 good afternoon everybody think we're going to go ahead and get started thank you so much for being here today my name is John Collins I'm affiliate at the Berkman Klein Center I'm here to do the very short intro work on a few jokes on a new set that I have got going and then we can start get started but just a reminder for everyone this is being live-streamed right now and it will be recorded for the rest of history so just be aware of that for those who are in the audience or those of you who may be watching at home and you have any questions you can use the Twitter hashtags crypto kiddies or the Twitter hashtag BKC Harvard or both for any questions that you may have and so with that I'm gonna kick it off and to this group and I want to introduce Alex Shea and Dieter Shirley Dieter is the co-founder and CTO of crypto kiddies and Alex Shea when I said Shea Alex Shea is the CFO of Axiom Zen and SJ Klein who is a researcher in decentralized systems and a Renaissance man about town will be moderating so thank you guys very much so it's really great to have you all here I think we've had a couple of casual crypto kiddies meetups in the Cambridge area and there's still a lot of latent enthusiasm but Axiom Zen didn't start as a blockchain company so maybe if you could give a brief history of how you came to crypto kiddies and what it would like to make that shift. Sure so Axiom Zen was founded by in part by a man named Roham Ghera, our CEO and he was actually working in venture capital in Silicon Valley. He was a junior partner in a venture firm and so his basic job was to go around and find companies that the firm could invest in and what he realized was that one the teams mattered very deeply and getting the right team was more important than getting the right product because you know half the half the teams pivot anyway but that also that a team is you know the old saying strongest and weakest link and so he would find teams and he'd be like man this is a great product and those are two great founders it's a shame that the guy who happened to be in their dorm room when they came up with the ideas along for the ride because I think that that person is probably going to end up being the weak link that keeps this thing from succeeding and the other thing he noted was that when companies do fail even if they're great teams you know even the best team can fail when Google releases a free version of your product a week before you go live just because of happenstance and they they just have to go home there is no they don't get a second swing sometimes there's a pivot but you know more often than not there's an aqua higher and then they end up going and working this great team gets broken up and goes and working for some larger company and so his thesis was let's just bring together some amazing people and let's just be a startup that builds startups and let's not put all of our eggs in anyone basket let's just keep trying different things and different things and see what works so there was in 2013 they've he formed the company and it was completely bootstrapped it took no external funding and so the first year was you know fair number of partnership products working with you know other startups other more established companies in order to get some working capital but within the first 18 months we had launched our first product called Zenhub which is still a going concern doing very well it's a project management tool that plugs into github we built it for ourselves and now folks like IBM and Walmart are using it then launched a company called rotific that went through the tech stars program and now his spun out and has taken external funding and and so the model was working and so in last last summer 2017 we decided that blockchain which we've been interested in for years me personally since before axioms and started but axioms and since the beginning was always dabbling in crypto technology but last year we decided it was time to consider making a business out of it and you know we launched crypto kitties and we did all right I mean it's hard to argue kittens on the blockchain that that alone is pretty great but blockchains are decentralized slow annoying to update compared to traditional systems that you were building for of what kinds of affordances did you need to make when you were planning out what what this would look like well I think the most difficult thing for us is that you know as a start-up who builds startups and you know who are you know big fans of lean startup methodology and agile and you know this move fast and break things the smart contracts we couldn't do that way so you know the typical mantra is you ship something even if it's terrible and and then you refine it but you can't ship a terrible smart contract and refine it part of the part of the nature smart contracts is that there are our limits on what you can change and part of the appeal of blockchain based apps is that your users can count on you not making changes to certain things and so we had to put a lot more time effort and you know code review juice into the smart contracts we still ship the terrible first version of the front end and all of that stuff and even ever been iterating it and making it better the whole time but that was a that was a that was a very big difference I own a couple crypto kitties which I guess means that I own a couple 256 bit numbers that happen to be interpreted by your code how many people here have never seen or played with a crypto kitty okay so for for everyone who hasn't worked with them yet what is it like what what are the crypto kitties it there's a sense in which they they act like other creatures you might raise you can breed them you can you can exchange breeding cats with other friends or people in your network but say a little bit more about what it means to have a cryptic kitty and how people currently interact with them so the the basics of the game is is that each cat is has its own 256-bit genome and it has a physical appearance that's derived from that so it might have you know these various different types of eyes and colors and all these things and those the visual appearance of a cat is is derived from its genes but its genes have it's more information in and then it is expressed and so when you breed two cats together which is the cool part of the game you get a new cat and it takes its genome is derived from both of its parents and so it might look like it might have its mother's eyes and its father's tail but it might actually have some sort of hidden recessive gene or there may even be a mutation and all that is mediated by a bit of randomness and so the game is well what cool combinations can you make you might think that black cat with red stripes looks really cool and so you want to go find a striped P cat and a red cat and a black cat and breed them together until you get with one that's got that's black with red stripes the reason blockchain is interesting is because our smart contract which as I alluded to earlier once we've deployed it we we have very we've we have given ourselves limitations on what we can change about it and we don't have an override you to change it once we've released it that smart contract handles all of the ownership and so if you own your cat we can't take it from you and it handles the genetics so there's no way even for us to manipulate the genetics of your cat once it's been born and it handles the genetic combination and so that algorithm that takes two parents and mixes their genes together to create the kitten is again something that we have no ability to modify manipulate and it it's easily verifiable for users well for technical users that that that genetic combination algorithm works the same for everybody there's no code in there that says oh if you are this user then combine it in this way and if