NFT, cautionary tales of Ethereum and cryptocurrency security
Author MATTHEW S. SMITH
On September 4, 2018, A man named Rabono bought an angry cartoon cat named Dragon for 600 Ethereum —the Ethereum cryptocurrency worth about $170,000 at the time, or the cryptocurrency valued at $745,000 in July 2022.
This is the highest transaction for irreplaceable tokens (NFTs) to date, a new concept for a unique digital asset at the time. This is a compelling opportunity for the world's first blockchain game - the popular CryptoKitties. But sky-high transactions conceal a more difficult fact: CryptoKitties is dying, and it has been a while since.
Dragon has never been resold – it's a strange fate for one of the most relevant NFTs in history. As the NFT market soared to record sales, total sales by 2021 were about $18 billion, new NFTs such as “The Merge” (a piece of digital art that costs $92 million) left Dragon behind. Is the world just a happy new thing? Updated blockchain project? Or is this the fate of waiting for all NFTs?
Blockchain, smart contracts and cat gene
To understand the slow death of CryptoKitties, you have to start from scratch. blockchain technology can be said to have started with a paper by computer scientist David Chom in 1982, but with the success of Bitcoin, it attracted mainstream attention, a cryptocurrency created by anonymous people or someone called Satoshi Nakamoto . Essentially, blockchain is a simple transaction ledger placed one by one – unlike a long Excel spreadsheet.
The complexity lies in how the blockchain keeps the ledger stable and secure without central authority; the details of how to complete it vary from blockchain to blockchain. While Bitcoin is popular as an asset and can be used for currency-like transactions, there is limited support for anything else. Newer alternatives are now also emerging, such as Ethereum, which is popular for allowing complex "smart contracts" - executable code stored in blockchains.
"Before CryptoKitties came out, if you said ‘blockchain’, everyone would think you were talking about cryptocurrency”
- Bryce Brydon
CryptoKitties was one of the first projects to be used to attach code to a data structure called tokens. Each piece of the game code (it is called "gene") describes the properties of the digital cat. Players buy, collect, sell, and even cultivate new cats. Just like a separate Ethereum token or Bitcoin, Cat’s code also ensures that the token representing each cat is unique, and that’s where irreplaceable tokens or NFTs come in. By definition, alternative items may be replaced with the same items. In contrast, NFTs also have unique codes that work for other NFTs.
You need to understand the last part of the blockchain puzzle: "gas". Some blockchains, including Ethereum, charge fees for the calculations that must be performed for network verification transactions. This sets obstacles to overworking of blockchain networks. High demand means high fees, and users are encouraged to think twice before making a transaction. The resulting reduced demand can protect the network from overload and transaction times. But when NFT games get popular, that can be a weakness.
CryptoKitty's rise and fall
After five days of closed testing, CryptoKitties was launched on November 28, 2017. Its fascinating slogan is: The world's first Ethereum game.
Founding member of the team that created CryptoKitties said Bryce Bladon. “As soon as it was launched, it immediately became popular, and it was an incredibly confused period.”
According to nonfungible.com, sales soared from 1,500 on the day of release to over 52,000 on December 10, 2017, with many CryptoKitties selling for hundreds or thousands of dollars. The value of cats generated by the game algorithm has sparked scrambling for hundreds of publications.
What is CryptoKitty?
Each CryptoKitty They are all a token, a set of data on the Ethereum blockchain. Unlike the cryptocurrencies Ethereum and Bitcoin, these tokens are irreplaceable; that is, they are not interchangeable.
Unique identity | Mother ID card, father ID card | Gene | |
token contains the bloodline of the kitten and other data. | The gene of the kitten determines its unique appearance. |
DAPPER LABS
More importantly, this game can be said to have promoted the success of using the Ethereum blockchain in the game. With the release of CryptoKitties , Ethereum took off like a rocket, from 2017 In early November, less than $300 per token climbed to just above $1,360 in January 2018.
