HatchyPocket is Poised to Redefine Brand Ownership and Usher in the Next Evolution of NFTs
HatchyPocket is a complex project with giga-ambitions, so I’m going to break this down into two main sections: (1) The Vision — what this project is aiming for; (2) The Innovation — how this first-of-its-kind Decentralized IP demonstrates a new way for creative human collaboration. It is my goal to describe how these weave together to create a revolutionary brand with the potential to flourish both within crypto and into the mainstream.
(1) The Vision of HatchyPocket
HatchyPocket started as a digital NFT collectible on Avalanche, launched in June 2021 as a collection of 40 distinct Gen 1 monsters (40,000 NFTs). Today they released another 107 Gen 2 monsters (500,000 NFTs), a next step in their systematic plan to create a brand that rivals other great monster-based ecosystems we all love (Pokémon, Yu-Gi-Oh, etc.).
A quick search for different monster-based NFT projects turns up dozens of attempts at creating a “Pokémon on the blockchain”, some more well-known than others (I see you Kevin).
The infamous Pixelmon minted out without providing much in the way of a pathway to reach these lofty goals. And these goals are lofty — “Pokémon on the blockchain” is an audacious statement. By the numbers, Pokémon is the #1 media franchise of all time:
- grossed >$118 billion since 1996
- grossed $1.6 billion last year alone
- has only 374 employees.
The fervor that Pixelmon minted out with highlights two things for me about the NFT space. First, a recognition of the immense potential value of achieving success in the creation of a new monster-based collectable brand. This is often expressed via the hopium-fueled crypto math that says, “if we can put forward a project that does even 10% of the established business then moon city!” Second, people recklessly spent money (lost >$70 million) without doing due diligence and therefore not fully grasping what it will take to achieve said lofty goals.
If you look under the hood of HatchyPocket, you will find similar grand ambitions to other monster projects, but also a novel plan to pioneer this via organic growth both within and outside of crypto. HatchyPocket is built different.
(2) The Innovation of Decentralized IP
Before getting into how HatchyPocket is positioned to achieve success as a brand, and because it is structured very differently than the typical NFT collection, let’s start with a mental model that describes the growth ambitions of the vast majority of NFT projects, shown in the figure below. This context will help highlight what makes Hatchy so unique.
Starting at the center, labeled NFT & Brand Value Accrual Tornado, NFTs are minted by an early subset of collectors/speculators — often via early access/discounted prices. Moving upward, the expanding levels represent growth in value and community size over time, from early minters to chain-specific collectors, to Crypto Twitter (CT), to celebrities. The blue vertical arrows on the right indicate three aspects associated with a typical NFT project that grow in parallel: the community, the NFT resale value (floor price), and the brand value. Under this model, growth in community size and brand value invariably hit resistance by failing to achieve mainstream acceptance — indicated by dotted line IP Access Cap. The NFT resale value is not affected by this cap, as speculation, flex appeal, and artistic/cultural value can and does drive NFT resale value to mind-boggling heights. Hitting celebrity adoption is close to the best-case scenario for most NFT collections; achieving this means that early holders reap profits and those who have come in later are happy (hopefully) to join an exclusive club. However, barring full-on cultural mainstream adoption (and even Punks have not achieved this), limitations as I see them are that:
(1) the community size is limited to the size of the collection itself (10,000 , 5,555, etc.)
(2) most NFTs employ a traditional restrictive IP model that inhibits wider use/distribution of the brand
I want to state a few quick caveats. I am not saying there is inherently anything wrong with this model for NFTs. Art and/or community as the utility goal is perfectly fine, and distribution of art or access via the blockchain is an achievement for both artists and collectors. The fact that Punks do not yet have mass market appeal clearly does not mean they are not successful. Punks have established themselves as cultural touchstone within crypto, and every project with aliens, apes, and zombies is a nod to their influence on the entire space (not to mention the numerous direct knockoffs). I also recognize that projects employ many types of “utility” beyond community and art, such as access to irl experiences, or NFTs linked to a multitude of use cases, more NFTs, etc. But however you define utility, the model largely represents the majority of projects out there today. Lastly, I want to say it is also entirely conceivable that an NFT project with restrictive IP could break through and achieve mainstream adoption. Maybe one day kids will be collecting *Kevin* happy meals. I just believe that the restrictive structure creates a significant hurdle for general public acceptance. Okay, back to the figure.
