CryptoKitties

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CryptoKitties  is an Ethereum blockchain collectable game that had a big impact on the blockchain when it came out in November 2017.  Their goals, as stated in their whitepaper were to;

  1. Gamify the unique features of the blockchain.
  2. Make an application that was approachable, easy for the non-technical, and fun.
  3. Make a self-sustaining financial model (no ICO required)

They succeeded on all fronts well beyond their expectations. The game generated over $12M in sales in its first 2 months and it has brought many people to the Ethereum Blockchain that would never have touched it before.  It has made Ethereum fun, because the kitties are cute, and they are fun to trade.  This was their goal and let’s face it disintermediation which is central to many of the other use cases in this website is pretty boring in comparison.

Maturity

This is an operating game, fully mature, though improvements are coming.

Problem Being Solved

Problem?  What problem?  This is just for fun.  Though non fungible tokens truly do fill a hole (more details below).

How it works top level

All you need to play CryptoKitties is MetaMask and some Eth in a wallet.  CryptoKitties is based on the Internet’s love for cute kitties.  It involves collecting, trading and breeding cute cat pictures.  You buy a cat, using your Eth through the marketplace at cryptokitties.co.  More comprehensive instructions are here.

CryptoKitties use a Descending Clock Auctions.  The Seller sets a Top Price, a Bottom price and a duration.  The price slides in a straight line as the duration goes buy.   The buyer sees the sliding scale.  He can wait, or bid immediately.  The sliding scale avoids entering bids that are later outbid.  This is frustrating in Ethereum because you lose the gas even in a losing bid.  The sliding scale avoids that.  When you bid, you expect you will win.  If you want a lower price, you must wait and hope no one else bids and takes it before you.

Some example cats are below;

After you have purchased your kitty, you can breed with another kitty, sell it or just look at it and wait for its value to increase. You can put it out to sire (where you put it up for auction, you keep the money, but they get the pup) or purchase a sire (you pay the money and keep the pup).  These kitties seem to be unisexual (any kitty can get a bun in the oven and birth a pup).  You can also breed them with your own kitties.  This will only cost you the gas for the transaction.  Each time a kitty mates, the time for recovery and gestation increases.

Kitty Genetics

When two kitties breed they mix their genetics to make a unique new kitty with traits from its parents plus some random traits.  The actual formula is secret and held by the CryptoKitties authors.  There is already a crowd-sourced website  that is working to define the genome independently and then they can determine the secret formula.

CryptoKittie Advantages

The real advantage of Crypto Kitties are the advantages of the blockchain; immutability (permanence), distributed and trading without a middleman.  For the first time in digital artifacts history, you can own a digital collectible (no one can take it away), trade it with someone else without relying on an outsider and it is not under control of a central authority.

Costs

Every CryptoKittie transaction (buy, sell, breed, sire) takes gas, but the transactions are not terrible complex so gas prices are not very high, 136,000 gwei which represented $6 in Jan 2018 when the network was very slow and gas prices high.  Then of course there is the cost of kittie or the auction.

Finances

CryptoKitties is self-financing.  They developed the code on their own and immediately got income from two sources.  Of the 50,000 genesis kitties they keep the revenue from sales of the genesis (Generation 0) kitties which as of Jan 2018 are selling at 0.35Eth or less ($350).  Also, they keep 3.75% of all sales on their marketplace.

Under the Hood

CryptoKitties is a website that is connected to the Ethereum Blockchain.  It uses MetaMask to connect the two.  In some ways you could consider CryptoKitties still relatively centralized.  Every transaction must go through their website.  Let’s go through what is on-chain or off-chain;

On Chain:  Transactions; Buying, Selling, Siring, Sliding Scale Auctions

Off Chain:   Viewing the Kitty (reading the genome and converting it to a picture), Breeding (Mixing the genome of each parent to create the new kitty genome)

 At the moment, the only way to view, trade or breed a CryptoKitttie is through their website.  As the internet decodes the genome, other people can make websites that will allow viewing and trading.  Breeding will need their proprietary functions and it is doubtful third parties can do it.

