CryptoKitties: Are blockchain Beanie Babies the future of e-commerce or a fad?
VANCOUVER — At first glance, CryptoKitties are googly-eyed virtual cats that come in an array of fanciful forms — from fluffy ninjas, to feline-duck hybrids.
But don’t underestimate these collectible critters, because some CryptoKitties have commanded six figures on the virtual market, and the B.C.-based company behind the project says it’s attracted more than US$12 million in investments.
And depending on whom you ask, the blockchain-based game is either a sign of where the digital economy is heading, or just another crypto-craze fuelled by the internet’s cat obsession.
For Vancouver-based developer Axiom Zen, it all began with a simple idea, said CryptoKitties communications director Bryce Bladon.
“Let’s put cats on the blockchain,” Bladon recalled a fellow CryptoKitties cofounder saying.
And that, more or less, is what they did. The result is a virtual game that CryptoKitties, which spun off into its own company in March, has compared to breedable Beanie Babies on the blockchain — collectibles that can be bought, sold and “sired” on the Ethereum network.
When a CryptoKitty changes hands, the exchange is logged by the blockchain, a digital ledger of transactions that is shared among a network of computers.
Every CryptoKitty is encoded with a one-of-a-kind token, which like its digital DNA, determines its heritable traits.
When two felines breed, new characteristics — or in the game’s parlance, “cattributes” — can be unlocked through the genetic lottery.
“Ironically, (we’re) trying to be the next Bitcoin by showing that there is a use for this technology beyond Bitcoin.”
A run-of-the-mill virtual kitten costs only a few dollars, but CryptoKitties of special pedigree can have exorbitant price tags.
One CryptoKitty was purchased for US$140,000 at a charity auction in May, and others have garnered similarly eye-popping sales in the cryptocurrency ether.
It’s hard to profit off virtual commodities that can be copied and pasted with just a few keystrokes, but Bladon said blockchain technology has given rise to a new phenomenon in e-commerce — “digital scarcity.”
Blockchains can set limits on how many and what types of CryptoKitties are in circulation.
This means limited-edition CryptoKitties are verifiably rare, and thus, more valuable.
As Bladon sees it, this ability to limit virtual supply makes a “true digital economy possible,” because it means cryptoassets can have real-world values.
Still, he noted, CryptoKitties are not financial securities, and he would steer users away from treating them like investments.
When asked about the prospect of there being a CryptoKitties bubble, Bladon initially said it was “certainly possible,” but later revised that assessment.
“I think we’ve proven at this point it’s not a bubble for CryptoKitties,” he said.
“We aren’t nearly as on fire as we were when we launched, and this is by no means an accident.”