Who could turn down the opportunity to own a cute, ‘furrever’ friend? Especially when your pet was cute, unique, and customizable. An even more pressing question is who could turn down the opportunity to sell it when it was worth $113,000?
Welcome to the world of CryptoKitties, the pets that brought cryptocurrency collectibles to the mainstream. In a digital world spending unprecedented amounts on reclaiming childhood innocence, could crypto collectibles be the future for hobbyists?
The World of Digital Collectibles
The concept of a digital collectible was at one time impossible. Digital material was too easy to copy (Limewire anyone?). It was not until the advent of the blockchain that digital individual ownership was possible.
Blockchain allowed the recording of information that could not get changed, hacked, or replicated. This digital ledger allowed two key elements. One was the ability to own unique, digital products, and the second was the ability for creators to add rarity.
Rare Pepes & Spells of Genesis
The first large-scale instance of digital collectible trading was that of Rare Pepes. This started as a meme of a green, frog-like man. As people created original artwork of the character, they began to trade them online and on eBay.
The first real attempt to attach value to blockchain collectibles was with Spells of Genesis. This is a mobile game built on the blockchain. The player could collect and trade cards, to build up teams in a fantasy battle.
Unlike Rare Pepes, which was trading artwork, this had multiple attractive elements. The game melded the card collecting hobby prevalent in games such as Pokémon with a playable arcade shoot ’em up.
Dirty Punks with Digital Faces
The next step, which many may argue was one of the most important, was the launch of CryptoPunks. While this did not have the playable aspect that Spells of Genesis provided, it played on the value of ownership and scarcity.
CryptoPunks were 10,000 digital faces, each one showing the head of a pixelated character. From green-haired smokers to bearded cowboys, each was unique. They were free to anyone with an Ethereum wallet.
They were a big hit, and still retain their popularity. In fact, one recently sold for $762,000. Yet as the CryptoPunk phase hit, another collectible world was brewing. Enter the land of the CryptoKitties.
CryptoKitties
CryptoKitties fused the playable aspects from Spells of Genesis and added them to the collectible nature of CryptoPunk. It allowed users to have unique, kitten pets that they kept online. Each of these could be traded or sold if the owner wished.
The real caveat that made the game stand out was the unique genome attached to each animal. It allowed people to breed their pets, creating new cats, and unlocking extra attributes.
The 12 attributes included features such a mouth shape, fur, pattern, and eye color amongst others. This made the possible combinations vast, creating a highly collectible product.
A test version of CryptoKitties was unveiled in October 2017. By December that year, Genesis, the first-ever CryptoKitty, sold for around $117.71. CryptoKitties became big business.
The company that created CryptoKitties, Axiom Zen, was then the target of major investment. Venture capital firms swooped in to provide $412 million to the studio. This resulted in a new company named Dapper Labs.
Attracting Financial Backing
In the December of CryptoKitties‘ first year, its popularity would be so huge that it would actually slow down trade in Ethereum itself. The game had become so popular, that it was taking up space for other trading. This accounted for a sixfold increase in pending transactions.
This moment was significant for two reasons. The first was that it showed the lack of scalability in Ethereum’s underlying blockchain at the time. Secondly, it began to show that blockchain could be used for more than digital investment schemes. It could provide entertainment.
As recent as June 2019, a seed equity fund was set up by Opensea, a crypto goods store that exchanged CryptoKitties. The fund was invested in by heavy hitters such as Coinbase Ventures. Serious money was heading the way of crypto collectibles.
Big Brand Licensing for Big Boys Toys
The most telling sign of the power of these products was the involvement of major brands in the world of digital collecting. Dapper Labs, creators of CryptoKitties, recently collaborated with the NBA to create NBA Top Shot.
NBA Top Shot is the equivalent of a digital basketball card. They come in limited edition packs, after which the only place to buy them is on their peer-to-peer marketplace. Each pack contains a video clip from basketball history, with packs available in common, rare, and legendary tiers.
As recently as January of 2021, a clip of Lebron James sold for $71,455 on their secondhand marketplace. A few days before, the site had made over $1,000,000 in a 24-hour period. Big licensing had arrived to back the investments.
This was not a one-off. Dapper Labs are set to repeat this success with their partnership with the UFC.
The Nature of Collecting
To understand what this means for the future, we need to look at the nature of collecting itself. It can be described as the attainment of works of antiquity or art, either for their preservation or for the self-gratification of the buyer. In the past, this was done through dealerships, auctions, and private sales networks.
With the advent of the internet, this changed, primarily with the introduction of eBay. Collecting became easier. Hunting for items only required a short internet search.
This pushed many collectibles, up in value. With everyone able to quickly find these items, vintage and retro goods became hot property.
All of this increased during the COVID crisis. With people unable to go on holiday or entertain outside, they turned back to childhood favorites to find comfort. Second-hand markets on everything from baseball cards to Star Wars toys rose in value.
In turn, this hike in value has created an industry of the simulacrum. For proof, look at the booming action figure market. High prices are being paid for modern imitations of the originals, as the originals are priced out of the market. And they are not cheap. A recent remake of an eighties Thundercat’s tank was retailing at around $500 brand new.
The Imminent Crash
Crypto collectibles could now go two ways. The first argument is that they will lose value, resulting in a market crash. This is purely because people expect them to be valuable. One of the reasons many popular culture collectibles gain worth is because no one expected them to be valuable when they were made.
Comics are a great example of how this can go wrong. In the sixties, they were produced as cheap, throwaway items. Their value, gained over time, was due to the fact they were not built to last. Their value is in the fact they were not preserved, were discarded, and later became popular.
In the nineties, comics were being created for collectability. Variant covers and a barrage of new titles destroyed the industry. It was a case of too many speculators, not enough buyers, and too many products that were mass-produced.
If the crypto collectible industry carries on with this path, overproducing and hiking up values, with an audience that is still small, could it go the same way?
The counter-argument is that unlike many of these other items, crypto collectibles are not mass-produced. CryptoPunks, CryptoKitties, and many of the other works of digital collectibles are one-off pieces. Therefore, they are more likely to hold their value as works of art do, than other types of mass-made collectibles.
What Is Art?
Art can be summed up as any activity or creation done as an expression of human emotions and opinions, not linked to the survival of the individual. Hunting for food and creating shelter is not art, but cave paintings on a wall are.
This brings us to a crossroads. Collectibles can either become mass-produced, like comics were in the nineties and risk a market crash. This risk lies more with licensed products like NBA Top Shot, which rely on material that already exists in the public domain.
Alternatively, it can follow the path of CryptoKitties and CryptoPunks. These are original pieces that are one-off works. If they do, the only question left to ask is should we be calling these items crypto collectibles, or classifying them as works of art?