Non fungible tokens

First off, what is a fungible token?  Well Eth and all ERC20 tokens are fungible.  With a fungible token, you don’t care exactly which Eth you have, because every token is identical and interchangeable.  With a NON-fungible token, each token can be different, they need not be interchangeable.  The information defining the token specific data is called the token Metadata.  The spec requires that the meta data is stored off-chain (such as IPFS, Swarm or with CryptoKitties on their website).

For CyptoKitties the genome of the cat is the Metadata.  The fact that the token represents a CryptoKittie (any kitty) is defined in the token definition.

ERC721 Standard

To create CryptoKitties, the authors had to create the Non-Fungible Token (NFT’s) standard ERC721  (Ethereum Request for Comment).  This standard is related to ERC20 used for most tradable tokens with the addition of the token metadata.  In this standard all the metadata is stored off-chain on an external website such as IPFS or just an internet address.  The standard is public domain using the CCO standard.   This shows excellent governance etiquette.  While CryptoKities is a proprietary for-profit creation of Axiom Zen (the company that owns CryptoKitties) the Non-Fungible token standard is public domain and available for all.

Impact of Non-Fungible Tokens

By creating tradable, ownable, distributed digital collectables using a public domain standard opens significant new opportunities.  If you take the case of items in video games, to date these items are traded within the Steam app often using a middleman.  Trust is required and often difficult to get.  It is now possible for a video game to create an ERC721 token for each item and allow trading.  Within the game they can enable trustless trading.  In addition, if the game developers allow the definition of the item to be public domain, the ownership of the item can exist after the game and could even be used in future games.  Third party websites could allow near trustless trading even without having an Ethereum account.  With an Ethereum account full trustless trading is possible.  This requires the game developers to enable this capability and to support it later.

Real World Collectables

It is possible to establish a connection between a real world collectable (or in fact anything of value) and an NFT.  This way a transfer of ownership requires both the physical transfer or the actual object and the transfer of its token in the Ethereum blockchain.  This creates an additional layer of security and establishes public ownership of the item.  It may even impact the saying “Possession is 9/10ths of the law” for possession without the token may look almost like theft.

These are just a couple of easily seen applications.  Clearly NFT’s can revolutionize several industries and have a long lasting deep impact.

Advantages of Blockchain

CryptoKitties use the advantages of the Ethereum blockchain, immutable, secure to great effect.  The public aspect is perhaps not a big advantage.  Normally NFT’s would not be traded often and would be valuable so the cost of gas and the impact of speed should not be a big disadvantage.

CryptoKitties is hit with the first disadvantage; speed because it is insanely popular, and many transactions are being demanded every minute (when I checked Etherscan in Jan 2018 I found 430 pending transaction on CryptokittiesCore Ethereum Smart Contract address.  The gas price is also having an impact as the network is almost always at top speed.

Governance

Governance for CryptoKitties is relatively simple as there are just users and the CryptoKitties core team.  They have active discussion channels on social media and a development path for a mobile app and payments in fiat and other cryptocurrencies

Ideal Use Case for Blockchain?

According to Vitalik’s 5 Points how well does this use case suit a blockchain application?  Score 16/25, 64%.  Great!

Censorship Resistant  (3/5) – The kitties being traded are valuable to their owners and ensuring the history is complete also important
Fraud Resistant (3/5) – The kitties being traded are valuable to their owners and ensuring the history is fair and unchanged also important
Transparency (3/5) – It will be important that the public using CryptoKitties know that all transactions are clear
Robustness – (3/5) – It is important but not vital that the marketplace has a 100% uptime
Interoperability – (4/5) – outside applications on CryptoKittie DNA (as an example) are already inter operating with the DApps.  The fact that no one can break that interoperability is a big feature

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