When investors gave US$12 million (AU$16.12 million) to a startup called CryptoKitties in March, many raised their eyebrows at the news.
CryptoKitties, which describes its product as one of the world's first blockchain games, uses blockchain technology to collect and "breed" digital cats. Users can buy colourful, googly-eyed cats, some of which cost thousands of real-world dollars, to trade and "breed" more digital cat offspring.
It's a bit like blockchain-based Beanie Babies.
Like Beanie Babies, CryptoKitties are considered collectibles. Their novelty lies in the fact that owners can prove that they possess sole ownership of the Crypto Kitty they have purchased.
In December, it was reported that one particular Crypto Kitty sold for around US$155,000.
People had already spent millions buying and trading CryptoKitties by the time top-tier investors including Andreessen Horowitz and Union Square Ventures decided to give the company $US12 million.
Before the deal went through, one investor in the company told Business Insider that the product embodied one of the most important and applicable use-cases of the blockchain: The ability to safely store digital collectibles online.
But it looks like CryptoKitties itself could be in danger of becoming a short-lived novelty.
The number of CryptoKitties transactions decreased in June by 98.4 percent compared to its peak of 80,500 transactions back in December 2017, according to data from Bloxy.
The game is still among the most popular options for ethereum-related gaming, but public interest in buying and selling them seems to have waned significantly in recent months.
CryptoKitties cofounder Bryce Bladon told Business Insider in an email that the decrease in CryptoKitties transactions was to be expected, and there were a few factors, one of which was the skyrocketing costs of processing a transaction based on ethereum.
"Since launching CryptoKitties and running headfirst into the challenge of scaling, we've made numerous product and design decisions to reduce the number of superfluous smart contract interactions," Bladon said in an email.
"From our discord community to the KittyVerse - our soon-to-launch program for developers building experiences on top of our [platform] - we're delivering numerous ways to engage with CryptoKitties outside of buying and breeding them.
"In addition, our community has become much more educated on what CryptoKitties is and how it works. Gas fees on the Ethereum network have also increased by 50x what they were when we launched. The result is much more purposeful transactions, as opposed to people engaging with the smart contract just to see what happens."
Basically, Bladon is saying that the livelihood of CryptoKitties can't simply be measured by the number of transactions that happen in a month, and that people's behaviours have changed as the price of processing a transaction has increased.
This has caused people to be more strategic in how often they make one, according to Bladon, and to experiment less with the platform's "smart contracts."
He could be right. But it still looks like there's a significant dropoff in the way people are interacting with the digital cats.
In April, Greylock Partners took a closer look at the usage of some of the most popular decentralized apps. Drawing on data from DappRadar, the firm estimated CryptoKitties daily active users at around 907.
On Friday, that same metric on DappRadar had fallen to around 300 daily active users. (Bladon said he was unable to confirm any numbers regarding CryptoKitties' daily active users as he was travelling, and wouldn't have access to the company's analytics until the following week.)
The average price of CryptoKitties seems to have decreased dramatically, as well. Blockchain analytics site Diar pegs the average price around US$5 per digital cat, a decline from what Diar suggests was its all-time median high of around US$41.
Like any marketplace, a decrease in the number of transactions is seldom good news - which could be one factor as to why CryptoKitties seems eager to find different use-cases for its product.
Just last week, the company announced the addition of "KittyBattles" and "KittyHats". Two new ways of engaging with CryptoKitties beyond a strictly transactional context.
Last month, a cryptocurrency startup founder told Business Insider that she felt that CryptoKitties might be destined for the same fate as their Beanie Babie counterparts:
"People want to spend their crypto on real stuff," she said.
"The only way you can justify spending hundreds of thousands of dollars on a cartoon cat is if there aren't enough real world use-cases for cryptocurrencies."
This article was originally published by Business Insider.
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