Dapper Labs – the company behind CryptoKitties – has a simple mission. They want to introduce a billion people to blockchain.
"The reason we decided to go for entertainment, especially games, is because we felt it was just a much easier way to introduce people to decentralization," explains co-founder Mik Naayem. "Gamers are the perfect target market because they already understand virtual currencies and virtual worlds."
In November 2017, CryptoKitties was Dapper Labs' Trojan Cat, and the game introduced the revolutionary concept of NFT & # 39; s (Non Fungible Tokens) to hundreds of thousands of people who use the word & # 39; fungible & # 39; had never used in their life.
It is widely believed, at least by those in the blockchain industry, that these unique or scarce digital objects have the potential to transform the internet and support new virtual economies. Dapper is now harnessing the power of major sports, entertainment and music brands – including the National Basketball Association and Warner Music – to draw their passionate fans to blockchain as well.
The NBA is not the only major organization enthusiastic about NFTs. Some of the biggest brands in the world develop blockchain based games, collectibles and virtual worlds including Formula 1, MotoGP, Atari, Ultimate Fighting Championship, Nike and even Shaun The Sheep.
It's a huge opportunity with the potential to be taken over by regular users.
Together, Fortnite and Minecraft alone have 300 million users per month – a user base that shadows the 16 million blockchain wallet users per month. Formula 1 reached 471 million unique viewers in 2019. And the NBA claims to reach over a billion people.
Games generated $ 150 billion in revenue last year, and if blockchain is adopted by the game and collection industry – and marketed by global brands – as believers think it will be, then NFT's might be the cutthroat app from blockchain.
Galaxy Interactive is a $ 325 million investment fund that is driving this revolution. The investment theory is based on the belief that the billions of people who tap their lives to screens want more meaningful ways to connect and interact.
"The virtual goods we buy, trade and sell will pervade status and define our identity, as will their physical counterparts," explains a Galaxy Interactive pamphlet. "The value we create in our virtual worlds will no longer be distinguishable from the value we have historically created beyond."
Sam Englebardt, who co-founded Galaxy Digital with Mike Novogratz, leads the Interactive division.
"I think where branding is concerned, I think adoption will be in games and content," he says. "When you think about digital worlds and a technology that allows you to do really interesting things with digital objects, and create scarcity of these objects, I just feel like that's the kind of environment where this (blockchain) technology is likely to scale first.
"That's where the people are and where the eyeballs are. That's where the brands are going."
A story culminating in the creation of The Metaverse begins with CryptoKitties in November 2017.
Naayem explains the whole idea behind CryptoKitties to teach new users about blockchain.
"When we created CryptoKitties, we tried to test whether we could get people who had never used a blockchain to use it … and understand why it is different and why it is valuable."
Until now, everything in virtual worlds was endlessly reproducible and therefore of little value. But NFT & # 39; s heralded the revolutionary concept of real and sustained ownership of unique objects.
Three million people visited the website to purchase a virtual cat, but only about 100,000 managed – thanks in part to the game hiding the Ethereum network, and partly the hoops users must jump through to acquire cryptocurrency. But it proved that cute NFT & # 39; s ownership appealed to people who didn't care about Bitcoin.
"With Crypto Kitties, just over 40% of our audience had never had a cryptocurrency and by analyzing their user behavior, we can see that they behave differently in this game than they do in normal mobile games," he says. & # 39; And so we became convinced of that. & # 39;
The game allows users to 'breed' their NFTs with others. and to sell the offspring, which contributed to the creation of a virtual economy (several million cats have now been bred). The value accretion deck was tilted heavily in favor of users who made it $ 20 million in the first year, while Dapper Labs took only $ 7 million. Users also created an ecosystem of DApps and built everything from racing games to Tinder and Facebook to cats.
Naayem says that once users experience uniqueness, scarcity and ownership in a virtual world, handing over cash in regular games completely loses its appeal.
"As someone who has had that experience, it's hard for him to go back and spend in virtual worlds where they don't have those promises. Much of the way I've been thinking about it recently is that it almost seems on giving users digital rights in their virtual lives. "
Blockchain in gaming is currently a young industry. My Crypto Heroes made $ 1.5 million in the first year and players took home $ 118,000. Gods unleashed made $ 4.2 million from the company that owned the lot. But the success of CryptoKitties caused some of the biggest brands in the world to sit up and notice.
& # 39; Many great IPs tried to have these conversations & # 39; says Naayem. "And we thought it was a really great way to take advantage of their vibrant communities."
Sports fans are among the most dedicated in the world, and sports brands make a significant portion of their revenue from video games, merchandising and memorabilia. Combining all these things with blockchain makes sense.
