The digital playground

Imagine a future when one’s digital footprint is a 3D representation of oneself that owns valuable digital fashion, digital land, stores countless digital memories and has a digitally recorded personality that can live forever. What would the implications be for those providing succession planning advice?

Although the adoption of this concept may seem like a far-off daydream somewhere in the distant future, Gen Z and Gen Alpha[1] (our clients of the future) are already well-versed in living in online worlds. Coupled with advances in technology that are enabling online worlds to be built more cost-effectively and the rise of cryptocurrencies and non-fungible tokens (NFTs), this future may not be as far away as once thought.

Popular games such as Fortnite and Roblox are pushing the boundaries of their medium and creating virtual worlds in which users can interact, create, play and monetise their online experiences. They are, in essence, metaverses. With their own in-game currencies and social commerce, users are more than comfortable interacting, trading and purchasing in these 3D immersive digital worlds. The popularity and success of such platforms is reinforced by the household names that are partnering with and entering these spaces.

However, one of their biggest limitations at present is the non-transferable nature of in-game accounts and assets. Avatars (in-game characters), creations and in-game purchases stay on the platform and generally cannot be transferred between account holders. Whatever time and money people invest in these platforms largely stays within the game, so if you stop playing (or the platform is withdrawn), the value is lost.

For most, the interaction within these online platforms remains, in large part, a traditional gaming experience with the added ability for in-game purchases.

However, with the growth in online ecosystems through cryptocurrencies and the ability to document digital asset ownership through NFTs, platforms such as Decentraland and The Sandbox are making the futuristic idea of the metaverse a reality (albeit of a virtual nature).

What is a metaverse?

Collins English Dictionary defines a metaverse as:

• a proposed version of the internet that incorporates three-dimensional virtual environments; or
• a three-dimensional virtual world, especially in an online role-playing game.

According to this definition, these online gaming platforms are indeed metaverses but if we look at developments through crypto-assets, we can begin to understand how such platforms have the potential to become sources of financial value to the end user and how this can be realised and adopted en masse.

Digital fashion and digital twins

Digital fashion has been gaining in popularity for some time, as seen at New York Fashion Week, which scheduled online fashion drops in the Decentraland metaverse earlier this year and included in-real-life (IRL) fashion inspired by NFT collections on the catwalk.

More recently, Milan Fashion Week showcased designer boots, the Hoofster, which have a digital twin (an NFT representation of the boots) linked by an embedded near-field communication chip in the boots. The NFT provides a certificate of ownership and provides for future benefits from the creators.

Wearable digital fashion in the form of NFTs is also making ground, enabling avatars in the metaverse to be dressed like their IRL counterpart. Given the value of high-end fashion and the transferable nature of their NFT counterparts, there is the potential for an online wardrobe that exists in the metaverse to have real-world value.

If the ability to move between metaverses (the ever-coveted interoperability of metaverses) were to develop like organisations such as Ready Player Me are working towards, this would only add to the potential value of such assets, given that they could be showcased across metaverses.

Digital land ownership

Virtual real estate in metaverses such as Decentraland and The Sandbox is also gaining traction. With such assets again represented by transferable NFTs, it is arguably only a matter of time before a premium is payable to hold certain areas of land within a popular metaverse. With big brands already acquiring virtual square footage with the assistance of metaverse builders such as Landvault, price per acre could well be replaced by price per pixel in our metaverse of the future.

Play-to-earn games

The popularity of the gamification of life in online worlds does not show any signs of slowing. However, enter into the equation the ability to earn in-game tokens, which can be transferred into something of value (such as Bitcoin or Ethereum), or to develop an avatar, which can be transferred for such tokens (given the NFT nature of the in-game character), and the potential for valuable gaming accounts within the metaverse is a real possibility.

Immersive events

Decentraland and The Sandbox are already well-versed in hosting online immersive events in the metaverse, with big names playing virtual concerts and festivals for their fans. Tickets for such events are often issued as NFTs and there is a real possibility that such tickets could well become the next big collectible memorabilia for adoring fans of celebrities or for iconic events.

Avatars and personal data

Of course, a glimpse into the future of the metaverse would not be complete without touching on artificial intelligence (AI). It is conceivable that AI models could be integrated into a metaverse in such a way as to capture all interactions of an account holder within that digital world over the person’s lifetime. With such a bank of personal data collected over a prolonged period, it is feasible for such AI to then be integrated with the account holder’s avatar, in effect creating an automated online version of the person in the metaverse that could live forever. An immortalised version of a person could hold huge sentimental value for loved ones following death; however, it also raises questions as to who would have control over the avatar, the data and the overall functioning of the account following death. In our imagined metaverse of the future, it would not appeal to many people to have zombie avatars walking among us.

What does this mean for succession planning?

An interoperable metaverse enabling ownership of digital assets that can be transferred on death and therefore hold real-world open market value creates a new conversation with our clients of the future. As well as planning for the devolution of high-value IRL assets, consideration will have to be given to their digital counterparts.

On the assumption that such assets would be owned on a blockchain and accessed through a wallet, the well-known issues for passing on cryptocurrencies would equally apply to their metaverse counterparts (on the assumption that the current user experience remains the same). There would also be the often-contentious sentimental value to some of the assets in the metaverse, such as beloved high-end items of digital fashion, immersive event memorabilia and metaverse moments that have potentially been captured and immortalised, similar to photos and videos on social media.

There is then the jurisdictional question over where the metaverse exists in relation to the law applicable to the devolution and taxation of such assets. Any disputes arising within the estate due to claims against the estate or posthumous fraud on the account could also raise complicated questions over jurisdiction.

Although these issues seem hypothetical, it is worth noting that there will be clients who already have a well-established existence in decentralised metaverses, owning cryptocurrencies, digital fashion, digital land and cultivating interoperable avatars. These questions are therefore as prevalent today for the right client as they will be in the years to come when the transition of wealth to Gen Z and Gen Alpha begins to take effect. It is also likely that such clients will not be averse to accessing professional services in the metaverse when the time comes.

Having an awareness of the momentum that is building in the ownership of such assets is key as it is arguably only a matter of time before the Rubicon is crossed and mass adoption begins to enter the market.

Until then, those who are at the forefront of cryptocurrency and digital assets ownership are not getting any younger and it is arguably only a matter of time before such assets become a more prevalent part of estate administration. The biggest questions at that time will be whether the advisor is able to assist in the administration of such assets and whether the succession-planning advice was appropriate during lifetime for such assets. If the answer is no, then there may be trouble ahead.