The rise and fall of CryptoKitties
Rapidly growing technologies also cast their shadows from a compliance perspective
Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Web3, Decentralization, DAOs
Want Institutional Adoption? You Have to Sacrifice Tornado Cash, says Kevin O’Leary
Cointelegraph | Brayden Lindrea | Aug 14, 2022
Mr. Wonderful thinks that crypto needs more regulation and less “crypto cowboys” like Tornado Cash creator Alexey Pertsev, who he suggested was a necessary sacrifice to create stability for institutional inflows.
Kevin O’Leary, Shark Tank host and venture capitalist:
- Ethereum-based crypto mixer Tornado Cash are a part of a “crypto cowboy” culture that shouldn’t have a place in the industry. Instead, crypto needs a “rules-based environment” in order to attract real institutional capital into the digital-asset industry, and much of that regulation needs to stamp out protocols like Tornado Cash, which enables users to conduct anonymous transactions and therefore potentially engage in criminal activity.
“At the end of the day, it’s okay to arrest that guy. Why? He’s messing with the primal forces of regulation [...] If we have to sacrifice him, that’s okay, because we want to have some stability in that institutional capital.”
See: Analysis: Into the Eye of a Tornado | Sanctions Compliance Best Practices for Crypto Businesses
Gnosis co-founder Stefan George:
- he protocol brings “much-needed privacy” to Ethereum and that writing open-source software should be recognized as “an expression of free speech.”
Patrick Collins, Chainlink Lead Developer Advocate:
- the decision to remove Tornado Cash’s GitHub account is “much worse than sanctioning a website,” as code is speech and, by doing so, the U.S. Treasury is violating the first amendment of the U.S. Constitution.
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Protocol | Aug 15, 2022
Spinning Crypto Perspectives
Dutch authorities say there may be more arrests. The Netherlands’ Financial Advanced Cyber Team, part of the country’s Fiscal Information and Investigation Service, began investigating Tornado Cash in June.
See: How do intellectual property rights apply to AI?
- The arrested man’s name is Alexey Pertsev, his wife confirmed to the Block. He was apprehended last Wednesday in Amsterdam’s city center, two days after the United States issued sanctions against Tornado Cash. Pertsev is not a founder of Tornado Cash. The founders are Roman Semenov and Roman Storm. Neither has been arrested, and neither responded to Protocol’s requests for comment.
- According to Dutch authorities, Pertsev is “suspected of involvement in concealing criminal financial flows and facilitating money laundering,” — not personally disobeying sanctions or making other illegal money transfers with his own funds.
Liability for contributing code is a complex question. Much depends on the specifics of a country’s law.
- In the United States, for example, posting code on GitHub is legal in most cases so long as it’s not a violation of intellectual property law. That’s because code is viewed as speech protected by the First Amendment.
- Jeffrey Blockinger, general counsel at Quadrata, says most developers don’t need to be concerned about an arrest. “While privacy concerns are legitimate, this arrest is reportedly focused on evidence of actual criminal activity,” he told Protocol. Quadrata, which provides an identity layer for blockchains, says it can help block people subject to sanctions and other bad actors from completing transactions.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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What Happened to Cryptokitties? Blockchain’s First Blockbuster Game
IEEE Spectrum | Matthew S. Smith | Aug 10, 2022
The rise and fall of CryptoKitties
CryptoKitties was among the first projects to harness smart contracts by attaching code to data constructs called tokens, on the Ethereum blockchain. Each chunk of the game’s code (which it refers to as a “gene”) describes the attributes of a digital cat. Players buy, collect, sell, and even breed new felines. Just like individual Ethereum tokens and bitcoins, the cat’s code also ensures that the token representing each cat is unique, which is where the nonfungible token, or NFT, comes in.
“Before CryptoKitties, if you were to say ‘blockchain,’ everyone would have assumed you’re talking about cryptocurrency”—Bryce Bladon
Launched on 28 November 2017 after a five-day closed beta, CryptoKitties skyrocketed in popularity on an alluring tagline: the world’s first Ethereum game. “As soon as it launched, it pretty much immediately went viral,” says Bryce Bladon, a founding member of the team that created CryptoKitties.
