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  • When I show you what I'm holding, some of you might see a simple cartoon.

  • Some of you might see a complex piece of engineering.

  • You'd both be right.

  • Meet Genesis, the first Cryptokitty.

  • She's not alone.

  • All of a sudden, cryptokitties are everywhere.

  • Cryptokitties

  • "Cryptokitties"

  • The viral blockchain-based game that sparked a global craze for virtual cats.”

  • It's a picture of a cat.

  • And apparently someone bought one for $100,000!”

  • You've probably heard of cryptocurrenciesbut these are cryptocollectibles.

  • They're like digital beanie babies or baseball cards.

  • It sounds silly, but Cryptokitties is testing a profound idea: Can a digital good be

  • rare?

  • Every 15 minutes, the company Axiom Zen releases a new cryptokitty that only one person can buy.

  • And they'll do that until November 2018, when they're capping theseGeneration Zero" kitties at 50,000.

  • But there are already more cryptokitties than that, because unlike baseball cards, you can breed them.

  • The game is that there are billions of different possible combinations of traits.

  • And so you can decide which combination of traits is interesting to you

  • and you can go out and try to find a cat that has that combination and buy it.

  • Or you can try and find a combination that no one's created before.

  • And through our breeding mechanics you can come up with new combinations of traits

  • or, if you're lucky, even new traits entirely.

  • That's Layne Lafrance and Dieter Shirley.

  • They both helped found Cryptokitties in November 2017.

  • And they've convinced a loyal group of users to spend more than $23 million buying and

  • breeding these digital cats.

  • In just a few months, a whole community of third party sites and services formed around cryptokitties.

  • You can do youngest first, cheapest first.

  • See, like $10 bucks.

  • And as I mouse over, this is a plug-in I found.

  • We are trying to find new ways to play with these Kitties outside of the main game.

  • So we're starting with contests!

  • Derpface is possibly one of my favorite kitties because he is just so unbelievably ugly.

  • The traits that made Derpface the ugliest Cryptokitty

  • even though, I mean, I think he's adorable

  • are baked into his code.

  • See, this is what Derpface and Genesis both really look like.

  • Thegenesin their code define their physical appearance on 12 features,

  • based on a template by a human designer.

  • They call those features….

  • Cattributes are the visual elements of the cat.

  • Like us, these cats can also carry traits

  • in their code that only show up in their offspring.

  • But the genetic algorithm that drives cryptokitty reproductionthat's kept secret.

  • When the cats are breeding together the secret sauce combines those elements to make with

  • a certain amount of... well we can't really tell you much about that.

  • But!

  • They are combined.

  • And people spend a lot of money on the chance to get their dream cat.

  • Price depends on the generation number and on what traits are in high demand.

  • In other words, popular Cryptokitties earn high prices the way collectibles always have:

  • Scarcity.

  • And what's so interesting about this is that digital scarcity is brand new.

  • Before the computers came along if you had a thing, only you could have that thing and no one

  • else have that thing unless you gave it to the other person in which case you would no longer have it.

  • But that completely changes when goods become digital and accessible online.

  • Every time you give somebody data on the internet it's a copy.

  • I think the sort of reckoning

  • we had in the 90s and early 2000s was how do we live in a world where everything can

  • be copied infinitely and you know and what's going to happen to the music industry?

  • What's going to happen to the news and entertainment industries? And we've seen it all play out.

  • But Cryptokitties can be scarce because of the technology they're built on.

  • They're using a blockchain.

  • Specifically, the Ethereum blockchain, so you have to buy them withether”.

  • But you might also be familiar with the original, Bitcoin.

  • A blockchain provides a decentralized system for recording transactions, making fraud and piracy a lot harder.

  • And so the essence of blockchain is that we have -- whether you want to call a book or people

  • used to refer to it as a ledger.

  • And they would say, “Hey, you know you know Bob has this, Alice has that.”

  • And then everybody gets a copy of that book.

  • And if someone comes along and says, "No Alice doesn't have that."

  • People can point to their own copy of the book and they can say, "No no no you're wrong.

  • I see right here in this in my copy that Alice has this."

  • When a Kitty is born and it's beautiful and I love it, there's something very special about knowing that

  • it belongs to me and no one else and no one can take it.

  • But the truth is, it's not all yours.

  • You own the code for that cat, but not the actual image.

  • In the case of cryptokitties, they have sections in their terms of service that say that they own

  • all of the images, all of the graphic elements and that they have the right to use them however they want.

  • That you actually have no right to use them in any way.

  • That's not so different from a baseball card.

  • If you have, say, a Topps baseball card and it has the player's name on it -- say

  • Barry Bonds, and a picture of Barry Bonds on it -- you own the physical object but you

  • don't own the copyright.

  • Owning the physical object doesn't give you the right to print up other cards but it does

  • give you the right to trade your card to someone else or to sell it to a collector.

  • But for Cryptokitties...

  • If they decide they want to, say, change the artwork or if they sell the company to someone

  • who wants to pull the artwork offline and use it only in their new Cryptokitties movie

  • series, they could do that.

  • And you'd be left just with this string of letters and numbers on the blockchain with

  • no art attached to it at all.

  • So I think that's a fundamental difference between real-world collectibles where you have the object

  • and they can't take it away from you

  • and a digital collectible...

  • We really really really wanted to put the art in the blockchain,

  • because our users, I think most of them conceptually know that

  • what they own is sort of some numbers, in a blockchain.

  • But what you think you own, what you think of as your, cat

  • is that picture of the cute little guy with the funny eyes.

  • And unfortunately, the decentralized systems are just not mature enough to support art in a robust way.

  • Cryptokitties are cute and complicated and they show that we still have a ways to go

  • until we can really keep a digital collectible like we can a baseball card.

  • When I was doing research for this video, I became super interested in what makes Cryptokitties a "game."

  • If that's the sort of thing you're interested in,

  • you should really check out The Verge's YouTube channel.

  • One of my favorites is on the way medicine is using games to improve cognition.

  • So, go check them out.

When I show you what I'm holding, some of you might see a simple cartoon.

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Why people are buying cartoon cats on the blockchain

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    Samuel posted on 2018/05/26
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