The numbers are huge: In two decades, the NBA 2K game sold 86 million units, and last year the NBA signed a seven-year deal to renew the license for a cool $ 1.1 billion.
With that kind of money on the table, it's not surprising that the NBA had already set up a blockchain workgroup to think about ways the brand could take advantage of the technology. They approached Dapper Labs and the result, NBA Top Shot is in beta and will be released soon.
Fans can "own" their favorite sport moments on the platform. That time, your hero hit a three-point buzzer to win the game? You can now own a limited edition NFT on the occasion of the occasion. The idea arose from discussion with the NBA fan panel.
"We understand that one of the reasons people love sports a lot is because of what I call 'moments of greatness'," says Nayaam. "There you create that really strong emotional connection with that player, with that team, with a moment when you, your family, your city essentially brought a lot of joy.
"We realized that this could be turned into a digital native memorabilia."
The moments will also be game pieces, and players can compete with them, trade them and use them in online tournaments and competitions.
The Ultimate Mixed Martial Arts Fighting Championship is also partnering with Dapper to release a range of UFC digital branded items on its Flow blockchain, and Warner Music is exploring how its artists can also use their technology.
"A big part of these are these brands, whether it's the NBA or UFC, which allow us to tap into very passionate fan base, hopefully helping to block those communities to blockchain," he says.
The opportunity isn't just limited to sports and music – passionate fans of everything from comic book heroes to cult TV shows are obvious contenders. "We think it makes a lot of sense to use characters – I'd like to work with the Batman brand or Marvel and create digital worlds for those characters. But it could also be things like sneaker brands. You can imagine your digital shoes makes for Nike or Adidas. In the end we have augmented reality. And then digital fashion might make sense there. "
Coincidentally, Dapper Labs already has one virtual garment for $ 9,500 at the Ethereal Summit in New York. The owner bought the token for the ability to & # 39; wear the garment virtually.
And last December Nike patented shoes like NFT & # 39; s called CryptoKicks. The concept pays tribute to CryptoKitties by essentially stealing the idea outright: you can & # 39; breed several pairs of shoes & # 39; to create new custom sneakers that can be made in the real world.
Englebardt expects this to become a growing trend.
"Sneaker brands are becoming a very big and important leader in this space, because the sneaker culture overlaps so heavily with the game culture and you already see a whole culture around making custom sneakers," he says.
Animoca Brands CEO Yat Siu believes that a few virtual Nikes may be transferable between different worlds – allowing you to get them from one game and use them in another or on social media.
"In the real world, you don't buy Nike shoes, so you can only use them on a Nike basketball court," he says.
"If suddenly millions of people eventually own virtual Nike shoes, how many game companies could actually say, should we use those Nike shoes in our virtual games?"
While objects can exist outside of the games with NFT & # 39; s, interoperability is likely a long way off. Englebardt believes it is more likely that NFTs will become usable for the first time in multiple games owned by the same publisher. So a Formula 1 car NFT from Animoca Brand & # 39; s F1 Delta Time game (out in July) could eventually drive around The Sandbox, which the company also owns.
The company made headlines in May last year when it auctioned the first F1 car NFT for the game. Theoretically made of 'black carbon', the super fast 1-1-1 was sold for 415.9 Ether – back then $ 106,000. Two other F1 cars sold for around 100 ETH each, showing that designing collectibles that draw on the sport's silver-plated fan base was a smart strategy.
"We didn't expect the 1-1-1 to sell for 415 ETH, which is an amazing amount of money anyway," said Siu. “It set the bar for the price of these cars, which also informed us how to work on that scarcity model, because the cars now have a certain price. And we now need to think carefully about how we will continue to spend these NFTs. ”
They also have 2000 & # 39; crates & # 39; of in-game NFT & # 39; s auctioned, offering players various benefits for a total of $ 360,000. Just like CryptoKitties, a secondary market emerged with users buying crates to resell various items. In August, they reverse auctions three Star Trek ships to Mad Trekkers for use in the upcoming CSC game, with bids starting at the ETH equivalent of $ 200,000 when the Enterprise NCC-1701 goes under the hammer. Animoca is also developing another collectible blockchain game for MotoGP – the motorsport world championship.
While most NFT & # 39; s buyers have been mainly crypto natives so far, Sui expects this to change after the games are released.
That's what happened to one experimental sales in May of 100 in-game NFT items for Crazy Defense Heroes “The top buyers are not crypto guys and that taught us something about adoption. They were players who played a lot and wanted these collectibles because they were fans and because it had an advantage in the game, ”he says.
