Posted on

'Ebay for CryptoKitties' Raises $2 Million from All-Star VCs

More money is being poured into crypto cats.

Well, cats, and the slew of other non-fungible digital items made possible by new token standards, such as ethereum’s ERC-721, which now have a home in OpenSea, a marketplace for allowing users to buy and sell these items – an Ebay for CryptoKitties if you will.

Coming out of Y-Combinator last winter, OpenSea today announced a $2 million seed equity round led by 1confirmation, with participation from a series of other high-profile crypto investors, including Founders Fund, Foundation Capital, Blockchain Capital, Coinbase Ventures, Chernin Group, Stable Fund and Blockstack.

“When CryptoKitties came out, it was this exciting, mainstream, fun use case for blockchain,” Devin Finzer, co-founder of OpenSea, told CoinDesk.

Indeed, the ethereum-based decentralized application for buying, selling and breeding digital cats was a quick hit within the community, launching in November last year and peaking in December, when the game nearly brought the ethereum blockchain to a halt as it tried to deal with a significant increase in transactions.

Many concluded that the game helped push blockchain technology and cryptocurrency into the mainstream, and others argued that the game displayed a blockchain use case that could expand away from silly cats and into serious business (such as real estate). For instance, Union Square Ventures and Andreessen Horowitz led a $12 million investment round to spin CrypoKitties out of its parent company so that the team could really dig deeper into future applications for the concept of non-fungible digital items.

And while those serious applications have yet to be realized, a spate of similar games were created after CryptoKitties success, including the more general CryptoPets, CryptoCelebrities and Crypto All-Stars.

But according to OpenSea, users need a place to more easily buy and sell those items.

It turns out OpenSea wasn’t alone – the decentralized online marketplace for physical items OpenBazaar has plans to open up its platform for digital items such as CryptoKitties as well, plus OPSkins recently created Wax, a platform for spinning up decentralized exchange services for these items.

So far, it looks like a fine idea, according to Finzer, who said:

“We’ve so far had about half a million [dollars] in volume pass through our marketplace.”

The go-to marketplace

One of the keys to OpenSea’s success, according to Finzer, is the team’s relationship with crypto game developers.

As to be expected, OpenSea has done best in offering a “store” for games that don’t already have built-in marketplaces (many game developers want to focus on the game and so aren’t keen to building a marketplace on top). As those game developers hear about OpenSea, they’ve typically just made OpenSea the game’s official digital shop.

“We’ve kind of developed a synergistic relationship with game developers,” Finzer said, adding that OpenSea offers a revenue share model depending on what marketplace duties are handled by what party (although Finzer declined to discuss this in more detail).

Yet, OpenSea is available for more than just games, although that’s the company’s main stream of business. For instance, one art project used OpenSea and Finzer said it could also work as a marketplace for software licenses.

We’ve barely scratched the surface on what these crypto collectibles and a marketplace for them could offer.

One thing that’s interesting about these programs, for instance, is that because a CryptoKitty, for example, is just a piece of code, different interfaces will create completely different visualizations of that cat (as recently displayed by a viral art image made purely from code).

These different visualizations could be shared between users and might make the games even more fun.

Zombies for kitties

Plus, Finzer wants to facilitate the trade of items that aren’t even part of the same game.

This would go above and beyond digital games today, where items that are part of a centralized game must stay within that universe, he said, adding:

“I could be breeding zombies and you could be breeding kitties. I think what that results in is, these items having a lot more value than they would in the existing digital world.”

In fact, this kind of cross-collaboration has already happened – a new game called KittyRace allows users to race their CryptoKitties.

This kind of thing, Finzer said, has garnered quite a bit of interest from other crypto gaming companies.

This interest in digital items isn’t new only to the world of cryptocurrency, though. In fact, the market for gold within the massively multiplayer online role-playing game World of Warcraft is so lucrative that prisoners in China are made to mine the stuff for sale to gamers in the developed world.

Yet, Finzer said, he plans to stay out of the world of trading digital items for physical cash, namely because it’s a business that’s somewhat frowned upon, but also because he doesn’t see a lot of opportunity in enticing more traditional gaming companies to move to a blockchain.

“The technological benefits of moving an existing game to a blockchain are actually negative now,” he said.

That doesn’t get Finzer down, though. He sees tremendous opportunity focused on crypto.

He concluded:

“Our thesis is that the most interesting use cases for blockchain-based games will come from new games rather than existing games.”

CryptoKitties image via CoinDesk archive

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Posted on

Better Bitcoin Relay? Crypto VCs Back BloXroute Funding

There’s one part of bitcoin that isn’t censorship resistant – its relay network.

At least that’s according to the team at BloXroute Labs, which just brought its network for relaying information between blockchain nodes out of stealth with an impressive group of investors including AngelList co-founder Naval Ravikant, Metastable, 1Confirmation and Flybridge Capital. Through these investors, the company raised $1.6 million.

But the new network is more ambitious than the capital suggests. Called BloXroute, the project aims to make relay networks censorship-resistant against any number of powers by blinding the system from knowing how nodes connect with each other. And that, they say, is an improvement on the current infrastructure, largely built over the years by volunteers.

