CryptoCelebrities: The Next CryptoKitties or Glorified Ponzi Scheme?
By: Ben Davidow
Tags: Cryptocurrency, Trading, Ethereum, Bitcoin, Altcoins

The other day, someone pointed me to a new game called CryptoCelebrities (CC). This was a day after I wrote about the potential of digital collectibles, so I was intrigued.

But first, a word of caution. If trading alts is playing with fire, then flipping digital collectibles is playing with dynamite. If you’re not careful, you might end up bag-holding Glenn Beck. . .

So…let’s take a look at CryptoCelebrities to see if it has the potential to be the next big craze in the world of non-fungibles.

Sidenote: In order to be semi-qualified to write this post — and to be honest, to indulge the degenerate gambler part of my brain —I dove head-first into the world of CC for the past 36 hours, trading everyone from Rihanna to Bruce Springsteen...

How it Works

In CC, you can buy digital representations of celebrities with ether, each one tokenized on the Ethereum blockchain. If the last sentence made no sense to you, the key point is that each digital celebrity is one-of-a-kind i.e., only one person (or more accurately, one wallet) in the world can own any given celebrity at any given point in time.

CC currently has several hundred public figures, everyone from Beyonce to Elon Musk. Whenever a celebrity is bought, its price automatically goes up by a fixed percentage and anyone else is then free to come along and buy it. So it’s guaranteed that if you sell a celebrity (emphasis on if), you will sell it for more eth than you bought it for. For example, I might buy Russel Brand for 1 eth. Then you buy it from me for 1.15 eth, and someone in turn can buy it from you for ~1.32 eth.

Let’s look at what CC has going for it (assets) and where it falls short (pitfalls).

Assets

Simplicity. CC is simpler than CryptoKitties, at least in terms of how the game works. There are no ‘advanced’ concepts like siring (probably a blessing in this context…). You just buy a celebrity and have the option of editing his or her bio and then you wait to see if and when someone buys it from you. It is also more intuitive to speculate on the value of digital celebrities than digital kitties, since they serve as proxies for actual people with varying levels of real-world status. Scarcity. CryptoCelebrities are intuitively more scarce than CryptoKitties (there’s only one Oprah) even if they are technically less scarce (new celebrities can be minted at a faster rate). There’s also time scarcity in that you know that a celebrity right now is as cheap (in eth) as it will ever be. You may never again be able to buy “Weird Al” Yankovic. for 2 eth… Identity and Status. CC plays on our innate human desire to associate with people of high status. Since our mammalian brain is not too sharp, befriending digital celebrities probably delivers a sufficient dopamine hit. The UI amplifies the focus on status in the network by showing who owns which celebs and ranking participants by total value owned. Publicity. While lacking built-in virility and network effects (see below), CC has some promising spreading mechanisms including an aggressive bounty program for marketing and a program whereby celebrities can receive (or donate) royalties on their CryptoCelebrities sales by verifying their contract. I’m not sure how many celebrities will do this, but it’s a clever idea. Addictiveness. Once you buy a celebrity you don’t know when (or if) it will sell. So there’s this suspense factor and the dopamine hit if and when you get an email alerting you that someone has bought Justin Bieber from you. There aren’t rising green candlesticks like on an exchange, but you can see the total value transacted and number of website users tick up (or drop) overtime. Compelling Pricing Scheme. The pricing scheme that ensures that a celebrity can only be sold for more than it was bought gives one the impression that they can only gain by playing the game. Of course this assumes 1) a greater fool will buy it from you and 2) ether won’t depreciate too much while you’re holding it. So it’s an illusion, but a powerful one. Growth. CC has been around for a few days. When I joined about 36 hours ago it had ~900 users. It now has ~1800 and usage is ticking up. And the site visitor is told “Cryptocelebrities is in beta & under media embargo, please DO NOT publish stories about us before Jan 31.” Reverse psychology gimmick?

Pitfalls

Uninteresting. CC is not a very interesting game. In fact, it may be even a stretch to call it a game. CryptoKitties is much more interesting and better gamified. Access. Requires the user to set up a Metamask wallet and have ether available to buy contracts. This is a hassle for newbies, but I’m not sure if there’s a way around this yet. There’s also poor access pricing-wise. When I last checked, there were no celebrities available for under .6 eth. Though when new ones are minted, they start selling for ~10 cents. Scaling Woes. I’ve noticed a moderate and increasing amount of downtime. A bit is inevitable as usage picks up, but if this is not improved, it could destroy trust and potentially kill the network. Network Effects. The celebrity endorsement scheme is clever (if it works) but there are no native, in-game network effects that I am aware of beyond the fact that digital tulips become more attractive as more people buy them. Legal Risk. I don’t know much about the law, but there’s probably more legal risk here than CryptoKitties with images of real people who have lots of legal resources at their disposal. Community Standards. When someone buys a celebrity they can edit and write whatever they want in the bio. In most cases, it’s appropriate and civil. But I’ve seen a few instances where folks use this as advertising space and it’s possible to imagine much worse. This could be a turnoff for some people and blemish the network’s reputation…if it has any in the first place.

So I think CryptoCelebrities is a mixed bag. It’s not a very interesting game, but on a purely psychological fun and human motivation level, it has a lot going for it. If it can overcome scaling woes and steer clear of existential legal risk (both big ifs at this point), CC has a shot at becoming a big phenomenon. In this case, I could see CryptoCelebrities eclipsing CryptoKitties in total transaction value but probably with a lesser number of total transactions and user engagement. I think something like 5–10% of the celebrities will account for ~90–95% of the value transacted.

Is CC an outright Ponzi scheme? I don’t think so. But it falls in a grey area and it’s hard to argue it’s more than a digital tulip mania. And even though ownership of celebrity tokens is decentralized, your practical ability to find buyers i.e., sell them, requires trust in a centralized party. This party is probably incentivized to act in a trustworthy manner since it gets commissions off of sales. Still, you are at the whims of a centralized party that may face legal and scaling woes.

The only advice I can offer is that if you do decide to play the game, don’t treat it as an investment but just a game of pure speculation. Don’t put in more than you want to lose. Understand that whatever you buy may either be your loss or someone else’s loss.

Non-fungibles have a lot of potential. But often with a new technology, you have to start with trivial things before you can get to the truly interesting stuff. Perhaps in future posts, I’ll dive into that side of non-fungibles. But for now, I have to get on CryptoCelebrities before someone snatches up Winona Ryder . . .

As always, these are just some thoughts, not investment advice.

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