you're not in this special class of users and combine it in this other way and so it it gives very very strong guarantees to our player base that we're not up to any jiggery pokery and maybe if we take a step back and think about a little bit why the line of discourse we've been a lot of time thinking and talking about but a token economy in a lot of ways is this new joint venture or partnership that the developers the platform have put together but the community is going to participate in and they're going to be an owner and and have a lot of control of kind of what goes on there and so what really kind of happens particularly with the consumer-facing piece of the business is we're crystallizing that cultural value and kind of representing it with these liquid tokens and so I think the combination of the excitement and some of the noise and fanfare that happened just with the block to this product but also the product itself that it's cute kitten hopefully you guys all think it's cute and people actually really like that kind of creates this awesome product that as a consumer that you own it's truly yours and I think that's something that's really cool so late last year you launched the first version of your interface you got a bunch of a bunch of people playing with crypto kiddies soon after I picked up a couple crypto kiddies the kiddies broke Ethereum you chose you implemented your this game on top of Ethereum and at some point in December well over a quarter of all transactions on the block on that blockchain were calls to one of your contract and the price of gas on ether the the intermediate fuel that that runs all contracts went up by a hundred fold how how did you deal with that what what things were you able to do in response and what things did you wish you could have done the the number of users we got in our first week exceeded anybody's expectations and so I mean it was really easy to see that that the Ethereum network was was saturated and and you know I mean technically it was functioning as design and it was still processing transactions so it wasn't broken but from a user standpoint it was terribly broken because there was very little visibility into why your transactions weren't working and when your transactions weren't being processed by the network it would stall your whole account the transactions in Ethereum have to be processed in order so even if you put a new transaction in we're willing to pay a higher transaction fee that old one would would block you from from getting processed wouldn't most people don't realize that our own infrastructure was burning at the same time so what we actually did was panic because our own databases weren't ready for that kind of scale our front end was falling apart and you know and and we run our own Ethereum nodes and they were they were breaking as well so that was a very exciting time for the most part we weren't able to do a ton and that's the you know that's the the double-edged sword of a decentralized system we don't own that infrastructure we don't have to maintain that infrastructure but it also means that there are great limits on what we can do to enhance that infrastructure and you know the the way it's architected in the nature of decentralized systems especially the way that Ethereum approaches it means that there are you can't just flick a switch and say okay well we're gonna have increased our capacity by twice as much and believe me there were lots of people that were asking for people to asking the network to do exactly that and and the the the sort of I guess it is essentially systems are odd because there's no one in charge but there are people that have influence so Vitalik Buterin was the one of the co-founders of Ethereum sort of the is sort of the spiritual father of the whole Ethereum movement and you know certain things are outside of his control but he has a lot of influence and so he basically said no we're not gonna do that because that'll make the network weaker in the long run but there wasn't a ton we could do we did a little bit of work to try and make it so that our users would have a better experience and we would we built a system so that we could filter or we could hold people's transactions so that if it seemed like the network was too busy to process their transactions at least we would hold it so that they could cancel it because there's there's no good way to cancel a transaction once it's been released to the to the peer-to-peer network and so at least then they could cancel transactions that weren't going through as opposed to just having them you know in this weird purgatory state where they weren't being processed but they couldn't really be cancelled either. Taking a step back again to the mechanisms of owning and breeding cats tell me a little bit about birthing and birth demons. You designed a system so that one of the most complicated parts of the network was something that anyone could call or that anyone could could help process and and that's also one of the places where you maintain a little bit of leverage over how the whole kitty verse works in that you can change how much it costs to run the birthing contract. So how do you think about how do you think about those mechanics and the part about the ether chain being set on fire that I remember was that the cost of birthing went up seven folds and that made a big difference in how and how people interacted with the game. So just as some background to that question the Ethereum network you have to pay for the amount of computation that needs to be done and the most expensive computation that we do in the CryptoKitties universe is that genetic combination where you take the genes from the two parents and combine them with a bit of random entropy and produce the genes for the offspring and the because it's a game and it's part of what makes things fun is anticipation. We have a time delay between the point at which the user decides to breed their cats and when when the child is born and so we determine what the genes of the child are at that birthing time and so the user needs to initiate the breeding and then somebody some time needs to call a give birth function and that function is very expensive and so we needed a mechanism to incentivize people to do this because we didn't want to have to count on ourselves to make that happen and so we do have a background demon that runs and we'll give birth to kittens if no one else does but we wanted to have you know sort of the decentralized idea is that you don't have any single central point of failure that that could fail and mean that no cats could be born and so we made it so that anyone could call that function and in particular we incentivize people and so the when you breed your cats you pay a fee called the birthing fee and that fee is held in escrow and then when the give birth function is called that fee is given to the person whoever calls the give birth function and so the person who calls give birth has to pay the transaction fee to do all this computation but they get as a reward this birthing fee and so when we originally set the birthing fee the gas prices were very low the cost of the birthing transaction was relatively low and so we we set the birthing fee quite low and it quickly became apparent that it wasn't enough to cover the cost of actually calling give birth and so we increased it and then then the network blew up and the the cost of gas went up even higher and no one was calling it and we didn't want to raise it again on our users we're we just launched this product a week ago we didn't want to upset our users by increasing the the fee to them and so we started eating that cost of of calling give birth and we actually it was on the order of a 100 ether that we spent one weekend ether was cheaper then but it was I don't anyone who wants