The Ethereum world has been purring over the cutest use of the blockchain yet: CryptoKitties! The community has spent the past week buying, selling, and breeding a nearly infinite variety of cartoon cats. Fur is flying over the heavy strain the application has put on the Ethereum network and the increased fees that have come with it. Rare cats have sold for incredible amounts — the very first CryptoKitty, Genesis, sold for 250 ether (approximately $115,000 at the time).
The frenzy has left a key question unanswered: who really owns your CryptoKitties?
What is a CryptoKitty?
Each CryptoKitty is made up of two key pieces: text-based “DNA” stored in an Ethereum transaction, and graphic elements created by Axiom Zen, the company behind CryptoKitties.
Each CryptoKitty transaction is associated with an Ethereum wallet, identified by a public key.
The transaction contains the CryptoKitty’s DNA, which determines its “cattributes”. The cattributes define the graphic elements displayed for any given CryptoKitty. CryptoKitty DNA looks something like this, or some other random-looking mix of characters:
To buy a CryptoKitty, you go to the CryptoKitties website and browse the marketplace while logged in with your Ethereum wallet. When you find the CryptoKitty of your dreams, you pay in ether and the blockchain entry containing the CryptoKitty’s DNA is transferred to you. When you view your CryptoKitty on the website, the DNA data from the blockchain is combined with the graphic elements to generate your pet.
Are CryptoKitties like baseball cards?
Axiom Zen, the company behind CryptoKitties, says in its FAQ that Kitties are a “cryptocollectable” akin to baseball cards or fine art:
CryptoKitties are NOT a cryptocurrency. They’re more like a cryptocollectible. The real-world analogy for a cryptocurrency is dollars or pounds; a cryptocollectible’s real world analogy is closer to assets like baseball cards or fine art.
As dictated by the smart contract, any CryptoKitty you own belongs to you. Like any product or property you can own, the market price is determined by demand, scarcity, and your asking price.
So the FAQ says the CryptoKitty belongs to you, but what does that really give you?
When you own a baseball card, fine art, or a book, you own the physical object. For the most part, that gives you the right to do what you want with the object. You can sell it or trade it, but maybe not dress it up for Christmas.
Owning the physical object does not give you ownership of the underlying copyright in the work. Think of it like this: buying a Harry Potter book does not give you the right to make a bunch of copies.
CryptoKitties follows in the footsteps of the work we did with ascribe, which allowed artists to register their work on the Bitcoin blockchain, create unique digital editions of that work, and transfer those works. In fact, a group at an ascribe hackathon created a collectable trading card game that was just a bit ahead of its time.
With ascribe, we recognized this distinction and worked hard to make sure that owning a digital object was as much like owning a physical object as possible. We did this by making sure the default Terms of Service created the same rights to digital property you’d have with physical property.
A. You acknowledge and agree that we (or, as applicable, our licensors) own all legal right, title and interest in and to all elements of the App, and all intellectual property rights therein. The visual interfaces, graphics (including, without limitation, all art and drawings associated with the CryptoKitties), design, systems, methods, information, computer code, software, services, “look and feel”, organization, compilation of the content, code, data, and all other elements of the App (collectively, the “Axiom Materials”) are owned by Axiom Zen, and are protected by copyright, trade dress, patent, and trademark laws, international conventions, other relevant intellectual property and proprietary rights, and applicable laws. All Axiom Materials are the copyrighted property of Axiom Zen or its licensors, and all trademarks, service marks, and trade names contained in the Axiom Materials are proprietary to Axiom Zen or its licensors. Except as expressly set forth herein, your use of the App does not grant you ownership of or any other rights with respect to any content, code, data, or other materials that you may access on or through the App. We reserve all rights in and to the Axiom Materials not expressly granted to you in the Terms. For the sake of clarity, you understand and agree: (i) that your “purchase” of a CryptoKitty, whether via the App or otherwise, does not give you any rights or licenses in or to the Axiom Materials (including, without limitation, our copyright in and to the art and drawings associated with that CrytpoKitty) other than those expressly contained in these Terms; and (ii) that you do not have the right to reproduce, distribute, or otherwise commercialize the Axiom Materials (including, without limitation, our copyright in and to the art and drawings associated with that CrytpoKitty) in any way without our prior written consent in each case, which consent we may withhold in our sole and absolute discretion.
That’s a long block of legalese, so here’s a human readable summary in bullet points:
- Axiom Zen owns all the artwork for every CryptoKitty.
- Owning a CryptoKitty gives you no right to the artwork.
- You can’t use the artwork in any way without their written permission.
- They don’t have to give you permission if they don’t want to.
So far, that sounds a bit like a baseball card, but the digital nature of CryptoKitties makes all the difference.
Are CryptoKitties not at all like baseball cards?
What happens if the Kitty site goes down or if Axiom Zen goes bankrupt? The art disappears, and you have no right to it. Your pretty Kitty is now just an ugly string on the Ethereum blockchain. Another scenario: What happens if Axiom Zen decides to re-do all the art in a style you hate? Sorry — you have no rights to that old art.
That’s the big difference with baseball cards. Your Barry Bonds card is safe where you left it, in a shoebox in your parents’ house. The picture isn’t going to fade away if Topps goes out of business, and Topps can’t come into your parents’ house to replace it with my drawing of Barry Bonds.
So what do I own?
There is a bit of a contradiction here — the FAQ says you own your CryptoKitty, but what you really “own” is the string. As long as you control the keys associated with a set of Kitty DNA, you can hodl or transfer that DNA. You can do what you want with those 256 characters. But that doesn’t feel a lot like owning a kitty, and a pseudo-random string probably isn’t super-cute enough to get you paid.
But I want to own my Kitty! (or: making digital property real)
But in blockchain world, if Axiom Zen wants us to truly own our Kitties, a bit of creative legal drafting could make it happen. Contracts could change the default to make CryptoKitties just like baseball cards. One easy fix would be to change the terms to grant you a limited license to use the specific arrangement of graphic elements defined by your Kitty’s DNA.
Someday, the law will catch up and recognize the reality of digital property, whether that’s in-game collectibles or blockchain-based property that links to off-chain data. For now, if we want to truly own digital objects, we need a more careful combination of law and tech to make it happen.
I think CryptoKitties are fun. There is absolutely nothing to suggest that Axiom Zen has bad intentions or wants to mess with your Kitties. From what I’ve seen they’re good people and community-minded… but they unquestionably are in control, and your ownership of your CryptoKitties is not what you might expect.