, these disputes could likely be easier to solve at a lower tier, leaving lawyers to resolve more complex issues.

Asian Legal Business: How does our engagement with digital worlds and environments shape the way we work and the kind of work we carry out?

Joseph Raczynski:听If we presume that we are moving increasingly into a digital world, then every nuance surrounding that space will become increasingly important. Start with artificial intelligence (AI). Algorithms will increasingly be able to make decisions for us. Yes, this includes much of the legal work out there. These algos start off simply, but will become far more complex, freeing us from some decisions or work.

Stack on top of that blockchain, which is trustless (as in, you don鈥檛 have to trust a third-party) database, meaning both AI and blockchain can work in tandem to begin doing some pretty impressive workflows that are automated. When we move into the Metaverse for both fun and business, everything can be quantified, e.g. a house, shoes, art, tickets to a concert, via a non-fungible token (NFT) which uses a blockchain. Processes will increasingly be leveraging data and AI to make decisions which will rely less on human intervention.

I know this can sound frightening, and it could be 鈥� which is why as this progresses, we need the best legal minds to understand the implications, yet keep a progressive mindset to guide the path forward. We do not merely wish to replicate everything we have in the real world, but try to evolve it to the best we humanly can.

This interview was written by Elizabeth Beattie, a Hong Kong-based journalist at 成人VR视频, and originally published in .

Welcome to LawFirmDAO, a hypothetical but now feasible entity created within a decentralized autonomous organization (DAO).

Mind you, I know of no one who has written or talked about this, but this LawFirmDAO concept is something that could be the future of law firm structure. The reason? The lack of transparency within some law firms on occasion has been their undoing. Howrey and LeClairRyan both were victims of a few partners making decisions sometimes in a vacuum, without a wider participation of the firm鈥檚 attorneys; this ended up costing the firms dearly.

For some perspective, let鈥檚 unpack the essence of what a DAO means. DAOs are essentially entities built on code, leveraging smart contracts and tokens that permit token holders (attorneys) to vote on decisions the organization (the law firm) is considering. Fundamentally, a DAO is a blockchain structure 鈥� think of it as a safe database 鈥� that anyone can leverage to self-govern through participation. The entity is authored by rules that are baked into the code, permitting voting through digital tokens, sort of like cryptocurrency 鈥� all while leveraging smart contracts.

So, what does this mean? A DAO is a newer governance structure that humans (for now) are creating, which has a stated purpose and a plan to execute decisions via code. Let鈥檚 explore how this would work for LawFirmDAO.

Decision-making and profit-taking in LawFirmDAO

As a component of Web3, the next generation of asset tokenization, DAOs create a structure of governance. (Currently, most of the successful DAOs are built on the Ethereum blockchain.) Participants are essential to this structure, and they are directly linked to that organization in a verifiable and provable way.

This is accomplished via a digital wallet, linked to a blockchain that contains your assets, money, non-fungible tokens (NFTs), deeds and your DAO tokens 鈥� the latter proving you are a part of that organization. Think of it as your digital identity card to partake in the governance of the DAO. Each attorney would have a wallet with the LawFirmDAO tokens inside permitting them to connect to the DAO, create proposals and vote. The intent is to move away from a top-down model, and inherently a DAO structure enables this.

A well-written DAO drives community, fostering the creation of guilds within it to create new opportunities; the DAO then rewards people based on their individual participation.

In this vision of LawFirmDAO, a founder, for the purpose of creation, sets forth a plan to create the firm with all the typical rules of governance, but in full transparency and outlined in code, which is stored on a blockchain. After its creation, the founder withdraws as the leader to be an equal partner with all other participants, i.e., attorneys. The DAO is created, and tokens (shares) are issued. Prospective attorneys coming on board interact with the code via a friendly app or website, connecting in a digital wallet.

Compensation and work matters could be doled out simply as well. For example, attorneys could choose Option A and be rewarded for every client they bring in at 80% of those fees; or Option B and they are rewarded 10% of client fees because they did not bring in the client but worked the matter. In this way, attorneys could shift from one type of work matter to another by choice, simply by reassigning themselves and the code verifying it鈥檚 acceptable. Virtually every nuance of a firm governance structure could be pushed into this paradigm via code, verifiable via the blockchain.

Profits for the equity partners would be calculated by fees and automatically generated with their direct success via smart contracts. Rewarding structures are innumerable. Proposals from anyone in the LawFirmDAO would be offered via an online voting mechanism, verifying the person by their token in the DAO, and allowing them to put something to a vote 鈥� such as the creation of a new practice area in the next week, opening an office in Lagos or voting to change the profit structure. In this way, a DAO offers full transparency, equity, innovation, incentives, all of which are auditable and viewable in code. No one group or individual is dictating the direction, rather it is a verifiable way to be inclusive and egalitarian in its authorship and action 鈥� again, all via code.

An additional advantage to a DAO is the incentivized benefits aligned to the structure created within it. A well-written DAO drives community, fostering the creation of guilds within it to create new opportunities; the DAO then rewards people based on their individual participation. While a guild harkens back to the age of people forming groups of like-minded and skilled individuals, attorneys can do the same inside their LawFirmDAO. As a flat organization, everyone can propose ideas for vote, and if selected, chosen for action.

