Loot is a viral social network that looks like nothing you've ever seen

Today, let’s talk about the latest project from a co-founder of Vine and what it tells us about how the tech industry is evolving. This is a rare tech story where basically every fact of it has surprised me on some level. And while some of the ideas here are way out there — to the point that I’m imagining many of you slamming your laptops closed to avoid hearing any more — the far frontier they represent appears to be inching closer to the mainstream every day.

I. The road to Loot

When I wrote here in March about non-fungible tokens, or NFTs, I tried to dazzle you by rattling off some of the more impressive sales numbers from the time: $600,000 for the Nyan Cat meme, $5.8 million for artwork by Grimes, $230 million in lifetime sales for NBA Top Shot.

What has happened since then has been enough to make some of those numbers look minuscule by comparison. On Thursday, the owners of an NFT associated with the original doge meme, which had been purchased for $4 million in June, sold partial ownership in the piece via tokens. (Coindesk has a great explanation of how this works.) Buyers snapped up the token, and now that single NFT is valued at $225 million.

Even as NFTs slipped out of the headlines in the mainstream press, then, the number of people creating, acquiring and trading them continued to grow.

That brings us to Dom Hofmann. Hofmann is best known as the co-creator of Vine, which helped to establish the short-form video format on mobile devices and became an incredible engine of meme culture along the way. Later he created Peach, a pop-up social network that remained beloved by its users far after its brief moment in the spotlight faded. More recently he worked on an effort to revive Vine as an app called Byte; it sold earlier this year.

Like a lot of software engineers, Hofmann had kept tabs on the world of cryptocurrencies as they evolved over the past decade, occasionally buying coins to better understand how they work. In the last decade, most of the focus on the blockchain was related to the original project: Bitcoin. More recently, though, developers have grown fond of an alternative blockchain, Ethereum, which is designed to let them create decentralized applications through more sophisticated smart contracts than Bitcoin enables.

For the first few years after Ethereum was invited, nothing much materialized that would be of great interest to the mainstream. But then a bunch of companies started growing really quickly last year by building decentralized finance apps on its blockchain, over a handful of months that came to be known as “DeFi summer.” (The worst part of writing about blockchain technologies is every single name involved.)

After that happened, Ethereum became like any other platform that had suddenly proven itself capable of generating huge amounts of money: it started to attract developers in droves.

Hofmann was one of them. In December, he began to teach himself Solidity, the programming language for creating smart contracts on Ethereum. He also sold an art piece he had created as an NFT and enjoyed the process. As he created, he became more and more interested in using NFTs to inspire decentralized creative projects.

In March, he created Blitmap, which he described as a “community-created fantasy universe.” It wound up serving as a kind of blueprint for what Loot would become.

Working with 16 other artists, Hofmann created 100 32-by-32 pixel images combining elements of science fiction and fantasy; those were then “remixed” into 1,600 “siblings.” The idea was to use the Blitmaps as the basis for a kind of blockchain version of the Marvel Cinematic Universe, turning characters into merchandise, games. The project was a modest hit — the cheapest Blitmap today costs about $98,000.

More importantly, it set the stage for what was to come.

II. Loot drops

One of Hofmann’s other side projects in recent years was to create a text-based adventure of the sort that served as the basis for some of the original video games. As part of the development process, he wrote a random item generator: a piece of software that would return names for various weapons, pieces of armor, and accessories.

Since Blitmap’s launch, Hofmann had been thinking about other novel ways to promote the creation of blockchain-based art and communities to surround them. One idea he had was to let people create (or “mint,” in blockchain-speak) NFTs based on his random-item generator for free — essentially just to see what would happen. He would not provide any art work or any instructions on what to do with them. And he would give these “bags” of items away for free, minus the transaction fees required by the Ethereum network.

“A lot of people have been wanting some sort of game that takes place in a fantasy realm, or a science-fiction realm,” he told me. “They want it to be compatible with with other realms. They want to be able to build on top of that. They want to know that the items that they have will always be with them. [I was] just kind of building in that direction. It was an experiment.”

