VC firm SparkLabs launches a security token to let anyone invest in its accelerator programs

Ardent crypto fanatics believe ICOs and cryptocurrencies will replace venture capital, but what if VC investors absorb crypto into their existing operations?

That’s the thesis that SparkLabs, a U.S.-Korean firm that runs multiple global funds and early-stage accelerator programs, is putting to the test with the introduction of a security token today. The firm said it is aiming to “democratize” investment opportunities by basically permitting anyone to buy into two of their accelerator program via the token, which will basically let them become LP-like investors.

SparkLabs’ team’s past successes include Siri( sold to Apple) and DeepMind( sold to Google ), and it claims a portfolio of over 160 startups from more than 60 countries. Its accelerator program has graduated over 80 companies, 80 percent of which the firm said have gone on to raise fund at an average of $3.5 million.

The experiment encompasses two of SparkLab’s new accelerator programs: a six month IOT-focused initiative in Korean smart city Songdo and Cultiv8, an accelerator for agriculture and food tech in Australia.

The firm has already created capital for both initiatives — $5.6 million for Cultiv8 and $500,000 for the IOT program — but it is aiming to bring in at the least$ 6 million from the token. That’s the minimum marketing, while the hard cap is $30 million.

SparkLabs is working with two crypto platforms to handle the token marketing to its implementation of KYC, operations and tapping into audiences. They are Argon Group, which has a community of crypto investors, and Swarm, a platform that connects retail investors with crypto the chance of PE and VC funds.

ICOs and tokens are in a precarious position in the U.S. while the SEC conducts an investigation into companies that raised money via ICOs and investors who backed them. Wary of that, SparkLabs is primarily targeted non-U.S.-based investors, but it said that the token is open to accredited investors in the U.S..

Unlike traditional LPs, who wait on the fund’s lifecycle to consider financial returns unless they can sneak a secondary share marketing, SparkLabs plans to introduce liquidity by listing the token on security exchanges in the future. That’ll make it tradeable. But the firm doesn’t advise U.S.-based investors to trade it since that is almost certain to violate the law.

Despite the legal grey areas, the firm is keen to experiment with a token, having backed a number of crypto-based companies via traditional equity investments since 2014 and also launched its SparkChain fund.

” We believe the ICO market is here to stay, it’s an boulevard for fundraising[ that] we believe will be complementary to Series B and Series C rounds ,” SparkLabs co-founder and partner Jimmy Kim told TechCrunch in an interview.” As a money, we believe in this space, and we thought we might as well dip our toes into the water and test it out .”

A number of 500 Startups’ recent batch of companies banded together to offer their own safety token earlier this year, but SparkLabs may be the first established firm to adopt the strategy officially. Already it is find strong interest from crypto hedge funds and individuals who are looking to diversify their crypto assets, Kim told, but the theory is fairly untested so it will be interesting to see how it is received by the wider market.

Certainly, it could be the first of many.

” We’re opening the doors to investors that we wouldn’t usually reach out to ,” Kim explained.” If it is currently working well, we’ll obviously do it with other funds in the future .”

Note: The author owns a small amount of cryptocurrency. Enough to gain an understanding , not enough to change a life .

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Coinbase has hired LinkedIns M&A boss to spearhead new acquisitions

Coinbase is continuing its executive hiring spree as the company has announced that Emilie Choi is joining Coinbase as vice president of Corporate and Business Development.

Choi comes from LinkedIn where she was vice president of Corporate Development and supervised a total of 40 M& -Arelated transactions. Prior to that she worked in business development roles at both Warner Brothers and Yahoo.

The hire constructs sense for Coinbase, a fast-growing startup that has had trouble keeping up with user growth and activity — both from a customer service and technical view. Having someone to spearhead acquisitions could help on this front — with limited engineering talent in the crypto space it can often build more sense to acquire or acqui-hire a startup either as a way to onboard a bunch of technologists at once or to quickly get a piece to new technologies without having to build it in-house.

Coinbase says that Choi “will be focused on scaling Coinbase globally, seeking out world-class acquisition and partnership opportunities, and managing our strategic projects.”

