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The COVID-19 epidemic forced people to switch to virtual ways of communication, and with the rapid development of online and virtual reality technologies in the 21st century, the global virtual reality realm has advanced and re-emerged as the Metaverse. The term “Metaverse” refers to a parallel digital universe with a network of three-dimensional virtual worlds that would connect real users from all over the world as avatars. The distinguishing feature of Metaverse is the use of blockchain technology to enable instantaneous purchase, ownership, and resale of virtual digital assets beyond all boundaries of geography and society.

The risk of increasing legal complexity comes as the technology behind Metaverse advances, broadening the range of actions made possible through Metaverse. When the COVID-19 was at its peak, modern technology allowed numerous courts in India and throughout the world to switch to the virtual mode of hearing. Such technology also included ADR techniques, allowing parties to settle disagreements through online hearings.


The majority of Metaverse transactions are controlled and made possible by Smart Contracts.  Essentially, smart contracts are legal clauses incorporated into computer programmes and technologies. When the predetermined conditions stored on the distributed ledger technology are satisfied, the pre-determined algorithms automatically execute the contract’s terms.

As the use of smart contracts increases, it is important to keep in mind that due to lack of technical knowledge and jurisdictional complications, conflicts involving smart contracts would be challenging to resolve through the traditional court ecosystem. Through the process of on-chain dispute settlement, blockchain arbitration makes an attempt to address this problem. The blockchain arbitration platform is typically embedded as an oracle within the Smart Contract, allowing control over the contract based on the results of the Arbitral proceedings and the Award thereof.

Due to the dispute resolution process’s encoding in the Smart Contract, the parties to the contract can immediately use blockchain technology to initiate it in accordance with the contract’s provisions.

Numerous blockchain arbitration solutions have already been developed to help with the process. The randomization of arbitrator selection, on-chain enforcement of awards using blockchain technology, low or no human interaction, and the predominance of party anonymity are all notable features of such blockchain arbitration platforms.

On-chain and off-chain arbitration are the two mechanisms provided under blockchain arbitration procedure. In on-chain arbitration, the Smart Contract is used to both initiate and carry out the arbitral processes, and it is also used to enforce the arbitral award. The enforcement of the arbitrator without judicial interference, however, is not automated in off-chain arbitration, which uses blockchain technology to automate certain aspects of the arbitral procedures.

When a dispute arises, the blockchain arbitration oracle built into the Smart Contract immediately directs it to the blockchain arbitration platform for resolution. Therefore, in the Metaverse, blockchain arbitration denotes an automatic dispute resolution system that is activated upon the occurrence of a specific dispute and ensures the rendering of an Award and enforcement.


The anonymity of the parties and arbitrators is emphasised as a key component of such processes in blockchain arbitration. However, parties may be unsure of the arbitrator’s competence and qualifications to decide a dispute involving complicated technology-based issues when the arbitrator’s identity is unknown.

At the same time, as the arbitrator’s physical person would not be visible to the parties, doubts would also emerge regarding the reliability of the arbitrator and if the arbitrator is actively present during the entire hearing.

The parties’ anonymity during the arbitration process further raises a number of questions, including whether they attended the hearings and if they adhered to the principles of fairness and honesty typically upheld during a traditional arbitration.


The existence of a trustworthy, independent, and technologically sound dispute resolution process within the Metaverse is essential for the people actively participating in the virtual world as Metaverse gains popularity among the technologically inclined populace. This need of Metaverse users is adequately met by blockchain arbitration, which integrates the decentralised technology of Metaverse with the established arbitral process.

Most importantly, blockchain arbitration combines traditional arbitration procedures with blockchain technology through Smart Contracts, allowing parties to a dispute to settle their differences in a way that is automated, cost-effective, efficient, and digitally empowered. Blockchain arbitration will undoubtedly become a popular method of dispute resolution in the Metaverse when combined with the automatic execution of arbitral awards.

The fact that the parties to the arbitration and the arbitrators are anonymous, as is the case with all things decentralised, presents several difficulties for blockchain arbitration on Metaverse.

To overcome the obvious gaps in these proceedings, it is imperative that international authorities and institutional bodies of arbitration adopt appropriate rules for blockchain arbitration.

This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.
Sources: Coinbase, AMLegal, LiveLaw

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