As the name suggests, Animoca Brand's entire game plan is to harness the power of existing brands in gaming – everything from Garfield to Snoopy and Thomas and Friends. As part of this strategy, it partnered with blockchain network Harmony to jointly acquire the digital collectible startup Quidd last year, which has sold over 2.1 billion digital collectibles since 2017. Quidd has licensing deals with 325 brands, including Marvel, Game of Thrones, and Rick and Morty and Sui say they are negotiating with the IP holders to start issuing collectibles at NFT & # 39; s. As a first step, they start capturing the property on blockchain.
Siu says talking to brands about NFTs currently requires a lot of education. "We need to tell people about the possibility," he says. "It's not yet time for IP holders to come up to us and say," Hey, I've heard you do cryptos and NFTs, let's see how we can work together. "We're not there yet."
"But I think this is where Animoca Brands has an advantage, because we've talked to them about non-blockchain games in the past, we've had a long history with them.
Some brands have seized the opportunity – including Atari and Shaun the Sheep (known from Wallace and Gromit), two brands building their own virtual theme parks within the blockchain-powered virtual world The Sandbox.
Mobile game The Sandbox, first released in 2012, gave users the freedom to create whatever they wanted, and has been downloaded over 40 million times since.
The new version uses blockchain to create an immersive "metaverse", much of which will be built by the users themselves. They target one million active users every month.
"It's a 3D decentralized virtual world where players can create and make money from 3D assets through the use of blockchain technology, essentially NFTs and our own cryptocurrency," explains co-founder Sebastien Borget , who also chairs the Blockchain Game Alliance. Competitor Decentraland has created a similar, but more realistic looking, blockchain world.
The Sandbox has held three major pre-sales of "land" on the game map: the most recent sold out within five hours, yielding 3,400 ETH ($ 760,000). "The amazing thing is that this strategy works really well," he says. "We have already sold more than $ 1 million in virtual land, even though we have not launched yet, and we have more than 1,500 landowners who are either artists, game developers, creators, crypto users and investors who believe in that vision . "
Land closer to major attractions goes for premium prizes, including the plots near the trailblazing game company Atari & # 39; s virtual theme park. It is packed with roller coasters, social experiences based on classic games and allows users to play classic games such as Centipede, Asteroids and Pong or buy Atari NAR content to use elsewhere in The Sandbox.
Shaun the Sheep, meanwhile, is building Mossy Bottom Farm from the movie Farmageddon. The community can also create their own gaming experiences around Shaun, Bitzer and the flock.
& # 39; As a player or creator, you have ways to interact with your favorite brand through the Sandbox platform, & # 39; says Borget. "There are more IPs coming that we haven't announced yet, but it is really exciting, those are regular IPs that everyone knows, including even larger game studios."
About 80,000 people have already downloaded the VoxEdit beta, which allows them to create voxel models to sell in the market, and Borget said about 70% of the makers were new to cryptocurrency.
"The main tenet is that we build a great game that looks fun and will attract regular gamers without necessarily promoting blockchain first."
While 2020 will be a turning point, blockchain gaming is still in its infancy and none of the major video game companies are on board yet (although Ubisoft has turned to blockchain startups for its incubator). Siu predicts it will be some time before they incorporate the technology into the big titles.
"You're talking billions of dollars on the line," he says.
"We think we're fixing something that's broken for the user experience. But from a (large) game company point of view, it works fine."
Siu compares it to the rise of mobile gaming ten years ago. The big companies focused on the rivers of gold from their proven model, letting smaller, more agile companies take all risks by experimenting with free games and in app purchases.
"I'm sure there are dozens of other big video game companies around the world who are actively watching it, but in the same way that they looked at mobile ten years ago. It's interesting, we should pay attention to it. But we shouldn't be place bets. "
Siu says if it happens the same way, once the kinks are resolved, the majors will pop in and buy the companies pioneering the space to use their technology.
In the long run, The Sandbox and Decentraland look like the first building blocks in the creation of "The MetaverseThe concept comes from Neal Stephenson's 1992 book Snow Crash and refers to a permanent virtual shared 3D space that connects all the virtual worlds. If you haven't read Snow Crash yet, think of Ready Player One.
NFTs, blockchain and decentralization are key ingredients that make The Metaverse possible, as these virtual worlds and virtual economies will largely be built from scratch by the users, a concept developed by Garrison Breckenridge in this piece for Cointelegraph Magazine.
"The critically important statement that really informs everything I do is the idea that The Metaverse is coming," said Englebardt. "I don't think there is a centralized, top-down creator of The Metaverse. I think it will be something that uses all the tools we have at our disposal to express ourselves creatively so we can build this collectively .
"The Metaverse … is the most important opportunity of our life."