His only real goal, he said, was that people would choose to mint all the bags he made available.

Last Friday night, Hofmann announced Loot in a tweet:

An uncharitable way of describing all this is to say that Hofmann created a way to let people pay the Ethereum network to return a list of useless names to them. But Hofmann’s fans saw it very differently, and quickly turned Loot into a phenomenon.

The 7,777 bags that Hofmann offered up for minting were all snapped up more or less instantly. In the next five days, Coindesk reported, Loot bags were resold for $46 million, and had a market cap of $180 million. On Wednesday, the cheapest Loot bag could be had for about $20,000. That price more than doubled overnight, and would now cost more than $46,000.

So far, this seems like any other NFT story: weird art work is released, price goes up quickly. What makes Loot different is the number and variety of projects that have spun up around it at a staggering speed.

First, of course, people started drawing the Loot bags: some by hand, and some by artificial intelligence-generated pixel art.

Then they began to create guilds based on the items found in their bags. Owners of
”divine robes,” of which there are only 396 in Loot, set up their own community — along with a storefront for robe purchase (cheapest price: $169,142).

Then they used smart contracts to let people sell individual items from within their Loot bags to, as the creator put it, “upgrade your adventurer.”

At this point I feel it necessary to point out that there are no adventurers in Loot. There is no game in Loot. There are just items, and pictures of those items, and tens of millions of dollars betting that it will all somehow turn into something much more. As one tweet put it: “Loot is NFT improv.”

Now the question is whether Loot will somehow evolve backwards from a set of in-game items to an actual, playable experience. If so, who will develop it? And how? For the moment, no one really knows.

“Obviously, games are very involved,” said Hofmann, who has been monitoring all these developments as a moderator of Loot’s thriving Discord server. “It remains to be seen what’s done with that, but it’s definitely a possibility. I think it would be really cool.”

One thing that interests him is seeing whether Loot items can span different games built by different people — a concept which is key to what tech leaders this summer have taken to calling the metaverse.

A key aspect of making that happen is to make Loot more accessible — the vast majority of people being unwilling to spend thousands of dollars to participate. On Wednesday, Hofmann announced “synthetic Loot” — essentially, a replica Loot bag that can be claimed by anyone who sets up an Ethereum wallet for free.

“Creators building on top of Loot can choose to recognize Synthetic Loot as a way to allow a wider range of adventurers to participate in the ecosystem, while still being able to easily differentiate between ‘original’ Loot and Synthetic Loot,” he tweeted.

III. Future games

So what next? Hofmann says he has no plans to shift full time to working on Loot. Due to the decentralized nature of the project, he’s not sure he could truly steer the community, even if he wanted to. (He remains the biggest shareholder in the project, due to the hundreds of bags he has yet to release for minting.)

“I’m not leading the project,” he said. “I’m providing guidance, when wanted.”

Mostly, he says, he’s just interested to see what the community does next.

One question I had is whether you can build giant fictional worlds this way. Right now the NFT market is full of speculators hoping to flip their acquisitions for a quick profit. There is more than a little of the mania that fueled this winter’s meme stock enthusiasm to be found on the crypto Discords. (More than a little cynicism among the investors, too.) How much will these folks ultimately be willing to contribute to building a world?

But it’s also true that plenty of people get deeply involved in fictional worlds without owning the underlying intellectual property.

“At the end of the day, these are just items on a list,” Hofmann said. “It’s just what people do with it and how they ascribe value to it. And value doesn’t have to be a dollar amount. It can be many things.”

Of course, it’s also possible that the bottom falls out: that the frothy Loot market won’t be able to sustain itself. Perhaps owning these artificially scarce goods won’t prove as attractive over the long run as they have been to collectors in 2021.