See: What Does The Financialization of Games Mean? GameFi
“That was an incredibly bewildering time.” Sales volume surged from just 1,500 nonfungible felines on launch day to more than 52,000 on 10 December 2017, according to nonfungible.com, with many CryptoKitties selling for valuations in the hundreds or thousands of dollars. The value of the game’s algorithmically generated cats led to coverage in hundreds of publications. Today, CryptoKitties is lucky to break 100 sales a day, and the total value is often less than $10,000. Large transactions, like the sale of Founder Cat #71 for 60 ether (roughly $170,000) on 30 April 2022, do still occur—but only once every few months. Most nonfungible fur-babies sell for tiny fractions of 1 ether, worth just tens of dollars in July 2022.
What went wrong?
Breeding, a core mechanic of the game, lets owners pair their existing NFTs to create algorithmically generated offspring. This gave the NFTs inherent value in the game’s ecosystem. Each NFT was able to generate more NFTs, which players could then resell for profit. But this game mechanism also saturated the market. Xiaofan Liu, an assistant professor in the department of media and communication at City University of Hong Kong who coauthored a paper on CryptoKitties’ rise and fall, sees this as a flaw the game could never overcome. More players meant more demand, but it also meant more opportunities to create supply through breeding new cats. This quickly diluted the rarity of each NFT.
See: Epic Games Raises $2 Billion From Lego Investors & Sony for Family-friendly Metaverse
“The price of a kitty depends first on rarity, and that depends on the gene side. And the second dimension is just how many kitties are on the market,” Liu says. “With more people came more kitties.”
“Players who wanted to buy CryptoKitties incurred high gas fees,” Mihai Vicol, market analyst at Newzoo, said in an interview. “Those gas fees were anywhere from $100 to $200 per transaction. You had to pay the price of the CryptoKitty, plus the gas fee. That’s a major issue.” Players might want to consider other gaming outlets instead and take advantage of $10 sign up bonus in Australia.
The high fees weren’t just a problem for CryptoKitties. It was an issue for the entire blockchain. Anyone who wanted to transact in Ethereum, for any reason, had to pay more for gas as the game became more successful.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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In Risk Lies Opportunity: RegTech in the metaverse
The Paypers | Raluca Ochiana | Aug 3, 2022
Rapidly growing technologies also cast their shadows from a compliance perspective
According to the 2022 Crypto Crime Report by Chainalysis, two main forms of illicit activity were observed in the past year: Wash trading to artificially increase the value of NFTs and money laundering through the purchase of NFTs. In principle, these scams are not new, however, the fast pace of technological applications poses a serious threat due to the still inadequate regulations.
Wash trading is the practice of purchasing and selling assets in a manner that is intent on manipulating or misleading the market supply and demand. In this case, the seller is on both sides of the executed transaction with the goal to make one’s NFT appear more valuable than it really is. Many NFT trading platforms allow their users to trade by simply connecting their wallets to the platform without any identification process. Therefore, there is no special effort needed to operate wash trading with NFTs.
See: Why RegTech is Essential to Regulate Innovation and What It Means for Policymakers?
In particular, from a compliance perspective there is enormous potential for improvement in the identification and verification of market participants in order to eliminate initial fraud risks. Customized KYC processes can help to detect and reduce transaction risks between multiple addresses and identify the actors behind them.
This need is also underscored by the report from blockchain platform Chainalysis, which states that 262 users were identified as having sold an NFT more than 25 times to a self-financed address, making a collective profit of nearly USD 8.9 million from wash trading activities.
In Risk Lies Opportunity
The latest Financial Action Task Force (FATF) guidelines have outlined that NFTs are not directly affected by AML restrictions as they are not seen as ‘Virtual Assets’. However, the FATF stresses that already existing AML regulations should apply to NFTs if the usage falls into particular categories, such as usage for payment, storing of value, or other investment purposes. Beyond that, NFTs are interlinked with the crypto ecosystem that is facing an increase in regulations. Based on this dependency, regulations are about to spill over to the NFT space.
See: Report: Targeted Update on Implementation of FATF’s Standards on Virtual Assets and VASPs
Since the industry expects future regulations to be implemented, it is advisable that players in the crypto and NFT space pre-emptively adopt internal fraud and AML programmes. Especially now is the chance to proactively address underlying risks of NFTs and to establish a sustainable business by pre-emptively adopting risk mitigation measures.
