The rise and fall of CryptoKitties
Mahi Sall, Advisor, Fintech-Bank Partnerships, Payments and Financial Inclusivity
January 25th, 2023
Mahi Sall is the CEO & Founder of FinXpair, a Berlin-based strategic advisory boutique firm focu[...]
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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