What’s going on here?
Nearly 3 million US dollars: That’s how much money has changed hands in the virtual collecting game CryptoKitties. The game is based on the Ethereum blockchain and accounts for almost 14 percent of the current Ethereum network traffic.
What does this mean?
The game CryptoKitties, which was launched a week ago, conquers the Internet — and, in addition to transactions worth the equivalent of almost three million US dollars, also ensures a high utilization of the Ethereum network on which it is based. In CryptoKitties, similar to baseball trading cards, players can buy, collect and trade digital kittens. Each cat has different characteristics, which they can pass on to their offspring. The aim of the game is to get kittens with very few but rare attributes.
CryptoKitties runs as a smart contract on the Ethereum blockchain, where each kitten represents a “token” in the blockchain, just like the cryptocurrency Ether. Every fifteen minutes a new “Generation 0” cat is born, offered for 1.5 times the average price of the last five cats (currently at about 10 ETH or $4500 per G0 cat). The price will fall indefinitely within the next 24 hours until the cat finds a new owner. According to the same principle (aka Reverse Auction), users can also offer their cats for sale, effectively creating an exchange for these crypto-collectibles. The transactions in the game work exclusively with the cryptocurrency Ether.
In general, the G0 cats are the most rare ones, mainly because they can bread (still rare) G1 kitties, which can in turn create (somewhat rare-ish) G2 cats, and so on. The most expensive CryptoKitten so far was the so-called Genesis kitty, which was the first cat that has been generated ever. The owner of the Genesis cat changed hands for about 117,000 US dollars. You can read more about the game in the FAQ's and follow instructions to participate.
Why should I care?
The bigger picture:
The game already has a significant impact on the utilization of the Ethereum network — and on the players’ wallets. In total, sales of the kittens amount to nearly 3 million US dollars. According to statistics from the ETH Gas Station, CryptoKitties is currently responsible for more than 13 percent of the transactions in the Ethereum network. Due to the ever increasing traffic, the developers of CryptoKitties already had to increase the fees for the birth of a new cat.
Even if one may very well question the meaningfulness of the game, there is no doubt that the cute animals could also inspire many new people to get exposed to the blockchain industry.
For investors:
Through the recent success of CryptoKitties, a lot of attention is on the inherent scalability issues of Ethereum, which experienced a significant congestion in the transaction mempool and therefore an overall throttling of the network. The ability to handle a high amount of transactions has always been a topic of discussion amongst Ethereum investors and users, but thus far, there was no application actually bringing the network to its limits. This has changed now. Proper scaling solutions need to be implemented sooner rather than later and this cat-situation just increased the urgency (and maybe decreased the time for proper development). Some companies actively exploring the blockchain space might take this as an opportunity to evaluate competing platforms for decentralized applications / smart contracts such as Stratis, NEO or EOS. On the other hand it could turn out to be beneficial for the Ethereum network, as the developers are now forced to bring the networks scalability to the next level.
What do you think?
Is CryptoKitties the killer app bringing blockchain-based technology mainstream?
Will the CryptoKitties craze make the Ethereum network effectively unusable?
Is this only a short-lived hype that will just slowly disappear into a niche until it is only found in history books and on the browsers of hard-core fans? (Looking at you Pokémon Go!)
Let us know in the comments below!
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