WTF is CryptoKitties: What it is, Why they’re worth anything, and How it works

WTF is CryptoKitties: What it is, Why they’re worth anything, and How it works

I’m a dog lover who currently owns four virtual, cartoon cats because I was curious.

Hopefully this post will help you make sense of the Cryptokitty madness because for the most part there’s no one who is explaining it in a way that I would understand. I got into this digital mess because I wanted to learn more about cryptocurrency, blockchain technology, and get an idea of how the whole thing works. For the most part the early adopters are cryptocurrency enthusiasts (mostly white techy dudes) so there’s no where for me to get a perspective similar to mine. This post is the result of a few hours of scrolling through reddits, google searches, and personal experience. Of course, this is not an exhaustive explanation, but hopefully contains enough information for you to talk to someone about this new phenomenon that is in its infancy (since November 2017).



Disclaimer: I am not an expert. But now this is on the internet so it’s all true.

 

A CryptoKitty Looks Like…

These are my CryptoKitties. They are computer generated cartoon cats. I’m very proud of my CryptoKitties because they’re kinda cute. They can also look totally demented and not like cats at all – those are kinda…less cute, in my opinion.

Here is a sampling of the current front page of my Marketplace. As you can see, there are all kinds of combinations of traits. Traits that make up your Kitty may include eye shape, eye color, fur pattern, tail type, belly fur, eyebrows, mouth, chin, whiskers, expression.

 

Where Babies Come From

CryptoKitties have DNA and that’s what makes each one unique. Depending on their parents, a CryptoKitten will inherit a set of genes.

What a CryptoKitty is worth on the market is based on combination of these factors (these are the only really tangible ones):

  1. Rarity of traits;
  2. generation;
  3. and reproductive downtime.

Whether or not a rare trait is expressed is based on the source DNA and also some randomness. Sometimes two totally normal CryptoKitties will give birth to a “fancy”

Because all CryptoKitties are descended from GEN 0 CRYPTOKITTIES, the lower the generation, the fewer CryptoKitties there are. There are a limited number number of Gen 0 CryptoKitties (50,000) that are being released every 15 minutes for 1 year. At the time of writing a Gen 0 CryptoKitty is going for the equivalent to $500USD ish. The beginning auction price is based on the price of recent sales. Then the price goes down until someone buys it.

Newer CryptoKitties have faster reproductive rates. There’s something called “Cooldown”. This is so that you can’t have a CryptoKitties Mill. Too many kitties!!! Not enough homes!!! Every time you breed your CryptoKitty the next time you “use” them, it will take longer. Also, inbreeding is not possible. You need to buy another CryptoKitty ($$$ to $$$$$) in order to make babies, or go into the CryptoKitty sperm market and see who’s “renting” out their CryptoKitty to sire new CryptoKittens ($ to $$$ depending on genealogy).

Generally speaking, the lower your generation number, the faster your cooldown rate will be. These are both kind of a measure of your CryptoKitty’s useful life. Also, there may be value in the fact that the lower a generation your CryptoKitty is, the easier it is to track down the whole family tree. Maybe one day,  there will be value in being able to produce a consistent “look” and have a breed of CryptoKitty, just like with real dog and cat breeds. But again, no one knows how the market and economics will play out.

 

Why CryptoKitties Are Worth Anything At All // Think of CryptoKitties as Digital Art

It’s really important to note that a CryptoKitty itself is NOT a form of currency. It’s known as a cryptocollectible. Basically, like a virtual asset that has a value within a market. It’s kind of like digital art. To people who don’t care for art, a painting isn’t worth much to them and they are not willing to pay anything for a random painting. However, for someone who does like art the amount that they are willing to pay will depend on its provenance. The art lover might purchase a painting simply because they like it, or because they hope it will appreciate in value. The painting itself doesn’t really have a value beyond what someone is willing to pay and is only valuable because there is a market for it.

You cannot use paintings as a currency because there is no single agreed upon value for each piece because of subjectivity of the market. This is what fiat currency is for. Everyone agrees that $1 bill is worth $1 and therefore we have a common currency we can use to purchase things like groceries. I can’t just go into a grocery store and trade a painting for some cheese.

However! I can trade that painting to someone else who agrees that it is valuable, in exchange for dolla billz.