Late in 2017 and 2018, the rise of Ethereum continues with dozens of new blockchain games based on cryptocurrencies. Ethermon, Ethercrafttml3, Ethercrafttml3, Ether Goo, CryptoCountries, CryptoCelebrities and CryptoCities and CryptoCities are relatively well-known examples.
This is the breakthrough that Ethereum fans are waiting for. However, for the healthy development of blockchain games, CryptoKitties stumbled all the way, which is an ominous sign for the healthy development of blockchain games, because Ethereum has risen.
Daily sales peaked in early December 2017, then fell, and by January and March, the average sales were less than 3,000 units. The value of NFT itself dropped even slower, suggesting that the game has a loyal fan base like Rabono, who bought Dragon shortly after the game reached its peak. Their activity set a record of NFT value in 2018. This keeps the game surrounded by news hotspots but fails to attract new players.
Today, CryptoKitties is fortunate to break through 100 sales a day, but the total value is often less than $10,000. Large deals, such as the sale of Founder Cat #71 on April 30, 2022 for 60 Ether (approximately $170,000), will still happen – this happens only once every few months.
CryptoKitties is unlikely to reverse. Dapper Labs, which owns CryptoKitties , has turned to projects like NBA Top Shot, a platform that allows basketball fans to buy NFT "Shot" from NBA games—essentially video clips. Dapper Labs did not respond to an interview request for CryptoKitties. Bladon left Dapper in 2019. What's wrong with
?
A clue to the demise of the game can be found in the last post of the Game Blog (June 4, 2021), which celebrates the reproduction of the 2 millionth CryptoKitty. Breeding is the core mechanic of the game, allowing owners to pair their existing NFTs to create algorithmically generated offspring. This gives NFT its inherent value in the gaming ecosystem. Each NFT is able to generate more NFTs that players can then resell for profit. But this game mechanism also saturates the market.Xiaofan Liu, assistant professor in the Department of Media and Communications at City University of Hong Kong, co-authored a paper on the rise and fall of CryptoKitties, which he believes is a flaw that the game can never overcome.
Liu said: "First, the price of an CryptoKitties depends on the rarity, and rarity is determined by genes. The second dimension is how many kittens are on the market. With more people, there are more kittens."
More players mean more demand, but it also means more newly bred Kitties to create supply. This quickly dilutes the rarity of each NFT.
Bladon Agrees to the evaluation of the breeding mechanism. "I think the criticism makes sense" he said, explaining that it is to provide a feeling of discovery and excitement. He also hopes this will encourage players to hold NFTs for a long time rather than sell them immediately, because breeding theoretically provides lasting value.
game
CryptoKitties blockchain game involves the collection, sale and breeding of irreplaceable cats. The huge number of DAPPER LABS
CryptoKitties raises another more direct problem: it functionally destroys the Ethereum blockchain, the second most valuable cryptocurrency in the world (after Bitcoin). As mentioned earlier, Ethereum uses gas fees to price for transaction costs. At any trading peak - buying or selling, etc. - it will cause gas fees to soar, and that's exactly what happened when CryptoKitties landed on the moon.
"Anything that symbolizes the success of CryptoKitties is imitated. Most of the things that are not immediately visible are ignored." - Mihai Vicol, a market analyst at Bryce Brighton
Newzoo, said in an interview: "Players who want to buy CryptoKitties need to pay high gas fees." "The gas fees per transaction range from $100 to $200. You have to pay the price of CryptoKitty, plus the gas fees. This is a major issue."
High fees are not just CryptoKitties 2CryptoKitties The problem with . This is a problem with the entire blockchain. As the game becomes more and more successful, anyone who wants to trade on Ethereum, for whatever reason, has to pay more gas fees.
This situation is still a problem for Ethereum today. On April 30, 2022, when Yuga Labs released Otherdeeds, an NFT that promises owners virtual world real estate, it pushed Ethereum’s gas fee to the sky. The average price of gas fees is above $450 at its highest, up from about $50 the previous day.
