East West Lifestyle

CryptoKitties Gold: The Power of Combining Blockchain and Video Gaming

Using cryptocurrencies and blockchain to rake in video game revenue.

CryptoKitties is a mobile app game for collecting and breeding digital cats and is one of the first games to be built on blockchain technologies, leveraging the logic of cryptocurrencies. Deemed “cryptocollectibles,” each CryptoKitty can be bought, sold, or traded like a traditional collectible using blockchain security.

Owned by innovative tech studio Axiom Zen, the studio offers a wide array of digital solutions and products, from virtual reality, to delivery route optimization technologies. Their unique blockchain gaming concept has so far been one of their most successful products. Since CryptoKitties first pounced onto the scene in November 2017, 250,000 people have played the game, selling more than 500,000 kitties and surpassing a total transaction value of $40 million. At some points, Ethereum’s blockchain network became clogged due to the sheer purchasing and trade volumes of these digital cats. In March, the startup managed to raise $12 million to build out its digital project, and the average price of a CryptoKitty was at a high of $41.

“Games consistently appear at the precipice of emerging technology,” says Bryce Bladon, co-founder of CryptoKitties and communications director at Axiom Zen. “They offer a crucial gateway for consumers to enter new platforms, and give incredible data and insights that shape growing technologies.”

The sweet spot between video games and blockchain

Cryptocurrencies have been receiving more attention and acceptance on Wall Street. One example of this is Morgan Stanley’s plan for Bitcoin derivatives and swap contracts, which are used in traditional currency markets. Other investment banks like Goldman Sachs have also announced the incorporation of more crypto-trading, and the market seems poised for a cryptocurrency future. Critics have mentioned the inconvenience of using nascent cryptocurrency technologies, but that narrative is quickly changing with the wider adoption of cryptocurrencies.

"We wanted everyday people to experience the values of decentralization and blockchain technology for themselves, and a game was the best way to do that."

-Bryce Bladon

(Photo credit): Axiom Zen

On a consumer level, a report by Chainalysis showed that consumers spent a monthly average of $190.2 million in bitcoins on merchant services in 2017, compared to $9.8 million in 2013. So far, 20,000 people have also signed up for a digital currency debit card, after pre-registering to open accounts at a cryptocurrency bank that fintech company Bitwala is slated to open this year. Some ATM machines, online shopping platforms, restaurants, and even landlords are beginning to use bitcoin and cryptocurrencies. With more mainstream consumers embracing the technology, it comes with no surprise that the video game industry is an eager early adopter. CryptoKitties set the precedence for a broader application of blockchain technology and made the concept more conventional, reminiscent of the way Pokemon Go encouraged mainstream adoption for mobile augmented reality.

“We wanted everyday people to experience the values of decentralization and blockchain technology for themselves, and a game was the best way to do that,” says Bladon.

But like all collectible crazes (remember Beanie Babies?), the zeal for CryptoKitties has since died down. Transaction volumes have dropped from 1.3 million in December to 115,000 in May, and the median price of a kitty today is $9. But the hardcore fan base, where much of the revenue is made, still remains; just this month, someone purchased CryptoKitty #896775 for $172,000 (600 Ethereum bitcoins). The game consistently remains within the top five most trafficked games on Ethereum, and the kitties themselves have been showcased in various museum exhibitions as art pieces.

The future of gaming and cryptocurrencies

The rise of crypto gaming has only just begun, as blockchain technology expands from one game to another. Interestingly, the adoption of cryptocurrencies is happening at a much faster rate among gamers because the culture of digital currency had existed before the current trend. Whether it was through the Super Mario World’s emphasis of collecting “coins,” or any number of role-playing games (RPG) that required gamers to collect items before they could advance, the concept of accruing and spending digital currency is familiar.

(Photo credit): Axiom Zen

“Having your in-game items and achievements secured by blockchain technology can lead to engagement, evangelism and a diverse ecosystem of experiences that complement the core experience.”

-Bryce Bladon

Games that use cryptocurrencies up the ante by giving items tender value and allowing gamers to have actual ownership of items that they purchase through the game. “Right now, players invest both time and money into collecting and achieving digital assets that only exist within a singular platform or product,” says Bladon. “Blockchain means players can truly own their digital assets and experiences. Players are given respect from the creator, freedom to use their item as they see fit, and have security in knowing that the rules dictating its use are immutable.”

Other mobile games that have begun incorporating cryptocurrencies and blockchain technology include Blockchain Game, Alien Run, Miner Simulator, Itadaki Dungeon; and Spells of Genesis. Strategy games, puzzles, races, and trading games allow for each of these games to have a blockchain element, while also making them accessible to the public through the app store.

“Knowing what we know, I’d predict that a wider adoption of cryptocurrencies and blockchain will occur in the next one to five years,” says Bladon. “A few big future successes will define how the technology is used and understood.”

What to know if you’re planning on using blockchain for your business

In-game items and downloadable content translate into big money for the video gaming industry; a prime example is Grand Theft Auto V, where 78 percent of its total gaming revenue came from such digital add-ons. Signs indicate that blockchain applications will become an inevitable feature in the future, and businesses in the industry are looking for ways to become an early adopter of the trend. “Understanding the correct balance of centralized convenience and decentralized value is important,” says Bladon. “It’s still easier to use actual dollars rather than cryptocurrencies, so you need a good reason to choose the less ubiquitous currency for transactions. Consumers find value in both an offering and the convenience of the offering.”

Bladon emphasizes the importance for user experience. The transactions must be seamless in order for the video game and the business model of cryptocurrencies to become successful.

“Knowing that the digital items you earn in a video game have real-world value is an incredibly powerful concept,” says Bladon. “Having your in-game items and achievements secured by blockchain technology can lead to engagement, evangelism and a diverse ecosystem of experiences that complement the core experience.”

Having a sense of ownership for gamers encourages a deeper sense of loyalty, engagement, and investment in a video game. “I invest a lot of time and emotion into completing levels in games,” says Chris Wells-Weitzner, an avid video gamer and an enthusiast for the RPG game, "The Legend of Zelda."

“To me, it’s all about the storyline, solving the puzzle and collecting items to give yourself the best chance of winning the game,” he continues. “I’ve never played CryptoKitties before, but the concept sounds awesome.”

CryptoKitties is a great example of leveraging ownership. “As a game developer, it’s valuable to have so many people complementing the core experience with what would be sequels, mods, and downloadable content in a traditional gaming ecosystem,” says Bladon. “These fans then bring CryptoKitties new life, new ways to play, and a profound utility each day.”