Digital Assets in Virtual Reality and Fighting Fraud

 Video games continue to create an endless supply of virtual worlds for us to escape into, explore and have fun. We can fly through the depths of space, control a hero as they undertake an epic quest, or just live as a virtual character in a digital world not too far removed from our own.

The rise of virtual reality (VR) takes us a step further. VR offers a truly immersive experience that allows us to feel like we’re really there.

While VR video games will always be designed to maximise fun, there are more and more ways for players to earn digital currency that can be exchanged for real life, fiat money.

In virtual worlds, money can be made through a variety of digital assets, such as land, property, clothes and offering other products, services and experiences, similar to that which can be experienced in real life.

However, with these new rewards come new risks. Just as there can be scams and theft in the real world, virtual worlds are not immune from unscrupulous individuals. And since digital assets cannot be physically possessed, they feel more challenging to secure and proving ownership might be more difficult.

But is securing virtual assets really such a big deal? And what can we do to tackle the potential for scams and fraud?

The Rise of the Virtual Millionaire

While the ownership of digital assets and monetisation will become a common feature in VR, it is not an entirely new concept. Many people cite Second Life – the massive virtual world – as the game that brought the monetisation of virtual land and other assets to the mainstream.

The game’s economy allows players to find themselves a job, run their own businesses and sell and lease property through Second Life’s marketplace. Linden Dollars – the in-game currency – can even be exchanged with fiat currency.

With time and effort, players were able to gain fiat rewards, leading wealthy in-game entrepreneurs to achieve real life wealth. In fact, one Second Life user, Anshe Chung, became the world’s first ‘virtual millionaire’ in 2006, by selling her digital land and other assets.

Now with the rise of immersive VR worlds, virtual land ownership, property development and commerce has reached an exciting new level. As the VR space continues to grow, I expect virtual land ownership and commercialisation to become increasingly common.

Many investors – particularly early adopters – look to buy and sell virtual land and eventually sell it at a much higher price as it grows in popularity. This has proven true with the likes of Decentraland and Somnium Space – VR worlds which allow their users to buy plots of land, build properties and monetise their assets.

Land parcels in Decentraland’s Washington DC-sized Genesis City have even sold for as much as $200,000. In 2017, the platform’s founders managed to raise $28 million via an initial public auction, while a further $26 million was generated in 30 seconds during an initial coin offering (ICO).

Tens of thousands of new virtual landowners are able to sell or lease their land to develop exciting, unique properties and activities which serve a whole range of purposes, such as the businesses seen in Second Life.

Second Life was, at its peak, so popular that the real world’s biggest brands, such as Coke, Toyota, Nike and Sony, got involved. Players were then able to buy digital versions of their products.

You can bet that as new VR worlds become increasingly lucrative, these same brands will want to be a part of it. And when they do, they will use their their global influence to ensure that their assets are protected.

With such an influx in the buying, selling and leasing of digital assets, this very modern phenomenon is truly big business. So, with such astonishing amounts of money at play (VR land has generated tens of millions of dollars alone) there is a notable potential risk for theft and fraud.

To tackle that, we’re going to need to make use of equally modern and technological solutions.

Fighting fraud in a digital world

To put a stop to scams in the many emerging VR worlds, it’s likely that dedicated legislation will need to be written in order to prove and protect ownership of digital assets. Laws may indeed be put in place to safeguard consumers from theft, prevent the production of fake and duplicate assets.

The most valuable tool currently at our disposal, which can help us to overcome these challenges, is the blockchain.

Acting as a digital ledger, the blockchain records every single transaction, making it publically available and, crucially, impossible to alter. This means that several forms of fraud, such as duplicate transactions and fiddling financial records, become unimaginable.

While usually associated with facilitating cryptocurrency transactions, the blockchain can also be used to authenticate and safeguard sales and transfers of digital assets.

Networks based on the blockchain can even facilitate the creation of smart contracts, which, much like a physical contract, outline the terms and conditions of a deal for the benefit of all parties.

Smart contracts could be used, for instance, to officialise ownership of virtual land, property, and many other digital possessions.

The Virtual Reality Blockchain Alliance (VRBA) – of which Somnium Space is a member – was partly founded to tackle potential fraud head on.

Beyond securing the transfer of digital assets, another key aim of the alliance is to protect the integrity of digital IDs. In virtual worlds, people can pour years of their time into creating avatars and digital personas. Beyond having such personal value to players, the stakes have been raised significantly with the addition of digital assets.

So, protection from what would essentially be virtual identity theft, is essential. By using the blockchain to track the ownership of this data, virtual identities will also be taken out of the hands of private corporations, adding an extra layer of user privacy and security.

Creativity and technological innovation paved the way for the creation and ownership of digital assets and it’ll take more of the same to prevent digital fraud. It’s crucial that safeguards are put in place to protect players from the cowboys of the virtual world who will seek to steal their assets and identities.

Video games have brought the world so much enjoyment, inspired creativity and developed a sense of community, all without any great risks.

Now, with the emergence of so many incredible immersive VR worlds filled with fun activities – and whole new ways of interaction – for the world to experience, we need to make sure that everyone is able to enjoy them just as safely and freely.

And considering how remarkable even the early creations within the VR universe are, I think it’s a challenge worth taking.

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