Although the demand for the network has weakened as the players leave, the high gas fee is likely to become the last nail in the game coffin. The median price of CryptoKitty has been around 0.04 Ether, or $40 to $50, which is usually less than the gas fee required to complete the transaction. Even those who want to have and nurture cheap CryptoKitties for fun will take hundreds of dollars to get the kitten they want.
Blockchain Game: Go two steps forward, one step back
CryptoKitties The rise and fall of the world is dramatic, but gives hundreds of successors a chance to learn from their mistakes and surpass their predecessors. Unfortunately, many people didn't follow the lesson: prices and activities of modern blockchain games such as Axie Infinity and BinaryX both initially saw similar surges, followed by a long spiral decline.
Bladon said: "Anything that symbolizes the success of CryptoKitties has been imitated. Anything that cannot be seen immediately is mostly ignored." It turns out that many of the difficulties of CryptoKitties are invisible to the public. "The problem is that the CryptoKitties project does fail.We have to deal with a lot of people who have never used blockchain before. We have a hacker vulnerability that leaked tens of thousands of dollars in Ether. ” Similar questions plagued recent NFT projects, usually larger.
Liu is not sure how blockchain games can curb this problem. He said: “The short answer is, I don’t know.” To be short, this is not just a problem with blockchain gaming. ”
For example, 2 World of Warcraft faces rampant inflation for most of the game. This is due to the continuous influx of players, the value of new items introduced by gold coins and expansions continues to increase. The ongoing demand for new players and items is related to another core issue in today’s blockchain games: they are usually too simple. “I think the biggest problem with blockchain games at the moment is that they are not fun, and if they are not fun, people can’t want to invest in the game itself,” said Vicol of Newzoo. “Everyone who spends money wants to leave the game with more money.” "The launch of
CryptoKitties has pushed up the value of Ethereum and the number of transactions on the blockchain. While the game transaction volume plummeted, Ethereum transaction volume continued to rise, which may also be due to the arrival of a number of counterfeit NFT games. Once
starts to experience a spiral decline, this perhaps unrealistic wish becomes impossible. Players have no other attachment to the game except to increase their investment, and they will only quickly escape without looking back.
Although some blockchain games seem to ignore CryptoKitties Red flags of rapid growth and long-term decline in , but some other games have learned their lessons. Most blockchain games now use sidechains, a blockchain that exists independently but connects to another more prominent "parent" blockchain. These chains are connected by a bridge, which helps transfer tokens between each chain. This prevents the rise in fees on the main blockchain, as all gaming activity occurs on the sidechains.
However, even this new strategy is problematic, as sidechains proven to be less secure than parent blockchain. The attack on Ronin, the sidechains used by Axie Infinity, took away the equivalent of $600 million in losses. Polygon Another sidechain often used by blockchain games, it had to patch a vulnerability that put $850 million at risk and pay a $2 million vulnerability bounty to hackers who discovered the problem. Players with NFTs on the sidechain are now carefully focusing on its security.
Look back Dragon
The cryptocurrency wallet with nearly a million dollars Kitten Dragon now only holds $30 worth of Ether and has not traded NFTs for years. The wallet is anonymous, so it is possible that the person behind the wallet can be transferred to another person. Nevertheless, it is hard for Rabono not to regard the idleness of the wallet as a signal, and the fun has not continued.
Whether blockchain games and NFTs Whether it's soaring or falling zero, Bladon is still proud of what CryptoKitties has achieved and hopes it will push the blockchain industry in a more approachable direction.
Bladon said: "Before CryptoKitties, if you said 'blockchain', everyone would think you're talking about cryptocurrencies. What I am most proud of is that it is something truly novel. There is real technological innovation and real cultural influence. "
This article appears in the September 2022 print issue in the form of "The Spectacular Collapse of CryptoKitties".
