Metaverse make-up

What is the role of digitalisation and cloud contracts in the metaverse?

A critical aspect of and enabler for the metaverse is that it is built in the cloud. The cloud concept essentially means storing databases and running software on servers accessed via the internet. Cloud services take various forms, but for an end user such as a player, the cloud makes it possible to access a gaming world with just a fast internet connection, a sufficiently powerful processor and graphics chip, and a log-in.

The fact that cloud-based worlds are run on remote capacity creates the potential to connect different people into the same environment. Cloud services are also highly scalable – the capacity of the cloud is growing every day. As the growth of the major cloud services providers demonstrates, cloud capacity is driven by demand and was structured from the outset for huge volumes of data and traffic. Although physical servers are sited in physical data centres, globally networked connections mean that the detail of how data travels to and from the servers and their actual location is often irrelevant – hence the moniker of "cloud".

Scale and power

For the metaverse, cloud enables scale and vast expansion, as it has done for gaming. Cloud offers the infrastructure for the current shift from gaming on consoles and PC hard drives to gaming platforms and gaming-as-a-service, with players accessing games from cloud-based servers. Newzoo notes, cloud expands accessibility and enables "instant-join experiences that don’t require download or installation." This point is echoed in the report by Inder Phull, the CEO of Pixelynx, who observes that cloud removes the need for participants to invest in expensive hardware such as consoles or virtual reality headsets.

Cloud's elastic capacity also enables the next step, with massive scaling of the number of players interacting in any individual game from hundreds of players to tens of thousands, as well as the diversification and scaling of the activities that can take place in a gaming world.

A further feature of the cloud is the potential to access vast processing power. State-of-the-art systems – such as high-performance computing and the emerging field of quantum computing – are increasingly being made accessible as cloud services, rather than sold and owned outright for all but the organisations engaged in researching and developing these technologies.

Flexibility, portability and interoperability

Since almost anything can be supported in the cloud, it affords the flexibility required for the metaverse. There is no single cloud but an interconnected global web of servers owned by different entities around the world. Different cloud service providers use internet protocols and standards to carry data traffic so that portability and interoperability are inherent in the structure of the cloud. Limits, barriers and controls can be imposed, but they are not unavoidable.

Although gaming worlds are currently closed and separate, the cloud creates the potential to open them up and to interconnect worlds. Of course, the way that they are written might make interconnections more complex but the cloud itself provides the networked framework for distributed and decentralised computing. Portability of data and content between proprietary worlds, and interoperability more generally, will need new standards and protocols to be created and adopted by all stakeholders. As the Newzoo report notes:

... mass concurrency and interoperability are immature, but new protocols are being developed and more is yet to come."

Data flows

The metaverse will necessitate the creation and collection of significant volumes of data. If it is to operate as a seamless global virtual environment, this data will need to flow both across real geographical borders as well as between different platforms and technical environments. This not only raises questions around the application of privacy laws but also technical and contractual considerations around the storage of data and the possible flows of data across jurisdictional and technological boundaries, and all within a decentralised metaverse model.

For example, how will platform operators contract with a customer who wants to port data across the decentralised metaverse between environments that have, until now, been closed and subject to separate contracts and restrictions? Traditional online methods of contract formation will need to be updated to ensure a user's experience is as seamless as possible – a user's agreement to contract terms will likely need to adopt a "virtualised" form of clickwrap or webwrap terms. Ensuring that these are enforceable and make sense in the real world, however, will be a significant challenge.

Elasticity and scaling

Cloud services tend to be provided on a flexible basis – one of the cloud's many benefits is its elasticity for organisations that need to scale up or scale down capacity or processing, based on their requirements. This means that contracts for cloud services need to facilitate that flexibility (for example, shorter termination notice periods or the ability to "add on" services quickly), although there is usually a degree of financial commitment for a minimum expected level of service.