But this has always been the bear case for the blockchain: that eventually enthusiasm for it would fizzle out, and everyone would lose their money. I’ve never been quite that bearish myself, but I get it: to the average person, it’s still not clear what anybody needs a blockchain for.

The thing that has always stopped me from being a blockchain bear is that each year, the number of smart people I know who are developing on it goes up. With every month that goes by, a bet on the failure of Ethereum means betting against a growing number of talented people. The odds on that bet don’t feel great to me today — and they’re getting worse all the time.

With projects with Loot, we can begin to see something new coming into focus: an open-source … something with potentially broad appeal.

On his blog, gaming company founder Kyle Russell envisioned a successor to Marvel’s cinematic universe popping up on a project like Loot:

Assuming the project’s originators went with the direction of the Loot zeitgeist, all of this would be [intellectual property] that could be re-used and remixed by anyone. That might sounds crazy — isn’t the point to own it, and the point of owning it is to control how it’s used?

That’s the Disney status quo. In a world of projects like Loot, you want to reinforce the value of the NFT you own — and that value reflects that NFT’s renown and reputation. Echoing the phrase “all press is good press”: any remix is a good remix. To be referenced is to still be culturally relevant. So if you own an NFT describing Arachnid Person, you want to contribute to an environment where as many people want to include Arachnid Person in their works as possible so that Arachnid Man #1 becomes something worth owning.

In the meantime, for the couple thousand people who managed to acquire them, Loot has been life-changing. Jackson Dame, who is the content and community manager at the cryptocurrency wallet Rainbow, told me he had only started paying attention to cryptocurrencies eight months ago.

Dame, 28, followed Hofmann’s work closely — he loved Blitmap — and was able to secure some Loot bags as part of the initial release.

“He was doing something very different with a lot of creative depth in comparison to most NFT projects,” Dame said. “So I sensed it had longer-lasting potential.”

After the price spiked, Dame sold part of his collection for six figures — he landed two divine robes, among other things — and was able to pay off his debts and contribute to his family members’ retirement.

As for Hofmann, he continues to work on multiple projects. There’s a Blitmap release coming up soon, he said. And he’s working on Supdrive, an effort to build a fantasy gaming console on the blockchain. In the meantime, he says he’ll work on Loot “as just another builder” — “finding new ways to iterate on it and expand it,” he said.

What he’s not doing is raising a bunch of venture capital and doing a traditional startup.

“Companies are difficult,” he said. “I’m enjoying having a respite from that.”

The Ratio

Today in news that could change public perception of the big tech companies

⬆️ Trending up: Facebook said it was part of an effort to airlift 175 Afghan citizens, including some employees, to Mexico. What were Facebook employees doing in Afghanistan? (Sara Fischer / Axios)

⬇️ Trending down: Black creators say their LinkedIn posts are being removed at a higher clip than other users, often for unclear reasons. LinkedIn blamed the issue on technical and moderation errors. (Steven Melendez / Fast Company)

Governing

⭐ Facebook was fined $270 million in the European Union related to alleged privacy violations by WhatsApp. WhatsApp plans to appeal. Here’s Sam Schechner in the Wall Street Journal:

The second large EU privacy fine against a U.S. tech company in two months was issued Thursday by Ireland’s Data Protection Commission on behalf of a board representing all of its EU counterparts. It came as part of a decision that found WhatsApp didn’t live up to requirements to tell Europeans how their personal information is gathered and used, including regarding the sharing of their information with other Facebook units.

As part of the decision, regulators gave WhatsApp three months to bring its communication with users into compliance with several provisions of Europe’s privacy law, the General Data Protection Regulation, which regulators began enforcing in mid-2018. That includes reorganizing and clarifying parts of its privacy policies and creating prominent notices for nonusers that their phone numbers may be uploaded to the app by their contacts.

