The CryptoKitties are growing up. The Ethereum-based cat collecting game received a big funding boost on Tuesday, with Andreessen Horowitz and Union Square Ventures leading a funding round that has raised $12 million. As a result, the lovable cryptocurrency-powered kitties will be spun out from original designers Axiom Zen.
CryptoKitties — which its website describes as “breedable Beanie Babies” — was one of the most visible beneficiaries of the December surge in cryptocurrency interest. The game uses Ethereum ERC-721 non-fungible tokens to create unique assets that people can trade. People use ether (the cryptocurrency that runs on the Ethereum network) to buy virtual cats and exchange with each other. A new cat will be released every 15 minutes until November 2018, after which point people will need to breed cats over an extended period. These conditions create scarcity, and one super-rare digital cat went on sale for a staggering $106,000.
“CryptoKitties are NOT a cryptocurrency,” the site’s frequently asked questions section says, dispelling any investor dreams of catching the next rising “altcoin.” “They’re more like a cryptocollectible. The real-world analogy for a cryptocurrency is dollars or pounds; a cryptocollectible’s real world analogy is closer to assets like baseball cards or fine art.”
It’s not clear what CryptoKitties plans to work on next, but the success of the ERC-721 token shows how blockchain technology can power new games. The network is decentralized, which means records of trades are stored in numerous places in a way that makes hacking extremely difficult. Similar to how Pokémon cards and Buzz Lightyear toys sparked collectibles’ interest in the ‘90s, ERC-721 could spark a new dash for digital assets.
Ethereum, which ranks as the second-largest cryptocurrency with a market cap of $56.6 billion, has inspired a new wave of businesses. The ERC-20 token standard in particular has powered a number of initial coin offerings, but CryptoKitties shows how new ideas could run on the blockchain to enable new uses.
While cryptocurrency has been characterized as a financial transfer system, CryptoKitties shows why bold new startups could emerge from a market now worth $352 billion.