Provenance in art also affects its value. Because Leonardo DaVinci is long dead there is a finite limit to the amount of DaVinci artworks out in the world. DaVinci is also a very famous name which adds value to his work. A 400 year old sketch is really cool. But still, it’s not worth very much if it was signed David Smith.

CryptoKitties have value because other users are willing to trade money for the piece of digital code that is a CryptoKitty (CryptoKat?).

Ethereum: It’s kind of like Bitcoin

CryptoKitties can only be bought using a cryptocurrency called Ethereum. Chances are, you’ve heard of BitCoin. Ethereum is another currency that can be bought. Currently a BTC is going for $21K and an Ether is going for $1.2K.

In order to participate in the CryptoKitties world you need open a cryptocurrency wallet and purchase Ether using fiat money. If you can figure out how to buy USD dollars using CAD dollars, you can buy cryptocurrency. It sounds intimidating, but it’s alright.

See post-script below for money matters. 

Why there’s nothing like CryptoKitties (yet) // What is Blockchain

Up until this point, you haven’t really been able to buy anything with Ether… Additionally, the only people who into cryptocurrency are crypto fans or investor-types or crypto-traders.

All this cryptocurrency stuff and CryptoKitties is possible because of a new technology called BLOCKCHAIN. Blockchain will be the next big technological revolution of our time. Why? Well, this is the best way I can think to explain this.

Right now we have centralized institutions, like banks, that control and regulate money. If I buy a yogurt for with a $20 bill, the store doesn’t know who had that $20 before me, and I can’t trace where that bill will go after me. Basically, my $20 doesn’t come with it’s own accountant who is keeping a ledger of the history of that $20 and every penny that $20 gets split into. Additionally, there’s no easy way to find out if the $20 bill I used is even legitimate.

Blockchain is a DECENTRALIZED system. Cryptocurrencies are incredibly disruptive because if it runs on blockchain we don’t need the middle man anymore. Each transaction is verified by going back along the network. The network isn’t stored in a single place, it’s stored everywhere. The ledger is transparent and ubiquitous.

Basically A BANK IS LIKE AN EXCEL SPREADSHEET THAT NEEDS TO BE EMAILED BACK AND FORTH, and can only be edited by one person at a time – Only one person can have the latest version of that document. BLOCKCHAIN IS LIKE GOOGLE DOCS where everyone can be editing the same spreadsheet in real time, it’s always the latest version, and you can see who wrote what.

CryptoKitties is a thing that can only exist now because of blockchain technology. Without a transparent ledger you wouldn’t be able to guarantee that a CryptoKitty is legitimate or unique. Because of blockchain you can trace ownership, parentage, progeny, and ensure that each and every transaction is secure.

 

Soooo what now?

The above is a public website where they are trying to map the CryptoKitty genome. People are investing a lot of time in this online experiment. I’ve even read of people who are working on valuation tools. CryptoKitties is exciting because it’s the first blockchain game to reach a mass audience. CryptoKitties is starting the conversation for so many interesting concepts like digital scarcity, rarity, transaction costs in a blockchain world, etc etc.

This is just the beginning of a brand new technology that will soon be everywhere in our lives. This game is the starting point and inspiration for many new applications of blockchain technology to come.

 

Links:

Home of the CryptoKitties

Where to look up “Cattributes”

My Kitties!!!

Where I bought my Ether

x.

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More on money matters:

I bought $100 CAD worth of Ether.

I bought my first cat for around $30 USD and my second cat for $20 USD. Reproducing a new cat starts at around $10-15 USD. Transaction costs have been around $3 USD. I’ve said goodbye to a lot of money through transaction costs (which you have to pay even if the transaction is a failure).

“Gas Money” – Transaction Costs in Ether: The SUPER simplified version.

Because each transaction needs to be verified by going back into the network, you can kind of think of yourself, the start of the transaction, as Point A. You need to get to Point B in order for your transaction to be verified. To get from Point A to Point B, you’ll need to fill up your car with gas. Depending on the traffic you will consume a varying amount of gas. You don’t really know how far Point B is nor how much traffic will be on the highway, so you only buy as much gas as you’re comfortable with. If you don’t buy enough gas, you may be on your way to Point B and not actually get there. However, you’ve still bought the gas.

How CryptoKitties makes money:

They take a cut of each transaction. (3.9% I believe…).

 



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