Digital Collectibles Are Being Used Like Money

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The cute digital cats that brought the Ethereum network to its knees at the height of the 2017 bubble are now being used as money to buy another type of crazy digital creature.

More concretely, CheezeWizard #5221 sold for 30 Wrapped CryptoKitties, or WCK, on Wednesday. Beyond the whimsical names and characters, there’s another level of weirdness to this.; it’s one of the few cases (if not the first one) where a non-fungible token was used to buy another non-fungible token.

There’s a lot to unpack here.

First thing to get straight is that a non-fungible token (NFT) is a digital asset that’s made to be unique and not interchangeable. 1 ETH equals 1 ETH, while Cheeze Wizard #5221 is different from every other Cheeze Wizard out there because of how their code is written. NFTs fall under a token standard called ERC721. Second thing is that wrapped tokens usually refer to tokens that have been made to conform with the most common token standard, ERC20, so they can trade with other coins.

Recently developers decided to wrap CryptoKitties, which are NFT tokens, and turn them into ERC20 tokens so they can behave like money. In 24 hours, almost 2,000 CryptoKitties were wrapped to make WCK tokens, tweeted a kittycalc.co developer.

People can trade their CryptoKitties in exchange for an equal amount of WCK (10 CryptoKitties will give you 10 WCK tokens and the market will price them), or buy WCK in an exchange. WCK can then be used like any other digital currency, including to buy NFTs like Cheeze Wizards (which was developed by Dapper Labs, the same company that created CryptoKitties).

More sophisticated financial assets like loans and derivatives based on CryptoKitties and other NFTs are just around the corner. Like Joey Krug said, '“next thing you know people are gonna be trading kitty default swaps.”

This transaction also gives us a peak into a truly wild future where we’ll be able to seamlessly trade our non-fungible assets. Today, it’s things like CryptoKitties and Cheeze Wizards, but in the future it could be things like property and art.

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