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Who owns IP on the blockchain? CryptoKitties give glimpse into less-cute crypto concerns

At SXSW 2019, the once-popular collectible cat avatar game Cryptokitties continues to prosper as blockchain gaming explores the technology’s foundation—particularly the topic of ownership.

Check out all of our coverage from SXSW here.

AUSTIN—When cryptocurrency temporarily gained mainstream media coverage in December 2017 and culminated with the infamous crypto crash of January 2018, there were many digital casualties as public interest dried up. However, CryptoKitties, the collectible cat avatar game that stole both hearts and Ethereum network bandwidth, lives on under ownership of VC-backed Dapper Labs, which was spun out of Axiom Zen.

At SXSW on Thursday, executives at the Vancouver, BC-based company provided their viewpoints regarding the past and future of blockchain-based collectible games in the context of the greater societal adoption of blockchain technology. CryptoKitties co-founder Dieter Shirley and founding member Kim Cope led the hour-long session.

CryptoKitties itself isn’t so much an elaborate “game” as it is a visual representation of data stored on the Ethereum blockchain. “Cats” are actually strings of data that the CryptoKitties platform interprets and presents visually with the corresponding proprietary cat artwork. The underlying data can be manipulated to form new, unique strings of data in a process known as “breeding,” leading to about 4 billion possible unique variations of cats. To keep it safe for work, there’s no official artwork depicting the cats breeding.

CryptoKitties search dashboard
Each cat is unique, as shown in the CryptoKitties search dashboard.

This simple concept and corresponding visual representation are perhaps what’s needed at this stage of blockchain technology’s societal adoption. Cope compared it to the software legends of yesteryear: “Consider Minesweeper. It was for getting people to learn how to use mice. Hearts was for learning networking between players. CryptoKitties was the first experience for people to understand blockchain.”

Shirley insisted that players truly own their cats independent of the company, which he claims is one of the benefits of blockchain. To illustrate this technological advantage, Shirley took jabs at Twitter to reference the idea of a centralized, non-blockchain based company taking advantage of ownership of digital assets.

“Twitter rose to prominence through third-party Twitter apps that used their API,” Shirley claimed. “Then suddenly boom, Twitter shut it all down, and now it’s nearly impossible to make money that way.”

On the other hand, Shirley noted, “When you play a traditional game, you are only temporarily receiving that time from the software. With CryptoKitties, you own [the cats]. We can’t change that. Even if our company goes away, your kitties are immortal.”

Intellectual property and blockchain

Shirley’s statement regarding ownership isn’t entirely true at face value, however. As mentioned above, the underlying data is owned by the player as that data is stored on the Ethereum blockchain and can only be accessed using the player’s private key. It’s safely the player’s property as a result, and this is rhetorically acknowledged by the CryptoKitties terms of service.

But that data is useless as-is. Dapper Labs’ artwork is what makes it a “game,” but the artwork is copyright protected. To the company’s credit, the CryptoKitties terms of service provides a generous license to transfer and use the art associated with any cats a player directly owns, including for commercial purposes up to $100,000 per year. But this weakens Shirley’s Twitter example as this license places the ultimate ownership of artwork under Dapper Labs, contradicting the “decentralized” ownership that blockchain boasts.

At the end of the session, I took time to pose the question to Shirley and Cope regarding the long-term value of cats if Dapper Labs were to revoke rights to the artwork or the company went out of business altogether. Particularly concerning to me are the game’s celebrity cats, which feature a “cat-ified” likeness of a celebrity, in addition to “fancy cats,” which are premium cats featuring elaborate, unconventional designs. These cats are more restrictive in the artwork’s use as a result, further eroding user ownership of their cat asset and limiting the long-term value outside of the CryptoKitties platform.

A fancy cat from CryptoKitties
A fancy cat is a premium asset, along with celebrity cats featuring celebrity likenesses.

Shirley acknowledged the ownership specifications set forth in the terms of service, but argued it’s necessary to protect artwork to maintain the integrity of the game. Since each cat is unique, the corresponding artwork is composed of multiple elements uniquely assembled together, such as eyes being constructed separately from paws and torso before being joined together. It’s therefore necessary for Dapper Labs to authenticate ownership and traits for each cat to maintain uniqueness and provide the necessary visuals for the game to exist. This consequently requires Dapper Labs to retain rights to said art, according to Shirley.

Users could always create their own artwork and third-party experiences that rely on the underlying player-owned cat data in the absence of Dapper Labs’ artwork. But this all goes back to the evolving question of maintaining the promise of decentralization via blockchain while also balancing the need for companies and government agencies to intervene when necessary.

Instead of determining who owns cats and the constructive parts thereof, as referenced in the context of this conference session, the question could center around who owns blockchain-based medical records, legal documents and other intellectual property. Is it the user that holds the private key and irrevocably took ownership of the asset, or is it the creator of the property originally, such as a hospital or game developer? The answer isn’t fully known yet and will take real-life trial and error to figure out. This seemed to be the underlying sentiment behind Shirley’s answer regarding artwork ownership.

While CryptoKitties is a lesson in getting started in blockchain for novice end-users, it’s also a lesson in the deeper, universal questions that need to be sorted regarding the use of the technology. With Shirley’s stated goal of getting 1 billion users on blockchain sooner rather than later, the answers may evolve rapidly.

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