So far Coinbase hasn’t had any big acquisitions — but that may change under Choi’s leadership, especially considering the company is now well capitalized from both significant venture funding( $225 million to date) and now from running a super profitable trading business.

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Visa confirms Coinbase wasnt at fault for overcharging users

Yesterday, we wrote that Coinbase clients were being charged multiple times for past transactions.

While some speculated that the erroneous recedes were down to a Coinbase engineering issue, Coinbase issued a statement saying it wasn’t liable for the duplication charges. The blame, instead, rested with Visa for the route it handled a migration of merchant categories for cryptocurrencies, Coinbase said.

While you can read my post yesterday for an in-depth description of what happened, the basic gist is that about a month of old transactions were refunded and recharged under a different merchant category. Many users saw the recharge come through before the rebate processed, making it definitely sounds like the latter are double charged. Honestly, the questions was likely exacerbated by existing payment rails — it’s normal for refunds to take multiple days to show up on credit and debit statements.

But here’s where it gets weird — this morning Visa issued a statement to some publications , which sounded to us( and others) like the latter are blaming Coinbase, telling TNW that “Visa has not made any systems changes that would result in the replicate transactions cardholders are reporting.” We are also not well informed any other merchants who are experiencing this issue.”

But now the payment giant has issued a second statement inducing it crystal clear that it wasn’t Coinbase’s fault.

The following is a joint statement from Visa and Worldpay, which is Coinbase’s payment processor partner. While Coinbase initially distributed the statement on its own blog, we’ve also received the statement immediately from Visa.

Over the last two days, some customers who used a credit or debit card at Coinbase may have considered duplicate transactions posted to their cardholder accounts.

This issue was not caused by Coinbase .

Worldpay and Coinbase have been working with Visa and Visa issuing banks to ensure that the duplication transactions have been reversed and appropriate credits have been posted to cardholder accounts. All reversal transactions have now been issued, and should appear on customers’ credit card and debit card accounts within the next few days. We believe the majority of these reversals have already posted to accounts. If you continue to have problems with your credit or debit card account after this reversal period, including issues relating to card fees or charges, we encourage you to contact your card issuing bank.

We deep regret any inconvenience this may have caused customers.

While the statement doesn’t give a ton of lucidity on the issue, it seems to absolve Coinbase of any blame, which is a win for the startup considering it’s been trying to prove to the world that its engineering and customer service squads can stand up to the challenge of maintaining a dependable financial platform.

Indeed, Coinbase CEO Brian Armstrong hit out at media reports that initially placed the blame for the snafu on Coinbase.

The startup — is valued at $1.6 billion after raising $100 million last year — has suffered some challenging periods as it continues to scale its services to accommodate its 10 million-plus registered customers.

Issues over the past year have included muddling prices on Overstock.com, a flash accident, and a general struggle to keep up as cryptocurrencies boomed in 2017. In December, Coinbase launched an internal investigation into suggestions that company insiders profited from knowledge of impending support for Bitcoin Cash.

This post was updated to clarify that Visa itself didn’t initiate the new batch transactions.

Note: The writer owns a small amount of cryptocurrency .

Jon Russell contributed to this story. He also owns a small amount of cryptocurrency .

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Coinbase is launching its own cryptocurrency index fund

When you’re the runaway leader in a growing industry, you typically have two sentiments: A) Stay in your lane and let other companies pop up to solve the industry’s problems, or B) Try to offer as many products as is practicable and own the entire customer experience from -AZ( no Amazon pun aimed ).

If there’s any doubt which alternative Coinbase is gunning for, that’s now gone. The digital currency giant only announced they’re expanding in yet another direction by launching a passively managed cryptocurrency index fund.

The fund will have a $ 10,000 minimum and charge a 2 percent annual management fee with no performance fee, which is rare for most traditional investment funds, but luckily is becoming the norm for crypto-specific passive investment vehicles.