to do the math can realize that this guy is a CFO he was very unhappy about that but in order to give people a good experience we actually ate that cost for a little while right now it's actually the birthing fee is actually quite a bit higher than than what most what needs to be paid but we actually keep it at that level because one the gas prices fluctuate and so it can you know it's conceivable that the gas price will go up again and we don't want our users to have to constantly be thinking about what the birthing fee is the other thing is is that it's a it's a remarkable good business model actually one of my guests today here is the dr. Michael's argument over there and he runs a team called block science and they're they're doing some formalization around blockchain based economic systems and working together on some actually non-crypto kiddies related stuff but he and his team independently have been analyzing crypto kiddies one of the few examples of non-speculative activity on a blockchain and they've built some interesting models around the the behavior of the people who are calling the the give birth and it's a it's a minor industry like these people have written custom code and they have these demons and they have they have you know heuristics in place to figure out exactly how much you know how much how much gas they should be willing to pay because if two of them go to give birth and one succeeds another one fails they both have to pay the transaction cost but only one gets refunded and so then they have to like play this game of chicken where maybe they'll overpay the transaction cost because then they're more likely to get processed first but then they lose more if they don't and it's it's a really fascinating that a game theory happening there but yeah I mean it's it's it's one of those crazy things where it seemed like a really simple and elegant idea and this is like all this complex chaotic behavior is sort of you know swirling away off the wingtip and it's it's a very very interesting aspect and maybe just respect with respect to the volatility I think it's certainly interesting there's this relatively benign game that that caused a little bit of ruckus as dearly if you there are certainly in four influencers around ethereum particularly and they're all benevolent generally but there's actually quite a concentrated mining pool and there's this idea that all these miners are economically aligning these kind of things and that will always have good actors that we haven't really seen what happens if somebody is not perfectly rational we know from behavioral economics that you know we're not all perfectly rational human beings or what if somebody actually is a benevolent actor and they actually want to create some more volatility or the things so when these systems are under stress and under attack in some form I think there it'll be an interesting topic to monitor and think about so luckily some of the commodities futures groups are reasonably rational and there seems to be agreement at least in North America that crypto kiddies are not a security can you say a little bit about what it was like in December and January talking to regulators about this short and Deter jump in and go try some more colors well but we spent a lot of time with the British Columbia Securities Commission talking through exactly what these are and I think a lot of regulatory authorities look at all of these different tokens that are coming out and saying well the security the commodity the real estate is a currency it's all unclear and so they asked a bunch of questions around well how many tokens or kiddies can there be any concept there can be infinite if everybody in this room wants to breed their kiddies into perpetuity or what is the creation event and again that's not under our control right that's under the community's control and so we spent a lot of cycles going back and forth with them and trying to say okay this you know is not a function that looks or acts in any way like a security but took a quite a long time to get us there yeah it was really interesting because it was clear that the the regulators were we're just coming to terms with the sort of predominant model of ICOs right so you go and you create some fixed supply of tokens and you sell a bunch of them and use that money to build a network that is powered by those tokens and the theory being that those tokens will increase in value as that network gets used and are a good proxy for the value of that network and so you're investing in the network instead of the company and and so the you know tons of ICOs and of course the regulators are talking to these teams and all of these teams are trying to make the argument that the thing that that they're using to raise money to build a network that's going to make the investors riches and the security and so they're trying to explain all of these things and and making statements that would be simply untrue so security the regulator would come to me and say well what's the hard cap on the number of tokens you have I'm like well first of all we call them kitties and second of all there is no hard cap like people can just keep reading them and they're like no but there has to be a hard cap like there's every every ICO has to have a hard cap and I'm like I'm sorry dude but people are lying to you like there is no reason for there to be a hard cap unless you want price appreciation so yeah it was it was really interesting it was clear to see that how difficult it is from somebody in that position to get accurate information because all the people they're talking to clearly have a particular side of the axe they want to grind so in the notion inside your ecosystem the kitty verse there you have your own questions of governance and policy formation what sorts of internal governance have you seen develop and what are some sorts of what are exploits that you've had to combat so that I would say the biggest question with our product our system our thing is that the question of what what is decentralized how decentralized are we are we decentralized enough and so this the idea of decentralized is that there's no single person or no no small group of people who are in control and we absolutely are in control of parts of crypto so the things I said earlier about ownership and the genetics of cats and the genetic combination being outside our control is a hundred percent true but it's not a very good game if we just released a bunch of trait combinations and let people breed them that wouldn't have any longevity it would it be a pretty short experience and so we made the decision early on that we would we would release about a third of the traits on day one and then over the course of a year release more traits and so you know every day new new eyes and body shapes and patterns are coming out not every day every week and and that brings some freshness to the game and it means that people you know every week have something new to try and get get a hold of and and there's a whole you know they're collectors right there players are fundamentally collectors and they want to catch them all and we that just simply would have been impossible in a fully decentralized way with the infrastructure that we have now the other big thing that that people have complained about is that we store the art for the cat so theoretically we could change the art for a cat after it after had been born because we don't store the art in the blockchain because the blockchain does not have an efficient way so the Ethereum in particular storing the art in Ethereum would have been very expensive there are systems most notably one called IPFS that lets you store data in a decentralized fashion that is resistant to tampering and we could store a reference to an IPFS to IPFS data in the smart contract and so