1. Provable digital scarcity

Artwork: Guilherme Twardowski

It’s easy to see how scarcity works in the physical world , because we’re limited to accessing physical pieces of artwork in order to experience them. If your friend has a painting you love in their house — an original Picasso, let’s say — they can’t simply copy it and give it to you. You could take it home and hang it above your couch, but then your friend no longer has it to enjoy in their living room. To truly experience the painting, you have to be present with it (you could snap a photo of it on your phone, sure, but I’m sure we agree that’s not really the same thing).

Unlike a digital file, you can’t instantly duplicate and share this physical object. Copying it requires a great deal of time, talent, and resources, so much so that forging comprises its own multi-billion dollar underground industry.

Even if there are several copies of work, scarcity remains a factor. Take the vinyl version of Nirvana’s Bleach album. One is the regular pressing, available on Discogs for 20 EUR. The other is a limited edition pressing with custom red marble vinyl, marked as 040/500, that includes an additional blue 7" vinyl. This special version sells on Discogs for 1,780 EUR. Not just because you get more with it, but because it’s rare.

In the physical world, collectors value the intended limits of quantity set forth by the artist — the exclusivity of a work contributes largely to its value. Nirvana wanted the limited edition Bleach to be available only to the first 500 keeners. I want it… I don’t know a Nirvana fan who wouldn’t.

Fans value the limited run for its scarcity, custom components, and as collector’s items. The regular edition Bleach album is still a great collector’s item, but it’s much more widely available and that’s reflected in the lower price.

So how does scarcity work in the digital world?

Artwork: Guilherme Twardowski

Prior to blockchain, enforcing that same scarcity in a digital environment was impossible. The internet allowed for songs, movies, images — any artwork, really — to be downloaded for free in minutes and immediately copied and shared. Bad news for creators.

But now blockchain enables a digital item to be one-of-a-kind. By adding it to an unchangeable, transparent record that tracks provenance and ownership, it ensures a digital asset can’t be duplicated with a few keystrokes.

That’s a central component of CryptoKitties.

Take the adorable Kitties above. On the left side, we have a “Fancy Cat.” They’re limited edition cats with special artwork — just like the limited edition Bleach record. On the right we have a normal Kitty (just ignore the unicorn horn, for the sake of this argument) which is very cute but much more common and, as a result, can be purchased at a much lower cost.

I’d be remiss, however, if I didn’t mention that players derive all sorts of value in their Kitties aside from just price. They may love their Kitty for any number of personal reasons spanning from a wacky trait, to the moment it represents, or simply because the Kitties’ adorable features melted their cold, cold heart.

You’re probably thinking, “can’t I just copy and paste that image and own the cat?” Yes, you can — but you don’t actually own the cat (the ERC-721 token), you merely own a low-res JPEG of its art. You couldn’t breed it, bring it into the myriad experiences available for your Kitties, or sell it for any value. Plus, you’d be a jerk.

Players really do own their CryptoKitties, and any similar digital assets — ownership which is backed by the permanent record on the Ethereum blockchain. The CryptoKitties website is simply a lens through which you can view your ERC-721 token via our user interface, artwork, and game experience. You can buy and sell Kitties on a number of other exchanges — although they’re less user-friendly — and bring your Kitty into numerous experiences developed on top of the core CryptoKitties platform.

Even though we made CryptoKitties, we can’t take yours away. Even if our company disappears, the cats go on.

Skull Trooper Fortnite Skin, Photo: www.usgamer.net

Ya’ll are probably on that Fortnite kick. If you don’t know what Fortnite is, I can’t help you. But, essentially, it’s an online multiplayer game where 100 people land on an island and fight until only one is left. And it’s awesome.

I understand that Fortnite itself isn’t art — but we’re getting there, so hear me out.

Fortnite is free to play with the exception of purchasable “skins,” essentially wearable avatars, and other purely cosmetic items. But in Fortnite you don’t actually own your cosmetic items — Epic Games, Fortnite’s developer, does. You can’t sell your items or transfer them between accounts, and they don’t increase in value over time. If Fortnite dies, your items do too.

If you were an early adopter of Fortnite, back when their Battle Royale mode was first taking off, and bought a “rare” Halloween “Skull Trooper” skin like the one above, you don’t benefit from contributing to the early success of the game. The act of selling your account to transfer these cosmetic items is against Epic Games’ terms of service: “Users do not own their accounts, and gifting or otherwise transferring of accounts or access keys is prohibited.” Even one of the most popular Fortnite streamers, Tfue, was temporarily banned due to violating this specific term.

I hope that someday these items will actually belong to players, accrue value, and become transferable from experience to experience. Imagine if you could bring your Fortnite avatar into another game like Call of Duty or World of Warcraft, the same way you can bring your CryptoKitties into other experiences in the KittyVerse (as we call the collection of community-build experiences and games developed on top of the core game).