The Index Fund is the first investment vehicle from Coinbase’s new asset management division. It will include all digital currencies that trade on GDAX, weighted by marketplace cap. This entails at launching it will be comprised of 62 percent Bitcoin, 27 percent Ethereum, 7 percentage Bitcoin Cash and 4 percent Litecoin. This will rebalance whenever a new asset is added to GDAX as well as once a year to account for render changes( as different currencies have different inflation targets ).

That being said, Coinbase does plan to offer future investment vehicles that aren’t limited to what is listed on GDAX — but for now it’s the best way to insure that there is sufficient liquidity to acquire the initial assets.

In terms of performance, the fund backdates to early 2015 when GDAX was launched. Since then it’s indicated( predictably) insane returns, up about 49 x or 4,900 percent.

Investments can be made in USD or any of the included digital currencies, as long as an investor can meet the $10,000 minimum investment. For this fund investors will also have to be accredited and U.S-based, although Coinbase hopes to remove those restrictions for future funds. New investment can be made once a month, with redemptions happening on a quarterly basis with no lockup period.

All funds will be held by Coinbase in cold storage, which is certainly a plus considering their experience managing such high-value assets. In fact, their security is so respected that they have another product called Coinbase Custody,which offers cold storage and custody services for other investment funds.

Of course, Coinbase isn’t the first to develop a passive crypto fund. Some are making similar SEC-sanctioned funds like Bitwise investments’ HOLD 10 indicator, and others are taking a platform approach like Iconomi’s services that are lets investors create their own custom-weighted crypto asset basket. But the major differentiator here is that Coinbase is already such an established name in the field with so many existing investors already utilizing at the least one of Coinbase’s services.

The fund will launch in a few months, and accredited investors can sign up now.

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Telegram has raised an initial $850M for its billion-dollar ICO

It looks like Telegram’s billion-dollar ICO has reached its first milestone after the chat app company raised an initial $850 million, according to a filing.

A document submitted to the SEC earlier this week states that the money was raised “for the development of the TON Blockchain, the developing and maintenance of Telegram Messenger and the other purposes.” The security is described as “purchase arrangements for cryptocurrency” and the filing is signed by Telegram CEO Pavel Durov.

Read our earlier tale for full details from Telegram’s TON white paper.

This initial sum is most likely the pre-sale stage of the ICO which, as TechCrunch reported on extensivelyand in detaillast month, was targeted at venture capital firms and top figures in the investment community who were given deep discounts to buy Telegram’s Gram token. The pre-sale was originally targeted at creating $600 million, but demand pushed the above figures up to $850 million, according to a Bloomberg report.

Telegram initially planned to raise a further $600 million to develop its TON project via a public sale that starts in March, according to documents assured by TechCrunch, but it remains to be seen whether the above figures will be adjusted. Bloomberg previously indicated the public marketing component would expand to $1.15 billion, bringing the total created to nearly$ 2 billion if successful.

Telegram CEO Durov did not reply to an emailed request for commentary at the time of writing.

Either way, the sale promises to be the largest ICO find to date. The pre-sale figure alone tops all other ICOs held by some margin.

The sale represents the first outside investment in Telegram, which has been self-funded by Durov and his older brother Nikolai, who founded VKontakte, the social networking site often referred to as’ Russia’s Facebook.’ The duo fled Russia in 2014 after a fall-out with investors, who they assert had links to the government, and they afterward set up Telegram.

Demand around the token sale has been unprecedented, principally because of Telegram’s unique position within the crypto community. Its messaging app is used by the majority of ICO projects, with its group feature particularly popular among crypto watchers — that includes more shady parts such as’ pump and dump’ scammers.

Quartz recently reported that pre-sale investors are selling their allocation for upwards of double the cost, while others had stayed away from the sale out of caution. There has certainly been hype, with a bevy scammers setting up fake websites and campaigns to cash in on the interest, as TechCrunch wrote last month.

As for the project itself, Telegram is aiming to develop a series of services alongside its messaging app, including 😛 TAGEND

Distributed file storage akin to services like Dropcoin and ICO company Filecoin

A proxy service for creating decentralized VPN services and TOR-like secure browsing surroundings based on the blockchain

Services for decentralized apps, smart contracts and decentralized web browsing experiences

Payments for micropayments and peer-to-peer transactions

Bitconnect, which has been accused of running a Ponzi scheme, shuts down

Bitconnect, the lending and exchange platform that was long suspected by many in the crypto community of being a Ponzi scheme, has announced it’s shutting down.