people would have very strong guarantees that the data for their cat couldn't be tampered with promise IPFS is a very very nascent project it's not especially robust yet and so we decided when we launched that we wouldn't that we wouldn't want to depend on on such such new technology it's bad enough depending on Ethereum which was which was more mature but still as we saw you know not ready for prime time in some way but you know it's funny is that even something as simple as a pause button so you know you know it talked about how you usually move fast and break things but with the knowledge that you can fix them and because we were releasing the smart contract and we weren't sure if there would be any sort of contract level exploits we wanted to put in a pause button so that we could in the worst case you know at the very least we could keep whatever bad behavior was happening from continuing to happen well we figured out how to address it and so we have a special function we can call in it requires a special key that's kept very securely cryptographic key that's kept very securely but it can pause the whole contract and some of our users believe it or not won't play the game or potential users won't play the game because they they feel like that's too much control for us to have even though it's an action we've never taken and you know it's not rational for us to take that action the fact that we have that key and that we can room the experience for everyone else if we chose to is is enough to keep certain people away so decentralization is is really important to certain people but have you had any instances of cat nothing or people trying to hack your exchange like you run a very nice clean beautiful exchange but you've made it possible for anyone to run their own exchange have people like what are some ways that people have tried creatively to take advantage of the systems that exist so there's certainly been scammers who have you know promised oh I you know I'll give you a free cat just send me your private key and I so I can send it to you and then had their cat stolen from them we we've had I mean actually what's most amazing to me is is how how much more irrational but benevolent behavior we've seen so there are you know one you know a simple example is kiddies for cause which is accepts donations of cats and auctions those cats and gives the proceeds to Seattle Children's Hospital there another one of our community members started a kitty orphanage where anybody who wanted to could donate the cats to the kitty orphanage and then anybody who was starting the game could ask for cats and then the person who ran the orphanage would pay the transfer fees out of their own pocket to get somebody started with the game and you know it was it's not uncommon in our in our chat group to see people be like oh I'm getting new to this game how do I get started and people like will send me your address and I'll send you some cats so so there's there's a ton of benevolent behavior the the behavior that is outside of what a normal user would be expected to do but it's hard to call it malevolent is descriptors so people will write automated scripts that interact directly with our smart contract and will do things like you know scan the genome decode it and see when we release a new cat see if we're releasing a new trait and if we are releasing a new trait by that cat before anybody else can before it even shows up on the website because their website reflects the on-chain what's happening on-chain and there's a delay for that to happen whereas if you are looking at the chain directly you can you can act very quickly people also will set up either manually or through scripting will set up breeding farms where you know certain certain genetic combinations leads to what we call fancy cats which have unique art so we have some stickers actually later you'll be able to see some of us but we have a dragon and Dracula cat and flutter bee which is this beautiful cat with butterfly wings so they'll breeding those cats is highly coveted and so people write scripts where they'll they'll just automate that breeding process and they can just they'll breed thousands of times and to generate these these rare fancy cats and if it's I think it's frustrating for some users who don't want to who like feel like they should just use the web interface but at the end of the day it's they're not breaking the rules of the game they're just playing it in a very different way so what we're trying to do to address that is just to make sure that we have a variety of different in the case of fancy cats options so that some of them are easier to breed some of them are harder to breed some of them will be more amenable for players who've been playing a long time some of them will be easier for people who have scripts to do it but hopefully there'll be enough variety so that everyone sort of has a chance if everyone starts sharing their favorite collectibles with their favorite items and moving more of their property registries onto things like the blockchain one of the side effects is that a lot of people can read the chains and figure out a lot about each particular person each particular character what do you see as the implications in all that for privacy of your players and what are some things that where some ways to address that in designing for someone who's designing new systems that's a big question I don't know that that's certainly that second part I don't know that I have any great insights but I think it's certainly an interesting line of thought that I think we should all be thinking about that privacy is something that's obviously top of mind for a lot of people there's been a lot of press recently about what information about you is out there and who has in that kind of thing and I think this can be a seismic landscape and just kind of the information that's available out there and if you kind of play this out the extreme that all the information about you can be recorded and put in some way and so somebody can access it there's this great quote that Dieter was on a panel for that we should talk about but I think we'll have to really rethink kind of what privacy means and how we all interact in that kind of world yeah but so the privacy angle is fascinating to me because some of our users of course there are old hands at Ethereum and they they create different addresses for each experience that they that they do so if they're gonna go and trade you know whatever Aragon or whatever tokens they go and they have one account for that and then they have a different account for crypto kitty but other users are just you know they use it the way you would use a credit card or something like that where you just like you don't think about having a different credit card for different websites you just use the same address and all the things and because of the nature of the blockchain we can literally if we choose go and look at our users and say well how much money do they have what other things are they doing on Ethereum how long you know obviously we know how long they've been playing the game but we can we can see things outside of our own game which is a which is a very unusual kind of power to have it's tough I mean the thing that Alex was alluding to was that I saw Albert vanger from USB speaking Albert vangers from USB speaking in Berlin and he was talking about how he he's starting to believe that privacy is not the thing that we are trying to protect with privacy the thing we're trying to put the things we're trying to protect our freedom of thought and freedom from persecution and that privacy is just the way that we have have protected those two things and if we can protect those two things by other means then then privacy actually isn't that interesting and in fact if we can't find a way to