If you don't understand blockchain, maybe these cats can explain it to you

If you don't understand blockchain, maybe these cats can explain it to you
PHOTO: Website/CryptoKitties

People may be flabbergasted by the idea of an illustration of a cat selling for more than $114,000, but CryptoKitties is more than that, according to its founders.

It's a lesson in both blockchain and genetics wrapped up in a digital game.

"There's no central organisation that owns these things," said CryptoKitties co-founder Mack Flavelle. "These cats do a great job of explaining blockchain to people. There's a democratization of how to use blockchain."

Flavelle is a product lead at Axiom Zen, which owns CryptoKitties.

The first thing to understand about CryptoKitties: It isn't a cryptocurrency, it's a cryptocollectable, Flavelle insists. The game involves collecting unique illustrated cats with specific digital genes, which breed and produce more cats after a certain period of time. You can keep, sell or trade your cat. That's it - well, and the game is built on blockchain technology, specifically ethereum.

Because of demand - more than 6 per cent of the etherium platform is currently being used for the game - and the volatile pricing of etherium currency ether, one uncommon kitten sold for as much as $114,481, according to third-party research from developer Niel de la Rouviere.

"Some of those extraordinary amounts, I don't really know why," CryptoKitties co-founder Benny Giang admits. "It's really early."

People like Daniel, who asked his last name be withheld for privacy reasons, say they like the game because it teaches them about blockchain technology and its applications in the real world. Daniel has been playing for a little less than a week and now has 20 kittens. He also loves how a kitten's DNA produces different kinds of cats, similar to how it works in the real world.

"Ether is rising, but all you need for a decent start is two kitties really," he said via a Reddit message. "From there, you can breed them and sell and sire them to cover all your running costs and even make some profit that you then can cash out or hold."

Photo: Screengrab

There will be 4 billion possible combinations of cats. The company does not own or control all the cats because CryptoKitties themselves can't tell when a certain type of cat will be born. It's all based on combinations of traits. For example, Giang's favourite cat is a not yet released dragon cat - but he has no idea when the right sets of cats will meet each other in order to create it.

You have to pay to play, so if you want to breed your own kittens you'll need at least two. You can buy the first generation "Gen 0" cats from the company which spawn every 15 minutes until November 2018, or you can purchase offspring from users in the auction-based marketplace.

Pricing is determined by supply and demand: "Fancy" cats with rare traits that look like birds, vampires or sailors go for more than common cats. To complicate matters, some cats may have unusual recessive genes that make them more valuable.

Each transaction is recorded on a blockchain ledger, so faking ownership or losing your cat is virtually impossible.

"In the end of the day, it's a cute game, a pioneer in its field and many are to follow," Daniel said, pointing out there's already a competitor CryptoPuppies game in the works.

Giang adds that the person who bought the $100,000 kitten could have purchased the ether coin at a lower price, so it's possible they weren't, in fact, spending that much on a digital collectible. Still, it's not the company's intention to make a game for the rich.

"What I would like is to create an ecosystem where a larger population can engage with the cats," he said. "I look forward to the future where someone who wants to spend $3 can buy one."

As for why the company went with cats as opposed to other animals, it's because cats rule the internet.

"If you were going to build a consumer internet application, you would need to explain why you are not using cats - not why you are using them," Flavelle said.

This article was first published on CNBC.

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