In a release on its website the platform said the shutdown is attributed to “continuous bad press” surrounding the platform, two discontinue and desist letters from both Texas and North Carolina’s securities committees, and continuous DDoS assaults on the platform.

While the platform says they’re refunding all outstanding loans at a rate of $363.62 USD( an average of the token’s price over the last 15 days ), the Bitconnect token is currently trading down~ 80% and worth less than $40, so while users may have been made whole on a BCC-equivlent, many are certainly suffering severe financial losses in terms of USD or Bitcoin( which is how they stimulated their original investment ).

Many in the cryptocurrency community have openly accused Bitconnnect of operating a Ponzi scheme, including Ethereum founder Vitalik Buterin.

The platform was powered by a token called BCC( not to be confused with BCH, or Bitcoin Cash ), which is essentially useless now that the trading platform has shut down. In the last The token has plummeted more than 80% to about $37, down from over $200 just a few hours ago.

If you aren’t familiar with the platform, Bitconnect was an anonymously-run site where users could loan their cryptocurrency to the company in exchange for outsized returns depending on how long the loan was for. For example, a $10,000 loan for 180 days would purportedly give you~ 40% returns each month, with a. 20% daily bonus.

Bitconnect also had a thriving multi-level referral feature, which also made it somewhat akin to a pyramid scheme with thousands of social media users trying to drive signups using their referral code.

The platform said it produced returns for users use Bitconnnect’s trading bot and “volatility trading software”, which usually averaged around 1% per day.

Of course profiting from market fluctuations and volatility is a legitimate trading strategy, and one used by many hedge funds and institutional traders. But Bitconnect’s promise( and pay) of outsized and guaranteed returns resulted many to believe it was a ponzi scheme that was paying out existing loan interest with freshly pledged loans.

Below is the chart that would determine how much users would build the using the platform.

All Bitconnect loans were denominated in U.S dollars but had to be made in BCC, the platform’s native cryptocurrency. So in order to make a loan users would have to deposit bitcoin into the platform then exchange it for BCC at whatever the market rate was. And loan interest and principal was also only paid out merely in BCC, meaning users would have to convert it back to bitcoin( and then if desired, USD) after the loan term was finished.

The requirement of having BCC to participate in the lending program led to a natural spike in demand( and price) of BCC. In less than a year the currency ran from being worth less than a dollar( with a market cap in the millions) to a all-time high of ~$ 430.00 with a market cap above $2.6 B.

But now with no other uses for the token, it’s likely that the price will continue to plummet. The company did say that the ICO for their Bitconnect X trading platform will still happen ,~ ATAGEND and that trading for the BCC token will continue there.

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Coinbase hires a new VP of Operations to lead its customer service effort

Coinbase only announced they’re hiring Tina Bhatnagar as VP of Operations and Technology to lead all operational squads at Coinbase and GDAX.

But perhaps more relevant right now is the fact that her responsibilities will include overseeing the fast-growing startup’s customer service division.

It’s no secret that Coinbase is in need of some assist when it comes to support and customer service. The company has struggled to manage both technological and customer support operations during the massive spikes in cost, new users and transactions over the last few months.

Tina Bhatnagar

But Coinbase isn’t blind to these shortfalls, and about six months ago unveiled a plan to revamp their customer service experience and roll out phone supporting and shorter response times. They also recently hired Asiff Hirji, former COO at TD Ameritrade and promoted Dan Romero as GM of Coinbase to oversee all of Coinbase’s retail platform.

Bhatnagar comes from Twitter, where she was VP of Operations and User Services and helped scale the customer support team from 20 people to thousands across six offices.

When deciding to join Coinbase, I was not blind to the challenges ahead of me. But when I gratified Brian and the team, I knew it would be a truly joint effort to run our customer operations how we envisioned it. It’s an exciting day, with Coinbase and crypto in the public eye more than ever before, but that also means it’s an even more critical moment to stake our position. And this can only happen if we do right by our clients every single day.

