Featuring Roham Gharegozlou
Published on: July 23rd, 2019 • Duration: 14 minutesRoham Gharegozlou is the CEO and founder of blockchain entertainment company, Dapper Labs. In this clip, he explains why open-source, third-party developers are crucial to the adoption of these digital worlds. This clip is excerpted from a video published on Real Vision on June 20, 2019 entitled “CryptoKitties CEO on Value, Gaming, and the Blockchain Use Case.”
ROHAM GHAREGOZLOU: Dapper Labs is the world's first blockchain entertainment company. We're the creators of CryptoKitties. This is the world's largest blockchain game. And of Cheese Wizards and other applications like Dapper, which make the blockchain easier to use for everybody. We created Dapper Labs at the end of February 2018 and raised our seed round of financing immediately afterwards from Andreessen Horowitz and Union Square Ventures.
A few months later, given the progress we were seeing under the hood, we raised a follow-on round of financing from Venrock and Google Ventures to accelerate our progress. We also have a number of smaller investors on board that are absolutely fantastic. We have two of the world's largest talent agencies, CAA and Endeavor, as well as Digital Currency Group, one of the leading investors in the crypto space.
The best way to think about the potential of blockchain, is to compare it to the impact that the internet has had. The internet democratized the ability for people to create, distribute and consume information. Blockchain's going to do the same thing for value. If you think about it at its most basic level, in the early days of the internet, anybody was able to go create a website, send an email, reach millions or billions of people.
Blockchain will create that same ability for folks to go create a token, whether that's a cryptocurrency or a non-fungible token like CryptoKitties, and have communities, corporations or even groups of people around the world that have never met each other, be able to exchange value without an intermediary, without any middleman.
The benefits of blockchain for gaming are really absolutely fascinating. Already, people are spending billions of dollars on digital assets without actually having any ownership of them. In 2017, it was over $78 billion dollars that was spent on digital items or downloadable content. Now blockchain adds three key benefits to games that really change the game in terms of how people will interact with future experiences.
First, it lets players be able to own the assets that they pay for and take them into third party experiences. So for the first time, folks that are buying, whether they're buying Fortnight's skins, whether they're buying in-game achievements or assets that actually advance their progress in the game, they can choose to sell them on third party marketplaces if they're no longer interested in that experience, they can choose to buy and trade them with other players in order to reach new parts of the game. And really, they're back in the driver's seat, rather than being kind of a vassal to the gaming companies' choices.
Second, and partially because of this true ownership, games that rely on blockchain technology are able to create this sort of joint venture between themselves and their players in a way that was never possible before. If you think about it, games are all social networks. They're just a way for us to come together and interact with each other in a different medium.
And the ability to tokenize parts of the value in that new medium and share it among different parties, has unlocked a crazy possibility for the future. Which means that that possibility is a possibility where gamers that are part of the game experience can financially benefit from the work that they do in the economy. They can financially benefit from making the game better, whether that's through bringing new players in. Whether that's through adding user-generated content. Whether that's through providing services to others that are playing in the game.
And third, maybe again, kind of most important, this possibility of games to be kind of moddable by default. If you think about some of the most successful games, they started as mods. As in third parties that took original engines or original games and spun them around a different way. Now what if we plan for that for default? And what if the tokenization could be an economy for all of these third party developers that are contributing back to the game and financially benefiting from it?
And folks are going to be able to interact with different paradigms without being as held down by their expectations of things in the real world. For example, if you're going to apply for a mortgage on the blockchain, you're going to question yourself a lot. You're going to talk to your financial advisor. You're going to really think about that decision. And the government's sort of, and the regulatory side of things will have to change a lot before it even allows that as a possibility.
But within games, people are already locking up their crypto keys and taking out loans with cats as collateral. People are already using their achievements in a virtual world to be able to take, to be able to get real benefits in the physical world. And we think that's absolutely magical. So CryptoKitties is the most successful blockchain game really because of the community that has been created around it.
In a sense, we could never create the game as it currently exists, without blockchain. Without blockchain, nobody would believe the commitment that we've made, that hey, we will not make more than 50,000 Generation cats. That is a, because of the blockchain, that is a commitment even we cannot change. And so that gives these assets value in a way that it really was impossible for a small company like ours to do previously.
Similarly, this concept of sort of a peer-to-peer economy, if you think about a Fortnite, if you think about any modern game day you download on your phone, you can buy things. You can never really sell them. You can go online and try to sort of through third party marketplaces, hock your account and things like that. But the possibilities for fraud are high. The possibilities for actually getting banned by the game maker are high, because you're contravening their terms of service.
Because of blockchain, when you buy a CryptoKitty, it's 100% yours, and we couldn't stop you from taking it into a third party experience, even if we wanted to. And that final concept is the reason that the KittyVerse even exists. Before CryptoKitties was even a platform that people knew that they could trust, they started building on top of it. And the reason is, they knew we couldn't stop them.
The folks that made Kitty Hats, one of which actually works here right now, knew that we couldn't stop him from creating this concept and giving it to our customers. And in a way, as a developer sitting by himself, this was the best way for him to be able to reach a new community and be part of something bigger without actually having to reinvent the wheel himself.