Cloud service providers will need to think about how current models ought to adapt to work in the context of their metaverse-based customers. For example, are there areas in which even greater flexibility will be needed to accommodate and reflect the nature of the metaverse (such as entirely consumption-based pay-as-you-go pricing models)? Will metaverse service providers need to commit to certain scale requirements to access enhanced services from their cloud services provider (whether by way of performance, support or otherwise)? And how will a requirement for increased scale and capacity be delivered on a consistent, ongoing basis for all metaverse participants, given the significant capacity requirements that the metaverse will create and the multiplicity of providers of the underlying cloud infrastructure? Will arrangements need to be made between the cloud providers themselves, beyond existing protocols and standards for interoperability, to ensure, for example, that sufficient capacity is available to support spikes in activity in the metaverse? Creativity will be needed to develop a robust contractual framework around this complex and interconnected environment.

Reliability and liability

To ensure that the metaverse is as realistic and as seamless as possible, the processing power and capacity of the underlying infrastructure services will need to be very high, as will the level of service availability – shutting down a virtual world for maintenance somewhat defeats the purpose of a seamless, always-on environment. Cloud service providers will be required to meet these needs in a way that is economical and energy efficient, and metaverse service providers will need to adopt a cloud strategy that mitigates possible downtime in services while allowing for the level of processing power and capacity needed to support metaverse-based services.

There will also be a question of how liability will flow through the various metaverse participants for loss or damage arising as a result of cloud service availability issues. Cloud service providers will be very keen to limit their liability for service failures as far as possible. However, if the metaverse is ultimately to become a true virtual world, replicating all of the various activities and interactions that take place in the real world, users will need to know that they can transact and engage via the metaverse with the same level of risk and security that they experience in the real world or online today.

Enhanced regulation

One major challenge for cloud providers in the context of the metaverse is the spectre of enhanced regulation of technology platforms. For cloud service providers, the EU's proposals for a Digital Markets Act (DMA) will be of particular concern.

The DMA proposal classifies cloud computing services as "core platform services", and the providers of these services as "gatekeepers" if the provider has a "strong economic position" (that is, a significant impact on the EU's internal market), has "a strong intermediation position, meaning it links a large user base to a large number of businesses", and has (or is about to have) "an entrenched and durable position" in the market.

There are also quantitative tests that will be applied to determine if a service provider is a gatekeeper. The DMA would establish new rules for gatekeepers that would be particularly relevant in the context of the metaverse.

Most important among these are that gatekeepers must:

... refrain from combining personal data sourced from their core platform services with personal data from any other services offered by the gatekeeper or with personal data from third-party services unless the user has provided its specific consent."

The sharing and combination of categories of personal data will be essential to the operation of the metaverse. Obtaining General Data Protection Regulation-level consent to such processing will be particularly problematic in the context of the creation of a fully seamless user experience.

Gatekeepers must also:

... refrain from requiring business users to use, offer or interoperate with an identification service of the gatekeeper in the context of services offered by the business users using the core platform services of that gatekeeper."

Identification of metaverse users will be of crucial importance, not only to establish a safe and secure metaverse, but also to ensure metaverse service providers can transact with metaverse users, and potentially to facilitate movement across the interoperable component parts of the metaverse.

The DMA will need to go through further stages of the EU legislative process before it is adopted as law. It seems likely that a number of large cloud service providers will be following its progress very closely in the months and years to come and hoping to help shape its development so as to facilitate the evolution of the metaverse.

Greener cloud

The physical reality of the cloud takes the form of vast data centres located in various parts of the world. Both the processing itself and the cooling systems needed for the servers have significant energy consumption requirements and the carbon footprint of cloud providers can therefore be a concern. On the other hand, the imperative to address climate change means that many cloud providers are in the vanguard of decarbonisation initiatives.

As well as locating data centres in cooler locations, even trialling underwater data centres, the major cloud providers are some of the largest purchasers of renewable energy in the world. In the US, they have often been drivers in the development of the renewables sector. Long-term corporate power purchase agreements can generate the revenue streams needed to finance investment in building new renewable generation infrastructure such as solar or wind farms.

Of course, calculating a business's carbon footprint is complicated and multifaceted. But, as the cloud service providers themselves work to eliminate the carbon emissions from their data centres and wider business activities, switching to the cloud from on-premises servers can be a way for the gaming sector to reduce its energy consumption from fossil fuel-generation and facilitate green foundations for the metaverse.



Catherine Hammon Digital Transformation Knowledge Lawyer Head of Advisory Knowledge, UK +44 207 105 7438


Matthew Sharkey Associate Director, UK +44 20 7105 7582