Web3: A legal perspective
Web3 is often described as a “series of open-source and interconnected decentralized applications powered by the blockchain computing architecture.”1 It allows different blockchain platforms to easily integrate their services to create secure and simple applications (this is known as ‘interoperability’).
From a user’s perspective, a Web3 app or website is simple and easy to use. However, there are back-end legal issues (such as compliance with different jurisdictions for consumer protection, privacy laws and the incorporation of a third party’s terms of use) that are complex.
For example, consider an NFT Company that incorporates on its community website, the OpenSea exchange where traders can trade that NFT Company’s NFTs, whether that be on a primary or secondary market.
Traders, investors and collectors enjoy the interoperability between the NFT Company and Opensea, however the NFT Company’s Terms of Use and Privacy Terms may not be in line of those on the OpenSea extension on the NFT Company’s website.
Problem?
This raises many issues, including (but not limited to):
- IP assignment;
- which party has liability;
- which party is delivering what service; and/or
- privacy and data collection (including the possibility of a $10,000,000 penalty).
Solution?
There is no one magic silver bullet however, the solution like the problem is always complex. A company may opt to:
- disclaim to customers they are subject to a third party’s terms of use and privacy terms once they access the third-party’s service (this may not be lawful in some cases);
- incorporate third party terms of use and privacy terms into their own terms of use and privacy terms; or
- negotiate exemptions from certain conditions for their own customers from the third party’s terms of use and privacy terms.
These are just some examples of different solutions available. It is important to appreciate and understand that the lawfulness and commerciality will vary depending on the context of the company, service it is offering, and the third parties involve.
If that raises questions and you would like to discuss further, please contact our Blockchain team.
