CryptoKitties: The Future Is Meow

Twitch is one of the thousands of CryptoKitties out there in the blockchain universe. CryptoKitties

At an art auction in May 2018 in New York City, a man paid $140,000 for a digital kitty cat. While this sounds like an excellent reason to finally give up on humanity, it's actually a fascinating glimpse into our technological future.

The six-figure cat is what's known as a CryptoKitty. Like Beanie Babies of yore, CryptoKitties are collectibles. But unlike Beanie Babies, there is no fluffy object to hold in your hands. CryptoKitties are entirely digital.

The creators of CryptoKitties are big believers in the potential of cryptocurrencies and the blockchain, the unhackable ledger that records cryptocurrency transactions. But they also understand that people's eyes tend to glaze over when you try to explain how the blockchain works, how cryptocurrencies are mined, what smart contracts are, etc. See, you almost fell asleep!

Instead, they decided to create the world's first blockchain-based game inspired by the internet's obsession with cute cat pics. Essentially, they are tricking us into using cryptocurrencies and smart contracts by blinding us with big-eyed kittens.

Here's how CryptoKitties works. You start by buying a cat on the CryptoKitties marketplace. Each cat is "genetically" unique, meaning that its unique DNA code is stored on the blockchain and cannot be copied or changed. Because each kitty has unique DNA, it also looks different than all other digital cats. Heavier eyelids, thicker fur, perhaps wearing a wizard's robe.

Here the creators of CryptoKitties are playing with the idea of digital scarcity. In technical terms, they created a special digital token associated with each cat that is "non-fungible," meaning that it can't be replicated or lumped together with some other assets. No matter how the CryptoKitty is sold or traded, it preserves its unique pedigree on the blockchain.

Scarcity, as we learned with Beanie Babies, gives collectibles their value. The more desirable the "cattributes" (that's a real word now) of each CryptoKitty, the higher the purchase price. But to buy a CryptoKitty, you first need an online cryptocurrency wallet. The CryptoKitties marketplace runs on the Ethereum platform, so you'll need to buy some ether (that's the cryptocurrency) and stick it in your wallet.

If, like me, this is your first time buying cryptocurrency, it's a low-stakes introduction to the technology. Instead of betting your life's savings on the fluctuating price of bitcoin, you're throwing away five bucks on a digital cat that looks slightly drunk (the cheap ones ain't so cute).

Once you have a CryptoKitty, the next step is to mate it with another cat and produce more genetically unique digital offspring. (An algorithm determines how it looks or its "cattributes.") CryptoKitty owners auction off their most desirable cats as "sires" to the highest bidder. The resulting coupling is registered as a smart contract executed on the blockchain, where the offspring's genealogy is recorded for posterity.

Several of those auctions have reached six figures with more than $24 million spent on the CryptoKitties marketplace since it launched in November 2017. CryptoKitties pockets 3.75 percent of each transaction.

The creators of CryptoKitties didn't expect their digital collectibles to get this hot this fast, but their nefarious plan to get us all playing on the blockchain seems to have worked.

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