A key outcome of these structural limitations is that the brand value and NFT price are driven almost entirely by $ within crypto. It also means that there is a finite amount of money available to create high value NFT collections. And unless a project transcends the crypto space and achieves a reliable outside revenue stream, everyone is going after the same pie. This is why the space feels so very saturated. And why there are so many squawks and squabbles around ownership and use.
And while I say that there’s nothing wrong with this model, it has critical limitations for creating a collectible brand capable of creating value for others outside of the crypto space. This is shown in the figure via the orange bar labeled Restrictive IP. Because of the restrictive IP, the brand must achieve a high valuation for large outside investments to take risks on it. Not to mention that in part because of the high valuation, the general public is likely to maintain a hostile posture towards high value NFT collections. This makes large licensing money (big green arrow on left side of diagram) unlikely to flow into even the most valuable NFT projects. In the end, such a restrictive IP model applied towards even successful NFT collectibles achieves “decentralization” not much different from the current status quo. But instead of a few hundred employees that work for the corporation, we have a few thousand NFT holders at most, or if IP is owned by the team/creators, even fewer would profit from any future licensing deals.
With this framework in mind, it’s much easier to describe how HatchyPocket differentiates themselves.
HatchyPocket proposes a novel, first-of-its-kind, Decentralized IP model. They present this in their Grand Vision and Generation 2 articles. I’ll summarize briefly. Gen 1 Hatchy NFTs are the first expression of this IP, but the IP itself if owned by the HatchyPocket DAO. HatchyPocket’s low-friction IP framework states that literally anyone (no requirement to hold NFTs) can use the brand to create any product and profit from it. When earnings exceed $300k/yr, 10% of earnings above this amount must be paid to the DAO. HatchyPocket proposes a new way for IP to exist and a new way for everyone (creators, owners, consumers) along the IP/Brand value chain to interact.
Why all this thought given to a new IP model? IP is protected via copyright, and the modern form of protection for creative expressions as we know it is relatively new, enacted in the 1976 Copyright Law in the United States. Crypto has been around 13 years, which is ~28% as long as our modern IP/copyright structure! How we as a society deal with IP is quite new when viewed through that lens. As blockchain brings a new era of decentralized reorganization to so many different aspects of human collaboration, it makes sense that it will develop updated distributed IP implementations.
This is at the core of how HatchyPocket is designed. I’ll quote Hatchy Project lead Sols Omayoglu: “We believe that the world is in a phase of irrational over-competitive mindset and that copyright is the ultimate expression of that broken ownership system essentially spawned by that mindset. Crypto we believe, is a technology that as an accounting system kind of has an ability to be a benevolent system…and can be preconfigured for fairness and can kind of allow us to transition into a more balanced society in which we can have open resources and private endeavors. We believe that the system offered by Hatchy is superior both to…the copyright system and to the common NFT structure…we believe that what we’ve got with Hatchy and the structure that we’re presenting allows for much greater opportunities at essentially all levels of engagement.” –@HatchyPocket Twitter Spaces, September 11, 2022.
If we make a few changes to our mental model for NFT & Brand Value Accrual, the illustration for HatchyPocket’s system looks something like this:
There are several key changes to the model. It effectively decouples community growth from NFT value from the outset. Or it might be better to say that there are now two community growth vectors: 1) NFT collectors and 2) IP users. Rather than needing to achieve a certain level of brand recognition to build a case for licensing products/investments that those outside of the NFT community might want to consume, independent creators can use the brand for games, merchandise, comics, etc., from day 1. The HatchyPocket team goes a step further than access, as they have a bank of different assets, (art, digital renderings, rigs, etc.) for prospective users in their entrepreneurial endeavors, as well as incentivized events like game jams planned.
