Welcome to the world of digital collectibles where you can breed, sell and purchase virtual cats. The “oh so adorable” factor along with recreational game centered non-fungible "one of a kind” token made most of the blockchain enthusiasts, the new ‘crazy cat ladies’.

THE NEW “CRAZY CAT LADIES”

Cryptokitties that were developed at ETH Waterloo hackathon by four Pokemon enthusiast crypto developers, have now turned into a $12M separate business entity backed by Union Square Ventures and Andreessen Horowitz. A cat, number 127 with pearl gem physical attributes of third order mutation fetched $140,000 at Christie’s auction last May.

“Mr. Twardowski’s CryptoKitty art piece looked something like a giant computer chip. A pixelated image of a first-generation CryptoKitty was embedded in a physical structure — a hardware wallet assembled by the engineer Richard Moore — that contained an ERC721 token. In non-crypto speak, that essentially means there were lines of computer code in the artwork that proved the origin and ownership of the CryptoKitty. (The digital cat itself is purple and goggle-eyed, and around its neck, it wears an attractive orb.)” - New York Times.

Many skeptics have called this craze as pricey Beany babies devoid of values. Such comparison have always stemmed out of the lack of understanding of emerging technology and cryptoeconomics. Previously, Bitcoin and other cryptocurrencies have been compared with Beany babies, tulip mania and even gold. Such frivolous arguments and skepticism gains legitimacy when new technologies gain enough market share without proper use cases.

In this article, I’ll try to look into the various real world use cases of cryptokitties that solve many compelling issues. Such relevance can be understood deeply once we dive into the technical details.

NON-FUNGIBLE TOKEN (NFT) ERC721

Fungible vs non-fungible: Just like our currencies (US dollar, Euro, Pounds etc) Cryptocurrencies are means of exchange, store of value and such characteristics can be maintained through fungibility i.e; mutually interchangeable quality. In economics, fungibility is the property of a good or a commodity whose individual units are essentially interchangeable, eg: flour, rice, currencies, oil, precious metals.

Why it is so special about being unique in non-fungible token (NFT)? Fungible tokens (ERC20) do not contain any unique data, they are blank tokens hence the interchangeable characteristics. Whereas NFT (ERC 721) are embedded with unique data identity hence creating verifiable decentralized digital scarcity depending on what kind of data you put into it. NFT projects like Cryptokitties, CryptoPunks and Decentralands (unique co-ordinates data embedded within the Land token) are all designed on ERC721 protocol.

Ethereum Request for Comment aka ERC721 is created by Dieter Shirley and Axiom Zen. ERC721 has the same compliance of ERC20 token but its code defines contracts of events and functions that professes digital ownership and property rights, which has been a struggle in real world for entrepreneurs and creators to establish their IP rights ranging from software, music or digital contents. (ERC721 is expensive and have its limitations in deploying large databases of items in big games, is out of scope for this article and there is also ERC115 standard that allows for infinite numbers of fungible and non-fungible items in a single deployed contract).

HOW NFT IS REVOLUTIONIZING THE SPORTS AND DIGITAL COLLECTIBLE WORLD

Trading your baseball cards in NFT: The baseball cards that were collected by our grandparents and now lying in the attic are each of one a kind. Each such baseball card can be traded in non-fungible token to bring more true digital ownership with viability and authenticity through blockchain.

Some recent project on sports card from World Cup 2018 is CryptoStrikers. Their achievements:

• 👤 Over 1,500 registered users (from 81 different countries).

• 🃏 10,261 cards minted (distributed across 630 unique wallet addresses).

• 🥇 Spent the tournament ranked as the #1 Collectibles app on Ethereum, according to DappRadar.

• 🔒 No vulnerabilities found in our smart contracts- this is huge in crypto world.

You can read more about this project here.

PHYSICAL SPORTS MERCHANDISE IN NON-FUNGIBLE TOKENS

Basketball Autographed by Michael Jordan & Michael Jackson from the music video “Jam” Sold for: $294,000. “Jam” may be one of the strangest eight minute long music videos ever produced, but the featured basketball is now a prized possession. With the autographs of two American icons, the Michael Jackson and Michael Jordan signed basketball is an odd but extremely valuable addition to any collection. - https://www.sportsmemorabilia.com/news/expensive-michael-jordan-memorabilia-ever-sold/.

Non-fungible token tied to an existing merchandise valuable merchandise traded in exchanges as tokenized securities creates a huge investment opportunities and a new marketplace of its own. Such digital collectible in sports as well as expensive arts already have an existing ecosystem of scarcity and loyal buyers. Physical Collectible global market size is $200Bn. Imagine a world of tokenized securities where a digital asset can be owned by multiple owners, traded easily as a NFT commodity in the market and bringing much more capital deployment through democratization and fair play of participation. One of the important factor of such tokenized asset is bringing liquidity to the owners through market appreciation and portfolio expansion.

Non-fungible tokens characteristics has the ability to bring innovation in ownership of in-game assets too.

Courtesy: TicketCity

Owning your favorite Sports Team: How cool it will be to own a part of your favorite Sports Team. Sports investment has always been top heavy. Tokenized private ownership gives the early liquidity to its investors as well as trust less ownership verification ushering a new opportunity to translate the fan engagement and loyalty into capital deployment. The NFL likes to tout the Green Bay Packers as a publicly owned franchise, and while that is technically true the structure doesn’t provide true ownership for the fans in the way that the blockchain can allow. The capability for individual sports fans to be able to invest in sports franchises around the globe are sprouting up in securitized tokens already and aiming to revolutionize the global sport ecosystem.

I have been wanting to write this article since Cryptokitties came into existent and people started questioning their use cases. Thankfully, the talented crypto developers have already been creating and engaging the fans in this new marketplace and hopefully we can bring more capital deployment in this space. I estimate this digital collectible marketplace will be a wall street of its own and can be a potential Trillion dollar ecosystem in future. I will not be surprised if our future generation have a trading career out of digital collectibles backed by securitized or highly evolved tokenized assets.

NOTE: This article should not be considered financial or legal advice and is the opinion of the author.

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