— Tina Bhatnagar, VP of Operations and Technology at Coinbase.

In a blog post, Coinbase CEO Brian Armstrong noted that Bhatnagar will work to meet the company’s commitments to double their support team over the next three months, as well as roll out 24/7 phone support to all customers by Q2 2018.

Coinbase also noted that last week when cryptocurrencies all sank around 20 percentthe startup again find record volume and traffic, but was able to meet demand and avoid any major outages or down time.

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Scammers are cashing in on Telegrams upcoming ICO

Desperate for an opportunity to jump aboard in the next big thing, cryptocurrency owners are losing money by investing blindly in fake Telegram ICO websites.

Chat app Telegram’s upcoming ICO promises to break records with a target create of $1.2 billion, which may be extended to$ 2 billion according to new reports. The public marketing component isn’t scheduled to launch until March, as noted by multiple media including TechCrunch, but that hasn’t stopped unscrupulous someones seizing the opportunity.

News of Telegram Open Network( TON ), the Telegram ICO project, first broke in the final weeks of December before TechCrunch reported exclusively on the full details.

Expectation was palpable. “Telegram is already the de facto communication channel for the global cryptocurrency community, making a natural home to its own coin and Blockchain, ” TechCrunch’s Josh Constine and Mike Butcher wrote. At the same time, English and Russian versions of its whitepaper and investor prospectuses, including precise information around the ICO, were widely leaked across the internet.

That gave would-be scammers the two conditions they needed — hype and legitimate datum — and numerous websites sprang up offering apparent immediate investment opportunities.

Gramtoken.io was the most prominent fake. The website, which is now offline, used details extracted from the whitepapers including project roadmap, squad members and more. It even posted a transcript of the whitepaper — which, again, had been leaked already — to give a sense of authenticity. The site’s tracker purported to have’ raised’ more than$ 5 million before it went dark last Wednesday.

A number of those who invested in the scam took to Twitter in annoyance after it was uncovered. TechCrunch hasn’t been able to verify how much Gramtoken.io raised.

Gramtoken.io screenshot via cafebitcoin.vn

It isn’t clear why the site went offline. NameCheap, the company that hosted the Gramtoken.io domain, declined to comment when we would like to know whether it had taken action. If Namecheap didn’t step in, it could be that the people behind Gramtoken.io decided to shut the party down before it depicted too much attention.

Of the rest of the fakes, ton-gram.io, grampreico.comand tgram.cc remain online, Gramtoken.tech is offline, while a number of Facebook Pages, including one for Gramtoken.io, were taken private or removed after being called out as scams.

In addition, it’s reported that some scammers turned to email to blast out fake Telegram ICO investment opportunities.

In the case of one website, Ton-gram.io, more than 70 people have invested over $30,000 in Ethereum, according to a billfold address connected to the website.

Gramtoken.io use paid Facebook ads to reach users

Some users on social media felt the need to highlight these sites as investment possibilities while in the same breath cautioning that they may be swindles. Perhaps in search of traffic or favorable Google search positioning, a number of ICO tracking sites listed TON which added further uncertainty.

In an email to TechCrunch, Telegram CEO Pavel Durov acknowledged that Gramtoken.io was not associated with his company.

Weeks earlier, when the first the reporting of Telegram’s TON project surfaced, Durov cautioned users to rely only on info from Telegram’s broadcast channel but he made no further remark other than responding to one question on Twitter.

It goes without saying that ICO investments are risky, those thinking of taking part are often advised do their homework thoroughly. That includes making sure that the company has actually announced a token sale through official channels. If it looks too good to be true, it probably is.

“The more hyped the project the more likely are scammers going to resort to phishing sites, ” a partner at a crypto-focused investment firm told TechCrunch on condition of anonymity due to sensitivities. “In some examples these sites even show up as top outcomes in search. So it is extremely important that investors carefully substantiate the details from multiple sources before participating in a token sale.”

Disclosure: The author owns small amounts of cryptocurrency .