protect those other two things which he does consider valuable and basic human rights that that privacy is actually more trouble than it's worth especially as we build more and more powerful technologies and you can imagine someone you know printing an automatic weapon in their basement you know he feels that he basically says look we have the right as a society and I know what happens in basements if they basements let you build automatic assault rifles and so it's a really interesting question I I don't fully accept his argument as yet but it is very compelling because when you think of all the reasons why you want privacy it does boil down to those two other things that at least all the examples I've thought of and and so the question then becomes okay fine let's say you're right and that is true how do we protect those things without privacy because it's just too easy to imagine you know like okay so I have freedom from persecution well you know if my employer can see what sport teams I like and and you know he's a huge Raiders fan and I'm not like can I like how do you protect against that kind of persecution so it's a I don't know I think it's a really difficult question but we're certainly starting to see it where you know one of the things that comes up a lot in in blockchain context is this thing called a civil attack and that's the idea where one person composes two people and there's no real way to detect that the the two actors that you're seeing interacting with you are actually one one person and more particularly it's so cheap to create these addresses that it could be a thousand actors and you can't tell if there's if there's a single person behind it and the number of times that that issue comes up this is remarkable we talked the other day about wouldn't it be cool if we had a contest where we gave away you know free cat every week oh that's great how do we know that people aren't entering the contest a thousand times by creating a thousand addresses you know I've seen people talk about building blockchain based UBI system well you know like that's very very right for UBI attack or sorry a civil attack so you know in the blockchain world ironically a civil attack is the defense against having your privacy violated the way that we don't know what other blockchain games you're playing is because you're using different addresses and different experiences and while the same time that that civil attack has has problems in all sorts of different blockchain or context where you know it's so easy to imagine oh we'll just we'll just give each user a free cat or we'll just you know you keep saying these things we'll give each user but we don't have a concept of each user in the blockchain it's it's really it's really remarkable but I think controlling that access to information is the important part and I think even in the world we live in today people don't really know you know what information is out there and who can access them that kind of thing and so to me this is a big big issue that that we all need to think a lot about I want to open it to questions from the audience yes and I think we have we'll have a couple roving mics yeah but while we're doing that just one other question for you Alex sure one of the nice things about a blockchain is that they've enabled these really fast capitalization of ideas as soon as there's an idea and you have people interested in it there's there's a natural way for them to support the process right cryptic it is still one of the few instances of this that didn't involve creating a token right what do you see as the the general opportunities for all sorts of projects to do something similar I think certainly if you're showing the token that the capital formation opportunity is unprecedented in my mind that we haven't really seen this speed and size of capital formed around ideas on the basis of where the projects are and the amounts they raise governance around these is a super interesting question so we alluded earlier to each of these token economies is this partnership but as a consumer user I think your main stick so to speak is just saying I don't want to use that I don't want to be a part of that economy anymore but we don't really know what happens if somebody has taken all this money and and they don't finish building the product and they just say okay this is it or they don't ship what they say they're gonna ship or they just do something and you're not exactly sure what's going on and so I think there are some projects out there that you say wow that is kind of interesting and feel kind of weird and there's not that much you can do about it today so in your case you built a product first people weren't taking a token in some future event right the the equivalent was allowing people to start playing with a thing that you made do you see do you see that kind of practice happening in other in other spaces outside of in other games or outside of games I think we have seen more of that there are people who are going the more traditional venture out to kind of build the product first I think that is a kind of step in the right direction certainly and I do you think we will see more of that I think there we'll see kind of how the token offerings kind of continue from this point forward but it will be an evolving picture I'm sure hey for those of us maybe I'm the only one who's never played with blockchain or Ethereum but you use some concepts that I don't quite know what they are you talk about gas you talk about gas prices there's some sort of interaction between you know the dollar economy and the economy of your game and I'm sorry I'm sorry I want to understand how that works also why can't you also why do I have to pay to run this function work if I could just run on my own computer those are those are great questions and I apologize for not covering that earlier so guess is the notion of gas comes up a lot in the concept of Ethereum but that's that's more sort of an implementation detail and I think the important thing to understand is that there is a transaction fee so yes is how the transaction fees computed but at the end of the day the the important thing to understand is that there's a transaction fee and the reason why you want to pay this transaction fee and have the computation done by this network is because then the once the computation is done in the network the the fact that the computation was done and done correctly is is locked into the blockchain and is is securely attestable by anybody and so if I say I have a cat that has you know googly eyes how do you how do you know to believe me and the way you know that is you go look at the blockchain and you see either the data that's stored this is my cat has googly eyes or you can go back and find the function call that created that cat and see that that was executed correctly and and you know if you actually run in a theory of note it will it will replay all of the computations and verify every single one of them and so that's that's the that's the value is that every computation done in the network is is recorded for all time in a very secure in tamper proof manner and is it is very easy to check that was done correctly. Hi Chris Dixon famously said all the cool advances started looking like toys and you've got the world's greatest investors coming in I know crypto cases and spun off but I got a sense that the people are not just looking at your promise the great the big picture out there is creating another games and being like a rovio maybe it is but could you talk about some of your thoughts about 721 tokens or you know where it's going in relates to crypto kiddies if you are now the masters of the personal non-fungible property where will this take crypto kiddies or crypto banks or crypto whatever you are gonna make. Are you staying just focused