How Nosotros Made $100K Trading Cryptokitties

Not us, we're HODLers, this guy:
Ivan Bogatyy Entrepreneur. Previously @GoogleResearch 2014–2018, @Stanford CS/SCPD, Moscow State U mathematics. ivan@bogatyy.org

From HackerNoon, Apr 10:

By at nowadays everyone has heard of CryptoKitties, a cute game that went viral to the betoken of overloading the whole Ethereum network. This is the within floor behind how nosotros made $107K investing inward CryptoKitties together with briefly laid the tape for the largest sale ever (currently second-largest). Later, nosotros made $8K running an automated arbitrage bot. While playing the speculation game at the summit of the mania was exciting, the bot was fairly technically involved together with volition live interesting to people who desire to larn blockchain technology scientific discipline inward general.

Founder Cat #4, the original protagonist of the story.

As I was toying alongside my Ethereum smart contracts on a regular Sabbatum nighttime (December 2), something was clearly off: transactions were stuck together with took much longer than green to confirm. Influenza A virus subtype H5N1 quick investigation showed at that topographic point were 10–20 times to a greater extent than pending transactions than usual, together with many of them were going to the same mysterious address, 0x06012..66d. This is how I source learned of the now-famous CryptoKitties game.

Investment thesis

Next morning time I called Oleg, a unopen buddy who runs a transcend crypto hedge fund inward Russian Federation to verbalize over this odd phenomenon. While the CryptoKitties game was exactly a curiosity for me, Oleg similar a shot spotted a lucrative investment opportunity. First, nosotros were clearly amidst the before entrants. Second, the game looked similar it had all the precursors of going viral, similar to Pokemon Go, together with was inward the early on stage of a hockey stick explosion.

Now the query was, which Kitties should nosotros buy? The marketplace offered four ways to form Kitties: cheapest first, most expensive first, newest first, oldest source (note: the website had been redesigned since). The source 3 options are clearly transient: you lot tin e'er position a cheaper, to a greater extent than expensive, or a newer Kitty on the market. Oldest, however, is similar diamonds: forever. Thus nosotros decided to purchase single-digit Founder Cats, despite their already hefty cost tags: somebody exactly snatched them at 25 ETH together with re-listed the lineup at 50 ETH ($25K), alongside Founder Cat #1 trading fifty-fifty higher at 150 ETH.

Oleg bought Founder Cats #4, #6, #8 at 50 ETH each ($25K at the time), together with I position upwards $5K for a 20% equity stake inward Founder Cat #4. We were pretty optimistic near the mania together with re-listed the Kitties at 250 ETH, 5x the purchase price.

As a side-note, nosotros wasted near an hr because of posting a depression gasPrice, together with had to reinstall MetaMask (at the fourth dimension it did non receive got the “resend transaction alongside increased gasPrice” feature — it was added correct after). Lesson learned: if you’re making a $25K purchase, arrive at non effort to salvage $20 on fees.

Right later hanging upwards on the telephone telephone I considered the chances that this was going to live my personal tape yet for the most ridiculous means to waste materials $5K. Probably pretty high.

The subtle fine art of exiting the top

Over the adjacent days (December 2–5), the game entered the viral explosion phase. Given the addictiveness, it was pretty difficult to focus on anything else. Clearly, the craze was non going to last: the game mechanics were means simpler than say Pokemon Go, alongside exactly ii functions available, either purchase or breed them to create novel ones. We assumed it could final for a span weeks tops, together with hence it was of import to formulate a rational acquire out strategy inward advance together with stick to it. 

Google Trends for “cryptokitties”. The breakdown past times province is real interesting as well.

We used 3 metrics. First, Google Trends for “CryptoKitties” showed how oftentimes people Googled information near the game, which is a pretty adept leading indicator of interest. Second, GasGuzzlers shows the transcend gas-consuming smart contracts on the network together with the portion of gas they eat (for CryptoKitties it was 4% when nosotros entered together with 20% at peak popularity). Third, nosotros watched the marketplace weather condition together with the prices of recent sales on a real nicely built app, https://kittysales.herokuapp.com....MORE