So we created CryptoKitties to make it simple and let people understand blockchain in a different way. For example, to illustrate this concept of digital scarcity, this concept of limited edition digital objects, we created 50,000 Generation cats. And everybody could tell from the day one of the game, that there can never be any more than 50,000, because the rules of the software won't allow it. And so these Generation cats throughout the bear market of 2018, actually kept their value better than Bitcoin did for this reason.
Another example of how CryptoKitties helps people understand blockchain better, is if 85% of transactions within the CryptoKitties network are between players, rather than between players and us. And this is much more of a Napster-like game than a Spotify-like game. And it lets people understand the concept of a peer-to-peer economy, rather than a centralized economy.
The third, and I think my favorite way, where CryptoKitties starting to show the potential of blockchain in a way that can be easily understood, is this idea of extensibility. So because the blockchain software programs run out there in the open, anybody can you build on top of them without taking this thing that we call platform risk. Without taking the risk that the creators of the software can cut them off.
For example, within weeks of launching CryptoKitties, we had folks building third party applications like KittyCalc. Now we have things like KittyRaces. We have KittyHats. We have Kota Wars, which is the ability for people to actually fight their cats together. And all of these developers are actually creating an ecosystem, an economy on top of CryptoKitties in a way that shows the owners of CryptoKitties, these users, the power of blockchain. The power of open source services that can live out there, be accessible by anybody, and eventually be recombined by developers in new ways, creating more choice for the consumer.
Yeah, the KittyVerse is essentially this global community of developers that are building applications for CryptoKitties. Most of them are hobbyists, they're hackers, they're independent Ethereum developers. But we also have the academic institutions. We also have people who are trying to use CryptoKitties to teach the value of blockchain. But also the path to building on top of the blockchain.
And recently, we've also had professional gaming companies that are reaching out, wanting to both license the CryptoKitties IP, as well as develop on top of the platform. And the reason people are doing this is that the community is a cohesive community of folks that are willing to spend in order to invest in their experiences in their cats.
And in a sense, because blockchain is a fabric of value, because these cats as tokens already hold value, it's relatively straightforward for third party developers to be able to have their own business models on top of ours. For example, KittyRaces charge per race. KiittyHats allowed artists to design clothing, whether they're hats or glasses or a variety of accessories for cats, and sell them to kitty owners and make a piece of the profit.
So in this sense, you kind of, because blockchain is such a by nature, a token-driven economy, it makes it a lot easier for folks who are already part of the network to spend on complimentary experiences, without affecting, I should mention, our experience. Nobody can corrupt your CryptoKitty. No third party developer can build something that takes something away from you. They can only add to the experience that we created.
The folks that are playing CryptoKitties are really the early adopters that were willing to go through all the steps and look past all of the under construction signs on the Ethereum blockchain to actually get to the core experience and be a part of the community. Most of our players actually don't identify as cryptocurrency fans. They identify as gamers or folks that are interested in the collectibility aspect of things.
And this is across the board. Whether it's parents that are playing CryptoKitties with their kids to teach them the value of true ownership and the different, the possibilities for a different kind of digital future. And these are mostly Silicon Valley parents, who themselves work in large tech companies. Or it's just hobbyists who really enjoy the puzzle aspect of finding these cats. And they enjoy the fact that they can actually monetize and sell the collectible pieces that they don't want.
Unlike every other game, where you sort of have to take the things you don't want, as well as the things that you're working for. It's a very interesting concept to them, because they're playing the game and they're enjoying, but they can also get the financial return or recoup part of their costs by interacting with this larger economy.
As a company, we're really focused on two categories of things. I mean, first is obviously creating experiences that teach people the benefits of blockchain. And CryptoKitties, we've got a lot of big plans for CryptoKitties ahead. You might have also seen Cheese Wizards, which is our next game experience. Now Cheese Wizards is essentially everything that people thought CryptoKitties was, in the sense that it's a speculative experience, it's a high risk experience really designed for the current crypto community.
And it lets people interact socially in a way that really wasn't possible before blockchain. And in a different way, I should add, than CryptoKitties. So CryptoKitties and Cheese Wizards are two of the experiences that we're working on currently. But the rest of our team is really trying to solve some of the fundamental blockers to adoption of blockchain as a whole. And we're trying to do that in a way that's as open source and serving the community as possible.
One of the products that we released in this vein recently is called Dapper. And Dapper is sort of the first step towards making blockchain safe and usable for everybody. Because today, most blockchains' applications really expect the user to take charge of everything related to their own security. They give the private keys away to the user and they say, well hey, if you lose this, you're completely out of luck.
We honestly got a lot of flack from some of our players for not guiding them better throughout that process. And that's why we created Dapper. Dapper as a smart contract wallet, which means instead of us giving your private key to you and putting it on your device or a place that it can get lost, we put it in a smart contract. And there's a variety of rules that determine how you can interact with your assets, And in a way, that keeps you safe, but doesn't give us any control over the things that you've bought and or paid for.