on games because that's a consumer behavior or is there something else. So I mean right now we've got what no one else has which is users. Every money else has investors speculators advocates but we have people who are actually using our thing which is which is kind of cool and so the the most important thing for us is to is to make sure that we're serving those users and growing the number of users and all of our users right now are gamers and they're playing a game and we want to make that a better game. I mean people who play I mean the term gamer is interesting because you know do people who you know play candy crush at the DMV are they gamers well you know by one definition I think they are even though that's certainly not the way that they would identify themselves but you know the the the audience we have the users we have in they engaging because it's a game and we just want to make the game bigger and better. One of the things that kind of blew our minds after we launched was there is this team that created a product called kitty hats and it's it's closed for your cats and they created their own smart contract they created their own web front-end and they sell tokens that are independent from our tokens that represent hats on glasses shoes and higher outfits and you can give the token to your cat and then the cat owns the hat this blows my mind and so it's you on the cat but the cat owns the hat and so if you sell the cat the hat goes with it and the amazing thing about this is that they built this without permission they built this without us having any special API access or anything like that everything that they needed was things that we already had to do in order to build a smart contract and everything we needed to do in order to make sure that somebody building on top of our product didn't break our product we already had to do because of the nature of smart contract and so without any added work we've got this massively extensible environment there's a team that's doing kitty races now where you race your cats around a little track and you know there's there's multiple teams working on kitty battles obviously inspired by Pokemon and I it's really amazing to me this idea that we can build an experience and other people can build stuff on top of it and it's this incredible win-win-win where they're able to build a product that has a revenue model that gives our users new toys and ways to use their cats which makes our own ecosystem more valuable all of which doesn't require any special permission or or and I think just as importantly that we can't stop like we can't keep people from doing this I mean we wouldn't want to but the the knowledge that we can't stop them is one of the reasons why they feel comfortable doing it right Twitter very famously cut off third-party clients at one point in its history and most people thought that that was irrational and and was hurting the company and I think it could be argued they were right but they did it and there was nothing that third parties could do but we can't ever cut people off from building experiences on top of crypto kiddies indeed we could shut our whole company down tomorrow and not our players could keep playing crypto kiddies and our players could keep putting half of them and to me I think that's really just saying from a digital collectibles point we're really just scratching the surface we're just figuring out what all that means our belief is gaming is a great way to kind of build public knowledge and get consumers comfortable with this technology so I don't know anything about your daughter but she had to go through the process and get a theory and buy the cat figure out how smart contract works all these things and also kind of change how you think about it so a lot of people I think who play the game think about the cats in terms of Ethereum they don't say oh wow this cost me five hundred dollars or whatever it is they're getting more comfortable with interacting that ecosystem and then we can really start to unleash the power of networks so there's like a two-part question so I spent my birthday buying crypto kiddies and it was a lot of fun when I was about to breed a kiddies there was like no gender so was that a conscious decision and then what do you think about cats that the interoperability of cats so let's say like I could if I could send my cat to like a dragon and now the dragon eats the cat and it becomes a stronger dragon cat or something I don't know what you mean by that second point like would we create an experience like that or would somebody else the last thing we'd want to do is to is to create an experience that that to our players doesn't feel like it fits in with crypto kiddies and so you know we've talked a little bit about what might be cool to have like if you were to do kitty battles made the cats get into robots to do the fight instead of just fighting Pokemon style but I don't I don't really like the idea of the cat being eaten so I was unlikely that would do anything like that option upgrade that yeah the the gender issue was absolutely a conscious decision the original thought was that the cats would would have a gender at birth and I just I'll be honest I just thought that the world was ready and you know I think it makes it a better game because you don't have this one less variable that you have to worry about but I also just think that it it makes it an important statement that maybe we think about gender a little too much and so yeah so every every time you breed your cats one is the matron and one is the sire but there's no reason why the next next time your matron couldn't sire and your sire couldn't matron thanks for coming y'all are the highlight of finals week so I saw yesterday the Steph Curry branded crypto kitty and I'm wondering how as you guys start to launch into partnerships you're going to deal with the fact that independent users can say create their own branded clothing already without any financial integration with your model and whether that's going to cannibalize the whole partnerships model so we're working right now with a legal team to try and and create a legal structure that maps the way that we and and our users think about the ownership of the cat so we hold the copyright for all the art and we kind of need to because if we were to release that copyright then anybody else could create a whole game that would compete with us using using our own our assets against us on the other hand you know the this idea of ownership is important and intrinsic to crypto kitties and we want people who own their cats to feel like they own their cat now when most people don't think about but I imagine if they did they sort of realize it is that there's no law against making your own crypto kitty t-shirt or or even a Steph Curry t-shirt or a mr. T t-shirt right like you can for your own personal use you can create any sort of likeness you want it's only when you start to sell it and make money on it that it's a problem but when you think about what our users want to do more often than not they don't want to make their own stuffy they want to go to a service provider and say please make a stuffy of my cat and we absolutely want to allow that and so the license that we're trying to create is a license whereby service providers can say are given a license to use our art and our assets and to create derivative work of our copyrighted materials provided that they are doing that the work the derivative work they are creating is for and person who owns the asset that they're that they're crazy so that's a very complicated way of saying that if you go to a t-shirt company and you prove that you own the cat with blue stripes then they're allowed to print you a t-shirt that has a cat with blue stripes on it but if you ask for a t-shirt with a cat with red stripes