Texas is set to pass a new, Florida-style law banning Facebook from “censoring” conservatives. It’s unconstitutional, of course, but at least this one doesn’t have an exemption for theme parks. (Makena Kelly / The Verge)

The Federal Trade Commission ordered SpyFone and its CEO to get out of the surveillance business. Its software has almost no theoretical good use and was beloved by stalkers; a rare and excellent enforcement action on this sort of thing here by the FTC. (Joseph Cox / Vice)

A federal court in Florida dismissed a defamation lawsuit from a man who sued Twitter alleging that its decision to temporarily lock the New York Post’s account during the Hunter Biden laptop affair was tantamount to calling him a hacker (?). Anyway, he has to pay Twitter’s attorney fees. (Colin Kalmbacher / Law and Crime)

Rudy Giuliani recorded a Cameo endorsing a case against his own client. Be careful which texts you will accept payment for reading out loud! (Olivia Nuzzi / New York)

A New Jersey woman who went by the handle @AntiVaxMomma on Instagram was charged with selling fake vaccine cards. I wonder how they caught her! (Jonah E. Bromwich / New York Times)

The United Kingdom’s Age Appropriate Design Code, intended to create privacy safeguards for children, has now taken effect. Developers who violate the code could attract the attention of the country’s data protection watchdog.(Natasha Lomas / TechCrunch)

The United Kingdom’s proposed Online Safety Bill would likely result in expanded censorship of posts from LGBT people and other marginalized groups, observers say. I’m glad this obvious side effect of speech regulation bills is getting more attention. (Benjamin Butterworth / iNews)

Alibaba pledged $15.5 billion to China’s “common prosperity drive.” Is there a reason China insists on these weird displays of corporate fealty rather than like, just taxing companies? (Coco Liu / Bloomberg)

Related: Weibo banned several stock-tip chat rooms with millions of followers under new Chinese rules banning information that could harm the economy. (Bloomberg)

Industry

⭐ In a significant concession to developers, Apple agreed to let makers of “reader” apps like Netflix and Spotify include a single link in their apps telling users they can sign up (and avoid in-app purchases) on the web. The change will take place in 2022; many questions remain about how Apple plans to enforce its new policy. Here’s Chaim Gartenberg at The Verge:

In a press release, Apple claims that the move will close an investigation by the Japan Fair Trade Commission (JFTC), and that it’ll only apply to those sorts of “reader” apps right now — a category that was originally designed by Apple to placate companies like Netflix and Hulu by allowing them to let users simply sign into their existing account instead of signing up for a new subscription via the App Store (and having to pay Apple’s fees).

The JFTC has confirmed the agreement in a press release of its own, saying that the move by Apple “would eliminate the suspected violation of the Antimonopoly Act.” The commission, which has been investigating Apple since 2016, says the company has pledged to report on the status of app review transparency once a year for the next three years. According to the JFTC, Apple proposed changing its app review guidelines in response to the investigation.

Related: Apple was hit with an antitrust lawsuit in India over its policy of requiring developers to use its in-app payments system. It feels like another one of these is filed somewhere every day. (Aditya Kalra / Reuters)

Hundreds of millions of dollars worth of stolen goods are ending up on Amazon. Organized crime rings are stealing from stores in bulk and then peddling their wares online; retailers are spending millions in an effort to stop them. (Rebecca Ballhaus and Shalini Ramachandran / Wall Street Journal)

Twitter is planning to test new privacy tools, including automatically archiving old tweets, in an effort to get people to tweet more. An excellent move; long overdue. (Kurt Wagner / Bloomberg)

Roblox is adding voice chat. A gaming platform can only let Discord eat its lunch for so long before it starts paying attention. (Taylor Hatmaker / TechCrunch)

Alfi is a company that “has ambitious plans to use facial recognition to target individualized ads to people as they walk through an airport, a shopping mall or stare at a screen in the back of an Uber.” Absolutely no thank you. (Brody Ford / Bloomberg)

Those good tweets

Talk to me

Send me tips, comments, questions, and rare Loot bags: casey@platformer.news.