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dYdX is a decentralized protocol for cryptocurrency derivatives

While some fiscal derivatives like futures trading are slowly coming to Bitcoin, we’re still a long time away from these financial products being widely available for the entire cryptocurrency asset class.

So dydX is constructing a decentralized protocol for derivatives, built on the Ethereum blockchain and the 0x protocol. The protocol lets you take out peer-to-peer short sells, long positions and options on any ERC2 0 token. It also provides the ability for traders to make fully-collateralized loans, which are used to to money short sellers.

As a refresher, a decentralized protocol means that no single entity controls the process. No one can cancel your order, steal your funds or rip you off as long as the smart contracts powering the protocol are securely written and properly vetted. There are already a few examples of decentralized exchanges like EtherDelta, where you can exchanges crypto assets peer-to-peer. But most of these platforms restriction you to exchanging one token for another, which is why dYdX’s focus on more complicated financial positions is unique.

When the platform launches in the spring there will be a decentralized open protocol that anyone can access, as well as a centralized relay built by dYdX that acts as a user interface to the protocol.

The UI will look like a traditional trading site but will never take control of user funds, and dYdX will charge a small fee on all trades that use their interface. Of course anyone else can also build private or public interfaces to interact with the dYdX protocol for free. Order volumes will be off chain with on-chain settlements, which allow for faster trading, especially during times of network congestion.

At first you’ll only be able to trade with ERC2 0 tokens( and Ethereum itself) but technologies like cross-chain atomic swaps may enable trading of non-Ethereum-based tokens in the future like Bitcoin.

dYdX was founded by Antonio Juliano, a former software engineer at Coinbase and Uber. The startup has raised a seed round led by Andreessen Horowitz and Polychain Capital, with participation from Coinbase founders Fred Ehrsam and Brian Armstrong, Elad Gil and others.

Juliano schemes on using the funding to build out a team of engineers( it’s currently a one-man store) and undergo extensive third-party security audits on the protocol before launching. As explained earlier the only thing that could bring down a decentralized protocol is flaws in its code, building crypto security audits very important for any serious decentralized protocol.

Both the decentralized protocol and centralized relay are expected to launch around April, with the independent security audits being the biggest roadblock before launch.

You can check out dYdX’s white paper here.

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People have spent over $1M buying virtual cats on the Ethereum blockchain

Launched a few days ago, CryptoKitties is essentially like an digital version of Pokemon cards but based on the Ethereum blockchain. And like most viral sensations that catch on in the tech world, it’s blowing up fast.

Built by Vancouver and San Francisco-based design studio AxiomZen, the game is the latest fad in the world of cryptocurrency and likely soon tech in general.

People are spending a crazy amount of real fund on the game. So far about $1.3 M has been transacted, with multiple kittens selling for~ 50 ETH( around $23,000) and the “genesis” kitten being sold for a record~ 246 ETH( around $113,000 ). This third party site ways the largest buys made to date on the game. And like any good viral sensation costs are rising and fluctuating fast. Right now it will cost you about. 03 ETH, or $12 to buy the least expensive kitten in the game.

So now we have people employing Ether, an asset with arguably little tangible utility- to purchase an asset with unarguably zero tangible utility. Welcome to the internet in 2017.

In all seriousness, it’s a little bit reminiscent of the beanie baby tendency where people were paying insane sums of fund for stuffed animals. But if the popularity continues to increase these people may be able to make a return by reselling or breeding their rare kittens, or they’ll be stuck holding the virtual cryptographic keys to a virtual rare kitten when the market crashes in a few days, like eventually happened with beanie babies.

There are a few cool things about the game though, and putting aside the valuation sillines it’s actually a cool way for novices to interact with the Ethereum blockchain.

First off, it’s important to understand that since it’s played on the Ethereum blockchain there’s no central entity managing the game. This means users literally own their kittens. Unlike playing Neopets where everything was stored under a central database and your pet was deleted where the business shut down, CryptoKitties is decentralized and will live forever on the Ethereum blockchain.