they're like no can do because we're legally can't do that and that's the world that we that we're trying to create and and so in a similar way to the way that the the GPL the new public license built this idea of open source or free software on top of copyright we want to build this idea of the ownership of digital assets on top of copyrighted for but those barriers are important I think you're hitting on an important point around the permissionless part of it right so kitty hats did a partnership with Ralph Lauren and they made you know a whole series of Ralph Lauren clothes for kitties that's outside of our that's something that they could do and they could build and so I think each person who's interacting with that ecosystem needs to figure out kind of where are their boundaries and what do they control and what do they protect yeah so I have two questions one is theoretically it would be possible for anyone to actually create a new front end and be such that the same exact token which is illustrated as a crypto kitty in your website will be illustrated as a crypto puppy or whatever else on another website and you can have a variety of representation of that same digital asset right and my question being here is why is it that no one has done that already right like you can leverage the exact same technology without even creating another smart contract but just having different metrics by which you can interpret the meaning of this this quote right and the other question is I think like one beyond digital collectible I think another really interesting thing of a blockchain based token is using it as an actual licensing device and then could you not if we were there with a question of copyright could you not actually say that when I own the crypto kitty I don't only just own these these little token on the smart contract but these token on the smart contract also represent the actual ownership of the licensing for that particular user that owns the token to be able to use that particular images that is on the website in various ways and in that case when I transfer the crypto kitty I'm also transferring the copyright that comes with it so first the first question is is that I think the reason no one's copied created a new front end with different art for the same genetics is because there's there's no business model there there's no way to make money doing that and there are dozens of teams that are creating their own smart contracts in their own front end but if you're gonna go to all the trouble to create the art and create the you know it that will basically the art and then and then the front end when I go the little extra mile and create the back end so that they're token so that you have the you're the one selling the tokens in the first place so the business model of ours is that any any when we create new cats so so I said we release new genetics and the way we release new genetics is that we create these new cats that we call generation zero cats or gen zeros and those cats have traits in them that are released by us and the only way for new genetic material to get out into the the population is through these gen zero cats and so we release those on a on a regular basis and anyone who wants to can come and buy one we use a an auction mechanism a downward a descending clock auction or Dutch auction and and so that that price is set automatically so that's that's where we get the lion's share of our money and so somebody creating a dog thing on top of that they would they would just make us more money which is fine I guess I don't know why they would do that though but those are people have copied it there's there's lots of different people who are doing their own smart contracts I'm sure some of them have borrowed our code as well the the question about the license the the idea of the the crypto acid being licensed itself is fine the question that we haven't resolved to ourselves is what rights do we want to give owners of the art because well the last thing that we want to do is make it easy for someone to use the art against us and so if someone wants to go and make a t-shirt for themselves that's great please do that right if you want to make your own stickers of your own cat or mugger that I we definitely want to do that on the other hand if you're going to take one of our cats and put it on t-shirts and sell that in stores that's a different thing entirely now you're not doing a thing for yourself you are making money off of our IP and the people who are buying that t-shirt don't own that cat and so what that's I think it's I think it's very different and so we haven't we haven't decided what to do in that case so that middle case is much grayer in particular because of the way that our cats are created by by by introducing layers of you know these different components that are layered together algorithmically you can imagine buying a very small number of cats on the order of you know 200 or so and ending up owning all of the different traits and then suddenly you're in that position again where you if we're giving you a blanket license to do whatever you want with the route of works and you buy one example of every single trait then can you recreate crypto kiddies on another network and compete with us using our own art and that's that's not a position we want to be in either I just want to take a soft break it is one o'clock we're gonna stay and take questions for another 15 minutes or so if anyone has to leave hi I'm an old guy so my first my first leap of faith is taking you guys seriously but I'll do that I've got two questions one can you give me a sense of the magnitude of the game how many users how much money is involved etc there's been so there's been nothing quantitative in this so I've got no real sense of how seriously to take you but then my second question which I think is a very serious one is that you said two things that are contradictory and I think untrue first you talked about how you have visibility outside your own game because of the nature of the blockchain and that's unique and to you talked about civil attacks which you know says you don't actually have all that much visibility outside your you know outside your game because otherwise you would know that it was a civil attack you know in the real world there are all sorts of uncorrelated activities and that has been seen as a business opportunity to create data brokers who then correlate all this stuff for you do you see I mean you you seem to start to be inviting you know a whole data broker level to you know integrate actions you know across the Ethereum blockchain so that you have you know visibility into this you see that happening and if you do how does that change your view of privacy so just the the contradiction is is not a contradiction it's just different users right so some users take steps to use different addresses in different contexts and therefore we have no way of knowing that those are the same user and so in that case we don't have the visibility that I was talking about having others users don't take any steps and then we have absolute visibility into everything they're doing so any address that that uses our smart contract we can see all the other activity that address is doing some users use a single address for everything some users that use a bunch of different addresses the the notion of data brokers and and finding correlations and you know the you know famously the US government has done this as well where they they do analysis of blockchains to say oh well these two addresses are actually clearly controlled by the same person on highly probable that they're controlled by the same people and if you do that in you know you can chain things together and start to make some some some suppositions about about that break down some of that that suit