This provides a pathway for outside $ and new community members who may or may not ever interact with the NFT side of things to help grow the brand, as illustrated by the green/blue arrows on the left side of the diagram. The IP access cap is removed, and community size and IP/Brand value can grow alongside the NFT floor price shown via the three blue arrows on the right. The Value Accrual Tornado can now more easily grow from smaller $ and loses reliance on FOMO as a driver of value. The decentralized IP is still structured to reap value from any future large $ licensing deals for projects that achieve earnings >$300k/yr, should the brand ever reach mainstream acceptance. I should note that I do not intend the model to describe the current status of HatchyPocket Brand/IP Value, which I would estimate is approaching level 3: Widespread community recognition on Avalanche. But this model illustrates how the Hatchy brand is structured to grow in a completely new way.
An example that Sols has used to illustrate the creative power of a community, is the existence of Massive Multiplayer Online Battle Arenas (MMOBAs), which can trace their existence to a fan-developed mod on the StarCraft build editor.
HatchyPocket is structured to provide the seeds for a broad range of creations by anyone via resources available for creators large and small to reduce their effort and help them jumpstart their own projects. The system incentivizes many to build towards creating a shared brand with more beneficiaries than possible before.
One of the coolest aspects of crypto, and I think one that those who fall into the rabbit hole recognize, is that it locates and challenges bottlenecks in how we organize different aspects of society. This is where its power lies. It’s not an internet replacement — it’s an organizational system alternative. Crypto is new enough that we are still working on language to describe use cases. It will provide new phrases and definitions as it establishes in certain areas. It will work in some arenas and not in others. Goals can be smol (Constitutional DAO, buying a sports team) or global (DeFi attempts to remove barriers around financial systems to provide access to all for all). HatchyPocket is a crypto use case that is breaking down old bottlenecks and collaborative limitations and presenting an alternative approach to shared creative endeavors and how a brand can be built.
Lastly, I’d like to take a moment to plug the HatchyPocket NFTs, community, and trading/collecting. The art is exquisite. It’s clear from the level of detail that these monsters have been painstakingly crafted over many iterations. The result is a truly unique aesthetic, an almost pixelated liquid or vapor effect on some, blur of movement for others. The collection somehow gives a retro vibe while still feeling like the future.
The collectors, traders, and creatives that comprise the community are itself an achievement for the project. Art, comics, maps, storytelling, toys, and merchandise all developed by community members are available or in the works. Trading is another thing that separates HatchyPocket from other NFTs I’ve encountered. People trade their Hatchies. Often. Are you collecting Fire elementals? Trade that Bolbon (plant) for that other person’s Phoenix (fire). Going for Lights?, swap out your Goblen (dark) for that Pegasus. No other crypto transaction that I’ve seen has been able to replicate this “on the playground with my friends” feeling quite so well. Another aspect of trading is that it’s a true Win-Win Transaction. I complete my Water set and you get closer to your Full set? Both sides are getting exactly what they want. This kind of exchange is unique in crypto, which so often depends on bag dumping. Not a criticism — dumping bags is a part of markets, but there is real power in the kind of trading/collecting where both sides win. And trading on NFTrade.com means it can be done safely via smart contracts instead of trying to find a trusted 3rd party or risking a swap with a stranger. This deserves a dedicated thread, but it boggles my mind that in 2022 there are top tier marketplaces that don’t facilitate peer-to-peer swaps.
I’ll close with this quote from Olaf Carlson-Wee on successful crypto projects that I think of often.
“…if there’s one theme, it’s the ones that sounded too crazy or too good to be true, or just the visions that seemed too big in a way. If there’s one mistake all of us have made in crypto is basically not thinking big enough.” -Olaf Carlson-Wee, Bankless Podcast 4/11/22.
HatchyPocket has obviously thought big enough and they’re using blockchain to pioneer a way towards their ambitions. The IP revolution has begun and all are welcome to join. Gotta Hatch ’em all.
~HM
P.S. Interested in joining the Hatchyverse? My ref link.