Legal DAO generator

Separate from this new partnership model created with a DAO, we will likely see DAOs created by law firms for their clients, which would allow for a coupling of current legal tech tools and blockchain. Issuance of a DAO could be done through an application like a contract automation tool; and for any company that wanted to create a DAO, the law firm would populate all applicable parameters 鈥� the name of the company and the token, number of tokens available, etc. 鈥� and then the firm could create the DAO, and, if necessary, file the business license with the appropriate state. (At the moment, only Wyoming has created laws around DAOs.)

Once this DAO has been created, another connected piece would be the voting mechanism. In this world, DAO participants would leverage their Web3 wallet to connect into the proposal and voting site. Once on the site, members would be able to vote on current ideas or propose actionable matters themselves. Each of these actions is stored on a blockchain that is inherently provable and verifiable.

The LawFirmDAO could be the future direction of equitable, democratic, transparent law firms that all parties can buy into through a Web3 DAO token. The fostering of community and innovation that this structure will birth could be transformative.

Yet, before the iPhone was launched 14 years ago, we didn鈥檛 imagine the myriad of things we could accomplish by simply touching a piece of glass-faced, hand-held technology today. It would have been a leap of faith to see where we sit now. Thus, the Metaverse is that next leap.

Over the next 18 months, following an era of Zoom and Teams virtual meetings on laptops and mobile devices, Apple will be releasing the first mixed or virtual reality headset, allowing for people to interact virtually. Initially the focus will be on new Zoom-like meetings with far more immersive business engagements, but then it gets more profound. Wait for it.

Why now?

The Metaverse, or Web 3.0, is developing, but what led us here? First came layer one: blockchain, an immutable database to store information, in concert with the proliferation of , an ability to transfer value akin to currency initially, but later representing all assets. The tokenization of assets is a seminal concept and means that anything physical, or more important in this instance, digital, can be proven and has authority via code on an immutable ledger.

The latest manifestation of this authenticated representation of ownership are NFTs (Non-Fungible Tokens), and their popularity is the slippery slope of the Metaverse. Initially, people are buying digital art. In building out the Metaverse, art will be displayed on the walls of homes. However, the assets, living in smart contracts on the blockchain represent all assets. Homes, offices, land and even designer clothing of this world 鈥� legally represented by deeds, contracts, and leases 鈥� have been tokenized. This means you can buy digital land, homes, and other objects on a platform like , to prove you own it. That value creates a network effect, enabling interactions within an ecosystem, and therefore a new Metaverse (world) is born.

Indeed, OpenSea is just one of several marketplaces where individuals can buy the future of asset ownership in the Metaverse. All asset ownership, both digitally and physically, could be ported over to an NFT on blockchains. All of these critical pieces are then layered on top of a platform of animation 鈥� the actual space inside the headset, which has been with us for many years. It is the asset tokenization that makes this paradigm shift most pivotal. Transactional attorneys should beware, and litigators should feel their eyes widening at the possibilities ahead.

The virtual spaces being developed have cities in which you can buy almost anything. Land, upon which you can build your house, then you can fill that house with pieces of art (via NFT), and wear an outfit that is a verifiable Ralph Lauren suit with Nike shoes. The concert you attend requires a ticket (another NFT), and the subsequent music you want to purchase is also digitally saved and copyright enabled. Again, all of this is purchased from companies with underlining NFT ownership.

These digital worlds will likely be our future in the next decade, and a substantial amount of your time will be inside of these worlds. I know, it鈥檚 terrifying. If you are skeptical, however, note that OpenSea processed transactions of more than $3.3 billion in August alone, and this is just the beginning.

In the Metaverse, people will interact, transact, own assets, have relationships, build things and companies, create intellectual property (IP), have copyright issues, and advertise. Further, crimes may happen, insurance likely will be developed, and a massive host of other IRL (In Real Life) concepts that now all now require will evolve 鈥� and that will require legal professionals to be involved.

Not to mention the scaling of DeFi (Decentralized Finance), which has already begun and will continue to ramp up. Clearly, this is a burgeoning market. While I have been engaged in this space for several years, from on the Metaverse underlined its importance for the legal industry. It is a worthy read if you wish to continue down the rabbit hole.

What鈥檚 next?

What is on the horizon as we move into the Metaverse? DAOs, for one,

DAOs (Decentralized Autonomous Organizations) are entities that have been built by humans. Likely a business initially, but once the code has been written, the code acts as the law and it runs the business autonomously. These DAOs will proliferate both inside, but more importantly for the foreseeable future, outside of the Metaverse. They are already very successful, supporting $25 billion on one DeFi DAO right now. (I will examine the magnitude of DAOs in an upcoming post.)

The implications of the Metaverse for the legal community and within the regulatory community as well as every other facet is enormous. While this space is being built, it is still early. Over the course of the next several years, the Metaverse and all its implications will move from the fringe to a more important arena for lawyers to contemplate and eventually address. Now is time for those lawyers to apply their critical thinking legal intellect.