on enmity protection I have no doubt that people will do that in a commercial context as well it's not something that we're looking into or that we're that we're especially interested in you know this this idea that we're looking that we can look at all of our other users data we're not right so that just saying that that's a possibility and it's interesting to think about that the was the first part of your question again the first part I was just understanding the game and kind of where we've shaken out all the metrics yeah so I haven't calculated that recently but I think plus or minus GMV of $50 million is that about right it seems a little high but just the size of the economy that then like if somebody bought or sold a cat basically but I need to check that and then we're tens of thousands of users all for yeah so we when we broke a theory and we had fewer than 50,000 users so the theory of network is very slow so the user numbers are very small the amount of economic activity like it most of that economic activity doesn't come our way most of that economic activity is between users and but yeah I think I think Alex is right is somewhere around $50 million has changed hands with regards to crypto case building on that could you say a little bit more about your business model what do you guys own and how do you make money and in this ecosystem well we saw the gender okay that's our primary way of making money we also provide auction contracts that allow users to sell their cats or put their cats up for for siring services and get paid for for that there there's nothing keeping people from using other means of auctioning off their cats especially for sales for siring it'd be a little bit more complicated but it's plausible as well the but most people just use ours because it's hooked into our front end and we get a 3.75% commission on that so any sale that goes through we just we just don't pass through that 3.75% and accumulates in our contract and we drain it out so that's the two that's the two ways that we make make money directly thank you on the topic of privacy some of the transparency that you have for certain users both ways people can also see who's using which contracts they can see what additions you make to the chain as soon as they happen and one of my favorite stories is that when the Gen Zero kitties for a brief time stopped being produced one evening someone noticed that the wallet that was paying for the gas the birthday kitties was empty and they just they put money they did yes they did so we have to pay transaction fees to of course because it's not our network and the yeah the account that pays the transaction fees for releasing new cats was drained and one of our community members because it was middle of the night our time one of our community members in a different time zone noticed and was it was kind enough to give us a short term loan so we we reimbursed them the next day but yeah that's true that and that's you know you talk about metrics I mean we don't have the numbers on top of our tongues but every single dollar we've made is recorded in the blockchain and so you could compute our revenue to penny if you wanted to so or to the night either decimal place 30 to 40 Ethereum so just these are not them but actually essentially participants in this economy who are providing services for fees in the broader infrastructure and though you know we have pseudonymity so these are Ethereum accounts that represent the agents in the economic network who have chosen to participate in this way and I know the scale of 30 plus Ethereum for those addresses means that these are serious businesses being executed by a combination of smart contracts and sort of bots that make the calls through those smart contracts because the contracts themselves are passed I'm wondering do you have any mechanism to back out of a fraudulent transaction or a mistaken transaction so if you had something like the Bangalore Deshi break it in the Swiss system that's done and there's protection against that yeah it's absolutely correct so the nature of the blockchain is that it it inherently doesn't have any mechanisms for that you can build those mechanisms on top as smart contracts so you could very easily build we could have designed crypto kitty such that transactions would be reversible for a certain period of time and you know keep the cat and the money in some kind of escrow so that they couldn't be so that nothing could happen to them during that time and that just adds more complexity which adds more gas which is the way by which transaction fees are computed and make everything more expensive and so it would make you know a hundred percent of the transactions more expensive for the you know less than one percent of the ones that might want to be reversed so again it's one of the reasons why starting with the game is great because you know people are a little bit more a little bit less upset about making mistakes in a game and having that impact them and they would be with like say a life insurance policy but it is I think it's a I think it's a flaw in blockchains it's also a strength of blockchains because as a seller you never have to worry about about charge back so one of the questions we've asked ourselves is well shouldn't people just be able to come and buy the genuine zero cats that we're selling why can't we sell them that with just a credit card well and the answer is that we would just be the victims of massive fraud people would would would either use stolen credit cards or they would use their own credit card and do a charge back and because we have no way of reversing the the crypto transaction then they would they would have this valuable asset and we would have nothing and so it is it is difficult to to bridge those two worlds because one world is that the implicit belief is is that you can reverse things and the other world it really isn't I'm still a little confused about which parts of things are confidential or encrypted and which parts are open do you suppose supposing someone wanted to keep his the genome of his cat's secret is he responsible for encrypt to get you provide some support for doing that so there's no there's no hidden information on the blockchain so people often think the blockchain is like this this massive like secure place that you can put data and no one will see it the the opposite is true all the data on there is 100% visible the reason why the blockchain provides any kind of privacy is because of the the cheapness of creating additional addresses and creating multiple identities and if you're careful it's difficult to to tie those identities together and to know that those the two activities are being done by the same person but in terms of things like like hiding the existence of or the the data of a cat that's that's completely impossible all of that data is completely 100% open and and replicate on every single one of these hearing him knows of which there are thousands so once someone makes his the genome of his cat available to one person it's available to everyone on the blockchain yeah so the it's the smart contract that mediates the creation of new cats there is no way to create a cat other than through the smart contract and the data that represents the cat is stored inside that smart contract and that is entirely visible to to anyone I think we have to wrap it at this we're just a final question I know that axiom Zen has done some nice explorations into AR and VR is there any hope that we might have crypto kitty go well I mean we've talked about that since before we launched and at the at the end of the day it's a cool toy but we just have so many ways to improve the product that make the core experience better right now that we just have to focus on those sorry thanks so much thank you everybody thanks for coming