This opens up the potential for RegTech use cases and solutions to shine. Agile RegTech solutions enable companies to tackle the challenges of a rapidly changing regulatory landscape and stay ahead with technological advances.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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5 Ingredients to Cook Up Your Own DAO
Cointelegraph Magazine | Julian Jackson | Aug 9, 2022
A DAO is an online community that collectively controls a cryptocurrency fund to achieve a particular goal — whether buying a copy of the United States constitution or running a DeFi protocol — explains Delman from Aragon, an organization that has helped usher almost 4,000 DAOs into existence.
See: Blockchain-based replacement for traditional crowdfunding: DAOs
You’ll also need a set of tools — and unique ingredients — and some collaborators to help you bring this banquet to the table for more people to enjoy.
Just five ingredients
- Establish a common goal, mission or objective.
- Build a community of like-minded people using Discord or Telegram.
- Create a shared fund to finance your goal.
- Construct a governance framework.
- Communicate to the group how the project is developing and disburse rewards as appropriate to contributors.
Some different DAO flavours include Protocol, Philanthropy, Collector, Investment and Grant DAOs.
“The idea is attempting to automate as many exchanges between people as possible and making it trustless so you don’t need to trust people,” Delman explains. “This makes it easier to collaborate with people that you meet online or to create a global team.”
Cooking Up Your DAO Recipe
Step 1: Lightly toast governance: You need to know what you want to do, and you need a strategy for how to achieve that. You also need research and planning. You essentially create a mini economy around a token. You have to decide what the different activities and priorities and contributions are. “You have a token, which might not just be a unit of value, but also symbolizes all the incentives and goals, so you can align different stakeholders to your objective,” Hof says.
See:
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Are DAO governance attacks avoidable?
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Research: Ownership of Top 10 Web3 DAOs is Surprisingly Concentrated
Step 2: Add some expertise: If you had an investment project, you might want to be guided by five people who were experts in the field — 90% of the members might agree to delegate authority to them to make the decisions. Hof also stresses the importance of getting good technical people to program your smart contracts because that is a major area where things can go wrong.
Step 3: Create staking incentives: Delman of Aragon says, “I see a DAO as a little like Kickstarter. Instead of giving you a free T-shirt or free product, a DAO gives you a stake in what you are building.”
Step 4: Confirm voting method(s): Snapshot’s taken off because it is a simple and free method of voting in DAOs, which is off-chain and efficient in utilizing resources. On-chain voting is effective but quite resource-intensive, so keeping voting off the main blockchain is often desirable.
Step 5: Pop it in the oven until ready for eating: Delman says, “The tool that Aragon operates is basically you can press a few buttons and then you are ready. If this proposal passes, then the money should move to this account. Everything is tied together with smart contracts.”
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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FTX Pay is Integrating with Reddit and Arbitrum
In the latest instance of FTX embarking on a massive bear market buying spree, the crypto exchange has struck a deal with Reddit.
The crypto-to-fiat exchange platform FTX Pay is integrating with Reddit and Arbitrum to allow users to pay gas fees on Reddit’s “Community Points” tokens using fiat. Community Points, rolled out in 2020, are blockchain-based Reddit tokens that allow users to divvy out rewards and interact with the social platform
Reddit is a choice platform for retail crypto investors — crypto was the platform’s most-viewed topic in 2021. In July 2021, the rollup solution Arbitrum won a contest to build an Ethereum rollup for Community Points, and now the rollup is launching on Ethereum’s mainnet, the company said Tuesday.
See: Manage Your Way Through The Labyrinth Of Cryptocurrencies By Following These 6 Tips
Community Points allow subreddits to reward active members or make governance decisions.
Like all layer-2 rollups, Community Points transactions are settled on Ethereum, and Reddit enlisted the expansion-minded FTX to let users pay Ethereum’s transaction fees using fiat.
Amy Wu, head of FTX Ventures:
Users need Eth for gas fees to transact with their Community Points on-chain, and FTX Pay allows them to do that.
Community Points are, for now, only live in the r/cryptocurrency and r/fortnite subreddits, though Reddit has a waitlist. Reddit airdrops points to active users — similarly to how users receive “Karma” for upvoted posts.
Top contributors in r/cryptocurrency earned 3,774 “Moons” tokens last month, or about $340 at current secondary market prices. A spokesperson for Reddit said Community Points are only meant for community governance and “reputation points” on Reddit, adding that selling the tokens is against the site’s terms of use.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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MoonDAO is Sending a YouTube Influencer to Space – Moon Party Anyone?
