A look into CryptoKitties revenue model

If you have missed it, CryptoKitties was launched recently and became the most used dapp on Ethereum. The previous leader was EtherDelta, an on-chain exchange for tokens. Both are highly profitable dapps. Below is the lower bound of CryptoKitties revenue per day. CryptoKitties was deployed on 23 Nov as a beta and launched 7 days later, so the charts below ends on 11 Dec.

The same chart but in ether is shown below.

In contrast to ICOs where companies obtain a big sum of funds up front to develop a product, CryptoKitties was able to deliver a product and obtain revenue right away.

What is CryptoKitties?

CryptoKitties is a game centered around breedable, collectible, and oh-so-adorable creatures we call CryptoKitties! Each cat is one-of-a-kind and 100% owned by you; it cannot be replicated, taken away, or destroyed.

There are a few revenue streams for CryptoKitties but we will only cover 3 of them here.

1. Gen0 sale

gen0 or generation 0 kitties are virgin kitties that has not mated before and has a low cooldown for mating. They are created by the devs every 15 minutes till the end of next year to a maximum of 45,000 and sold in an auction.

2. Sale auction fee

Users are able to put up their kitties for sale in an auction. A 3.75% fee is collected for each successful auction.

3. Siring auction fee

Users are able to put up their kitties for siring in an auction so kitties from other users can mate with it. A 3.75% fee is collected for each successful auction.

ERC721 token

Most should be familiar with the ERC20 token standard that most ICOs are based on. CryptoKitties introduces a new token standard, ERC721, for non fungible tokens. In contrast with ERC20 tokens in which all the tokens are equal and interchangeable, each ERC721 token is unique. So basically each kitty is represented by 1 ERC721 token and that token can be transferred and traded. A new token is created when 2 kitties breed. Similar to ERC20 tokens, they both emit the following event whenever a transfer takes place.

Transfer(address,address,uint256)

The signature of the event is its keccek-256 hash.

0xddf252ad1be2c89b69c2b068fc378daa952ba7f163c4a11628f55a4df523b3ef

This allows easy query of the transfers from the Ethereum blockchain with the following snippet.

//dependencies:{web3: "^0.19.1"}
let filter = web3.eth.filter({
  topics: ['0xddf252ad1be2c89b69c2b068fc378daa952ba7f163c4a11628f55a4df523b3ef'],
  fromBlock: 4605167,
  toBlock: 4605168,
});
filter.get(function(error, result) {
  if (error) {
    console.log(error);
  } else {
    console.log(result);
  }
});

Here we take a look at the volume of CryptoKitties transfers compared to other tokens.

The red line includes all token transfers except CryptoKitties. So all your favorite tokens such as OMG, BAT, KNC are included here. It is impressive that the amount of kitties transfers came close to overtaking the sum of all other token transfers on the network. The spike in the red line is mainly due to a single token doing an airdrop, so we exclude it in the graph below.

As the creation of new kitties also constitutes a transfer event, a yellow line is added to give an idea of its proportion compared to kitties changing hands. The drop in red line and rise in green line is most likely due to a network congestion as CryptoKitties users were paying better gas prices than normal token transfers thus more of their transfers were included by miners.

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