CryptoKitties

When the developers behind the viral sensation CryptoKitties first turned their virtual cats loose on the blockchain they intended to hew closely to the blockchain ethos of decentralization. Accordingly, the only components of the game actually registered on the Ethereum blockchain are the ownership of the individual cats and the cats’ “digital DNA” that allows them to “breed” with other virtual cats to create new unique CryptoKitties.

The actually renderings of the kitties — the goofy, cartoonishly colored cat images that have seduced users into the world of crypto and virtual assets — were never added to the chain.

“The code is all open-source. I was really hoping that people would start to do their own renderings of the cats,” CryptoKitties Fat Cat Mack Flavelle told a packed house at the Digital Entertainment World conference this week. “If you wanted to go in and change the code so that your cat rendered with antlers you could do that. It’s your cat.”

Had the code for rendering the images been added to the blockchain it would have become immutable, which would have made modification of the code impossible.

“Decentralization meant decentralization,” Flavelle said.

That philosophy carried over to ownership of the intellectual property in the images as well. Part of goal in launching CryptoKitties, Flavelle explained, was to introduce people without a background in blockchain or cryptography to the concept of owning virtual assets, which mean Axiom Zen, the studio behind CryptoKitties, abjuring any interest of its own in the images.

“We we get questions from people asking whether they can make a t-shirt with their cat on it to give to someone, and we’re like, ‘knock yourself out.'” Flavelle said. “If you want to print up 800 t-shirts with your cat and sell them you can. It’s your cat.”

As a proof of concept, that approach has worked spectacularly. CryptoKitty owners have quickly become possessive toward their cat and put great store in its appearance, according to Flavelle. The vast majority of the buying and selling of the cats, along with their “breeding” rights, he said, has been transacted directly between owners, rather than through CryptoKitties’ own marketplace, implying that players indeed view the images of their virtual cats as having real value, independent of the platform they were born on.

To date, 10 CryptoKitties have sold for more than $100,000 each, Flavelle reports.

The success of CryptoKitties’ decentralized model, however, turns out to have a dark side. According to Flavelle, scammers have seized on the popularity of CryptoKitties to try to defraud people of money by selling them fake kitties. With no fixed code for the images on the blockchain, and no claim of rights in them itself, Axiom Zen has found itself with few technical or legal tools to pursue the scammers.

Flavelle said he is searching for ways to prevent scammers from infiltrating the CryptoKitties ecosystem without compromising its decentralization, but is yet to hit on a workable solution.

“It’s a problem we need to solve,” he said. And a possible warning sign for other entrepreneurs looking to democratize and decentralize the creative process.

When Satoshi Nakamoto introduced Bitcoin into the world, whoever he, she, or they were set the total number of coins that can ever be released (“mined” in Bitcoin parlance) at 21 million. While individual bitcoins can be sub-divided into an infinite number of smaller units (fractions of bitcoins), the total whole number of units is finite.

CryptoKitties fat cat Mack Flavelle

That inherent scarcity is one of the reasons for the dizzying run-up in the price of bitcoins: At any given time there is a fixed number of bitcoins in the world.

The key to establishing that scarcity is the blockchain, which leverages cryptography to ensure that individual bitcoins (and their subdivisions) are unique, identifiable, unalterable, and un-reproducible. Unlike the internet, where sending a digital file from one computer to another inescapably involves creating a new copy, bitcoins themselves are not really “sent” or transferred over a network so there is no need to create a copy. Instead, the shared ledger that records ownership of bitcoins is updated to reflect the new network address (i.e. owner) of a cryptographically unique asset on the network.

Those properties, of uniqueness and scarcity, are part of what has attracted many artists to blockchain technology. What is unique and scarce can have and hold value, and what has value can be bought and sold, traded and collected, or held as an asset in the expectation of appreciation.

Getting people not steeped in cryptography and accustomed to the infinite reproducibility of digital files on the internet to become familiar and comfortable with the concepts of digital scarcity and uniqueness, however, is a challenge. Without that buy-in from consumers, the blockchain hopes of many in the media and creative industries could be broken.

It was that challenge that Mack Flavelle and his team of developers at AxiomZen set out to tackle. Their solution? Cats.

The team came up with a collection of digital illustrations depicting goggle-eyed, cartoon cats they called CryptoKitties and created an online game allowing people to buy, sell and collect CryptoKitties using Ether. The game also leverages smart contracts to make the kitties “breedable,” based on their unique “DNA,” creating new, unique CryptoKitties.

Why cats? While there are other blockchain-based digital collectibles on the market, most are targeted at limited audiences, such as RarePepes, based on the adopted alt-right mascot Pepe the Frog. Flavelle’s goal was to appeal to a broader market and introduce ordinary consumers to digital collectibels. “Cats are part of the internet,” Flavelle tells RightsTech. “People are already familiar with the idea of trading cat videos.”

Trading in CryptoKitties has been robust. At one point, it became the dominant application on the Ethereum network, to the annoyance of others trying to use the network.

According to a third-party site that tracks sales of CryptoKitties, some virtual kittens have sold for the equivalent of more than $100,000, based on the then-current value of Ether.

Flavelle, who’s title is Fat Cat, will sit down for one-on-one fireside chat with me on February 6th, as part of the RightsTech track at the Digital Entertainment World conference in Los Angeles.

We’ll discuss the origins of CryptoKitties, what their creators have learned about the market for digital collectibles, what their popularity portends for consumer adoption of blockchain-based applications, and whether CryptoKitties are a fad or will prove to have nine lives.

Click here for information on registering for Digital Entertainment World.

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