CryptoKitties, Explained ... Mostly
Posted December 28, 2017 4:20 p.m. EST
SAN FRANCISCO — Joe Buttram, a former mixed martial arts fighter and startup security guard turned cryptocurrency investor, was looking at a new toy called a CryptoKitty.
“You can see he wants to sire,” Buttram, 27, said.
For about 20 of the cryptocurrency called ether ($14,000 at the time), the cartoon cat would “mate” with one of Buttram’s, and he would get a new CryptoKitty. That kitty could inherit its father’s desirable eyes (traits include thicccbrowz) or fur pattern (like totesbasic).
Let’s back up.
Every new technology gets a game that helps bring it careening into the mainstream. Social networks had FarmVille. Mobile phones had Angry Birds. And, its investors hope, blockchain has CryptoKitties.
Blockchain technology like bitcoin and Ethereum, ledgers for recording virtual currency transactions, is booming, and CryptoKitties is the first big blockchain game. As they did with baseball cards, people collect CryptoKitties, but these cards can breed.
The Ethereum network, whose currency is called ether, is valued around $70 billion, but not many of the investors really know what their ether can be used to do. And now here’s one thing you can do with it: Ether is the only currency that exists in the CryptoKitties world.
Since CryptoKitties was introduced a month ago, 180,000 people have signed up. They’ve spent about $20 million in ether, and more than 10 kitties have sold for over $100,000.
Based in Vancouver, British Columbia, CryptoKitties is now a team of 18. Next the company is starting social games like kitty beauty contests and expanding into other “blockchain collectibles.”
“We’re just like, man, people want cats,” said CryptoKitties co-founder Mack Flavelle, who works for AxiomZen product design studio. “We thought it would build slowly, take a few months, but it’s been so fast.”
A few years ago, investors talked about cryptocurrencies becoming a mainstream currency, so you would one day buy coffee with your ether. But high transaction fees, slow processing and wildly fluctuating prices make it a tricky replacement for cash. So what to do with $73 billion of digital money?
“There’s nothing to do with it, so hey, for a couple bucks now you can get a cat,” Flavelle said. “Nobody’s even pretending it’s going to be a transactional currency anymore. It’s a stored value.”
Industry experts echo Flavelle’s conception of cryptocurrency as, well, not yet a currency and digital kittens as a pretty good use for it.
One of those is Dan Romero, 30, general manager of Coinbase, the main trading platform for cryptocurrencies.
“In 2014, it was more corporate, everyone was just talking about using cryptocurrency for payments,” Romero said.
No longer: “Now we’re all talking about CryptoKitties,” he said. “There’s been a resurgence of playing, and that’s a good sign.”
Like Beanie Babies before them, CryptoKitties are collectibles. Each kitty has a core “DNA” on the blockchain, and the game is basically to mate them (the illustrators do not go deep into specifics) and see what kitty results. The progeny tend to have their parents’ traits (an expensive cat will have an expensive kitten) but might surprise or disappoint with more or less valuable traits than either of its parents.
There’s a limited number of highly desirably first-generation kitties and 4 billion possible combinations of cats based on traits the on-staff artists have created (whisker aesthetic, background color, fur type). The company gets a 3.75 percent cut of the breeding and selling auctions.
“And the other thing we have are fancy cats, which are hard to unlock, and if you get one of those, it’s fancy,” Flavelle said.
What makes it fancy? “Fancy cat is a specific recipe,” he said.
The activity helps make sense of the strange world of Ethereum, Flavelle said. “In our lizard brains we have fear of chaos,” he said. “Collecting allows you to bring order.” And the game does seem to be attracting a lot of people who are willing to go through the byzantine process of getting a digital wallet and acquiring ether. When the company started, there were so many cat-based transactions, it slowed down the Ethereum network, upsetting regular traders.
“I’m not calling all blockchain people neckbeards,” Flavelle said. “But when these cartoon cats come through and sit on your network and break it, you’re not happy.”
Where there’s $20 million changing hands, there will be brokers. And a new set is cropping up to help manage the market.
At an Ethereum cocktail party in San Francisco one recent night, hosts projected CryptoKitties across the wall.
Cassandra Shi, 27, quit her job as a product manager at the financial technology firm Enova three months ago, and is going into CryptoKitties, developing a new price evaluation tool.
“I’m making a Kelley Blue Book to assess their real value,” Shi said. “There are a bunch of cattributes” — yes — “and you can do a machine learning model to assess, based on cattributes, how much each should be worth.” Shi, who lives in Oakland, sees the digital kittens as a way to get mainstream adoption of cryptocurrency beyond the mostly white and mostly male online communities that have been early adopters, she said, gesturing around the party.
“A lot of people get into this from r/bitcoin,” she said, referring to the Reddit group many investors cite as their main source of news. “Which is not a very inclusive community.”
“I have three friends who bought ether just for CryptoKitties,” Shi said. “And those are people who wouldn’t have except the kitties are so adorable.”