To understand this, it helps to know where relay networks originated, coming about as “mining pools,” or networks of miners seeking to share profit started to form.

Smaller mining pools saw a higher number of orphan blocks (those that weren’t eventually added to the blockchain) since they were usually not the ones that found blocks. This meant they spent time working on the wrong blocks as the information took time to propagate to them. So, in an effort to level the playing field, relay networks allowed faster for the faster propagation of information over the network.

While Uri Klarman, BloXroute Lab’s CEO, said existing relay networks, including bitcoin developer Matt Corallo’s FIBRE and Cornell Universities’ Falcon, are working fine in this regard, these networks allow parties to understand network traffic, such as the IP address of the node, where it’s sending information and where that information is coming from.

In this way, existing relay networks offer insight into transactions that governments, big businesses and others could exploit, censoring certain wallets.

“If the protocol depends on the relay network to scale, then that ends up that everyone has to trust the relay network for that work,” Klarman said, adding:

“Then what’s the point of the blockchain? Just leave the bank in the middle.”

The BDN

In an effort to eliminate this issue, BloXroute Labs founders Emin Gun Sirer and Soumya Basu built what they call a “Blockchain Distributed Network” or BDN.

Inspired by the content delivery networks that allow data on the Web to be delivered quickly all around the world, the BDN is entirely controlled by BloXroute Labs. But, the company has spent a significant amount of time building in blinds that will keep the network from being censored.

According to the team, the government wouldn’t try to shut down the company, and in turn the whole network, just for a couple bad actors.

And some of the top venture capitalists in the space believe in that vision, seeing how this is the first time investors have funneled money into a relay network-like technology.

Ravikant told CoinDesk that’s what he sees as the value-add.

“I liked it because it’s addressing one of the top two problems with blockchains – scalability and the other is decentralization,” he said.

A networking problem

Going deeper, BloXroute Lab’s neutrality is based on its ignorance of what it carries. Put another way, the protocol “doesn’t know what is the data it’s propagating,” Klarman said.

In fact, it doesn’t even know what network it’s serving. BloXroute is meant not to privilege any blockchain. Instead, it wants to make it easy for every blockchain to scale.

To that end, BloXroute’s white paper describes methods that enable users to audit its blindness.

While Klarman is most proud of the censorship-resistance the team has built into the system, like Ravikant said, scalability is another one of BloXroute Labs’ benefits.

“Our network is a lot faster than anything out there, by orders of magnitude,” Klarman contended, pointing to the fact that the company has brought together a group of experts and has some centralized control, which allows for extra speed.

And that speed is really the key to scaling blockchains, he continued.

As blocks get larger, they take longer to propagate around the network. And Klarman fears a day when blocks become so large that the data can’t reach all miners quickly enough (before the next block gets verified) and end up causing forks.

If the last block hasn’t reached every miner on the network before the next block gets verified, the whole blockchain will start to unravel, the project’s white paper explains.

Klarman told CoinDesk:

“Most people get the scalability problem wrong. Our main argument is the following: the scalability problem is really a networking problem.”

The token

But while BloXroute Labs isn’t at the stage of focusing on revenue, its white paper does mention a token meant to provide a way to invest in BloXroute Labs (not access the system). (BloXroute has not stated when these tokens will go on sale.)

At first, BloXroute will be completely free to use. Nodes will pay BloXroute by adding a very small extra charge to transaction processing fees to users, but Klarman contends this should more than be paid for by the fact that the scaling it permits will prevent the bottlenecks that cause fees to go up.

The fees will be negligible, fractions of a penny, but 50 percent of all fees collected would go into a fund backed by the bloXroute token. The token entitles a holder to a proportional share in all the fees that had collected in that fund up until redemption. So, if there were 100 tokens and $100 in the fund, redeeming a token would be worth $1.

As BloXroute becomes hugely popular and orders of magnitude more transactions are going through, it will also reserve a percentage of its bandwidth for transactions that don’t pay the fee. Klarman said, the “limitation is in place to prevent bloXroute from censoring transactions,” even freeriding transactions.

That scale of activity is a long way off, though. BloXroute and its supporters are more focused now on proving the promised speed, and that’s why its earned the support of major crypto investors.

“We’re excited about all of the research that is currently happening around figuring out blockchain scalability and we think that it’s possible that there are many winners here.” Nick Tomaino of 1Confirmation told CoinDesk.

As anyone who followed the scaling debate within bitcoin knows, though, scaling is both a technical problem and a governance problem.

Take bitcoin for example: even if bloXroute’s speed really clears away any concerns about increasing block sizes, the miners still have to opt-in. Nothing can force them to. When asked why he was sure bitcoin miners would adjust block size even as propagation becomes easier, Klarman argued that bitcoin alone isn’t really the point.

“We remove the scalability for all cryptos. And this is the point where cryptos should start to compete over real-world traction,” Klarman said.

He concluded:

“Each crypto would make its own decision what to do.”

Electric wires via Shutterstock.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.