Coindesk | Eli Tan | Aug 6, 2022
A decentralized autonomous organization (DAO) called MoonDAO sent someone to space on Thursday, one of the biggest successes yet for such a crypto-crowdfunded project.
The DAO didn’t send just anyone up – Coby Cotton, a member of the viral YouTube trick-shot group Dude Perfect, was chosen in a Discord vote by the DAO’s more than 5,000 members to be its astronaut representative. The DAO’s future ambition includes hosting parties on the Moon.
Crowdfunding DAOs, which are groups of crypto enthusiasts that come together and purchase a currency or non-fungible token (NFT) to raise funds towards a common goal, have been more prone to failure than success.
The genre was popularized in November 2021 by a group called ConstitutionDAO, which came together to raise $40 million to purchase an original copy of the U.S. Constitution.
See: Blockchain-based replacement for traditional crowdfunding: DAOs
Dude Perfect’s Cotton made the trip with five other first-time astronauts as part of the Jeff Bezos-backed space tourism program Blue Origin, which has thus far completed six of these missions, each time sending regular people into space for around 12 minutes.
MoonDAO was able to purchase Cotton’s ticket with funds from its crowdfunding campaign that has so far raised more than $8 million. The DAO’s mission is to “decentralize access to space,” with the ultimate goal of creating its own Moon colony, according to its website.
I'm just kind of in love with the idea of DAOs in general, I think that they have a lot of promise, like a tool set for people to collaborate and coordinate online. When you buy an NFT, you know, it's pretty abstract. The idea that you could be selected to go into space because of it, now that’s interesting.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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How will Web3 impact the future of work?
WEF | Jul 25, 2022
The global pandemic accelerated the digital transformation of work and the work experience. Stranded at home, millions of workers across the globe replaced daily commutes, office desks and watercooler chats with Zoom calls. Cue the next evolution in the virtualization of work, the metaverse; essentially an application of spatial computing that will see us using our avatars to work, meet, learn, socialize, play, trade and transact in fully immersive virtual environments. Media hype notwithstanding, the metaverse is already here.
Decentralized autonomous organizations in web3
DAOs exploit smart contract architectures and digital tokens verified on public blockchains, such as Ethereum, in order to give members of a DAO the possibility to directly participate in its governance. Decision making thus becomes collective and based on how many votes – expressed in the number of tokens – a certain proposal in the DAO gets. There are no barriers to entry, and owning tokens in a decentralized autonomous organization is permissionless. Since all rules are coded in smart contracts and all transactions are recorded on a blockchain, a DAO is fully transparent to its members. If the DAO is purposed with developing ideas, or software, then the IP is open-sourced, at least for now.
See: Sounds like a DAO, Looks like a DAO: Introducing the Modern Digital Organization
The combination of the metaverse and a decentralized web3 has the potential to radically transform operating models and the labour market:
- As Zarkadakis explains in Cyber Republic, as decentralized autonomous organizations are adopted more widely, new types of businesses will emerge that would look more like cooperatives and less than corporations, significantly reducing agency costs.
- Leadership will rely on soft power and empathy, using culture and shared values to align the interests of disparate stakeholders to a common mission and purpose.
- In a DAO there are no officers, or directors, or managers, and therefore leadership roles are more fluid and impermanent, giving more opportunities to members to rise up. DAOs may decide to prioritize social goods – such as job security – above operational efficiency.
- This shift from hierarchical structures to flat, widely distributed networks and ecosystems run by stakeholder communities instead of boards and executives, will have a profound impact on work too.
How Distributed Workers Get Compensated
See: Fintech Fridays EP55: Global Hiring Trends: How Gen Z Talent Thrives
Within the context of work being increasingly organized as decentralized autonomous organizations, the traditional hierarchical mix of roles within a corporate structure (leader, manager, employee, contractor and vendor) and functions will morph significantly into a flatter construct comprising:
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A core group of individuals responsible for coordination of work and delivering on the value proposition of the DAO.
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A broader contributor group that provides specific services to execute the mission of the DAO. This includes other DAOs that provide services like HR, finance and accounting and customer service on an ongoing basis and individual contributors (gig workers or contractors) that take on projects as needed.
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An even broader group of “members” who will promote brands, support continued crowdsourcing of ongoing product innovation or otherwise contribute to the advancement of the DAO’s mission.
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The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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