The game is run via a decide of five Ethereum smart contracts written by AxiomZen, and users interact with it via their own Ethereum address. Right now the easiest style to do that is by using the Chrome extension MetaMask which gives you the ability to send and receive Ethereum immediately in your browser. You then would navigate to the CryptoKitties site which is essentially an interface to interact with their smart contracts so you can buy sell and breed kittens.

Right now about 15% of all Ethereum network traffic is dedicated to the game, constructing it the more popular smart contract on the network. For reference, number two with about 8% of network transactions is EtherDelta, the popular decentralized token exchange.

This traffic is building it hard to play CryptoKitties, and a lot of transactions( like buying and selling cats) are taking longer than usual to process and requiring multiple attempts.

Not only is this attaining it hard to play the game, but this scaling issue is a real concern for the Ethereum network in general. If one viral game that hasn’t even spread beyond the tech world can slow down the network, what happens when the blockchain expands to real world applications?

Anyways, back to the game. Still confused? Us too. Here’s an explanation of how it works 😛 TAGEND

How to Play

The game was seeded with 100 “Founder Kitties”. There’s also one new “Gen 0” cat released ever 15 minutes, which are listed for the average cost of the last five sold, plus 50%- but the sale price deteriorations over 24 hours until person eventually buys it.

And anyone can sell their kittens via an auction, where they pick a starting price and an ending cost and the price declines over period until someone buys it. So for example I could set a kitten up for sale for a the working day auction for 1 ETH starting cost and 0 ETH ending price, and if anyone buys it 12 hours after the auctions starts they’d be paying me. 5 ETH.

Kittens can also be created by breeding them, which the game calls Siring. You can put your own kitten up for sire for a specified amount of ether and someone can breed with it, and they get the offspring and you get the ether. Or, you can pay to breed your cat with someone else’s and you keep the offspring and they keep the ether.

It can take anywhere from an hour to a week in “cooldown time” to breed a new kitten. The shorter the time the better, since you can sell the progeny sooner and breed again. This entails kittens with shorter cooldown period usually sell for more.

Each kitten has a 256 -bit genome that holds the genetic sequence to all the different combinings kittens can have. These include things like background colouring, cooldown day, whiskers, beards, stripes and so on. Some of these genes can be recessive, meaning a kitten without stripes could still breed one with stripes.

It’s important to note that there’s no “rare scale” established by the game that designates rarity values to these genetic sequences. That means the community is independently choosing what traits are rare by paying a premium for them. For instance, kittens with a gold background have been selling more than kittens with other colors.

Users can only self-customize the name of their kitten, and often use this space to advertise rare attributes like coloring or generation.

Right now there’s no way to ensure the actual genetic sequence for a kitten on CryptoKitties’ site, but since it’s all open-source code within an Ethereum contract it’s merely a matter of time before person figures out how to “read” your cat’s genetic sequence and build breeding recommendations based on it. There’s also some randomness built in, which maintains it fun by giving someone with a less rare kitten the chance to breed a rare one.

Each time a cat breeds the generation increases one. So the progeny of a Gen 0 kitten would be a Gen 1, and so on. Earlier generation kittens seem to be selling for more money, both for the intangible rareness factor and the tangible fact that earlier generation kittens usually have shorter cool down times.

Axiom stimulates money by maintaining the ether collected from selling the initial 100 kitties, plus the freshly made kitties sold each 25 minutes. They also take a 3.75% fee of all auctions or siring transactions. If you sell a kitten by interacting directly with the smart contract( and not “re going through” CryptoKitties’ website) you wouldn’t have to pay the 3.75% fee.

What’s Next?

Unlike some viral projects, the team behind CryptoKitties was set on building out this product regardless of this hype. Mack Flavelle, the project lead for the game explained to me that the team has at least a year’s worth of product improvements in the pipeline, the most immediate of which is improving the UI on the web platform.

They also want to work to stimulate the on-boarding process easier, because at the end of the day it’s still not easy for the average person to setup MetaMask and figure out how to buy ether and use it to transact on the network.

The project has a pretty good FAQ here which explains a bit more about the game’s future plans and how it works today.

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