Blockchain Kitties’ ambiguous effects on Ethereum
Buying a Crypto Kitty has become a major trend in the Ethereum Blockchain community. The game CryptoKitties has become a viral success by allowing people to buy a digital image of a kitten for as little as $12 to as much as $113.000+ dollars. Of course you need to pay in ether (ETH) to do so.
Why would people do that?
For once these kittens are quite cute to some. You can make up your own mind about this in the picture above.
Second, if you purchase a kitty on the Ethereum Blockchain you can be sure that this kitty with its unique characteristics (skin, background color, cool-down time, etc.) only exists once and belongs to you. No one can simply copy a digital kitten in the game or change the ownership without your consent. Not even the game development team. This is ensured because the whole game logic is written in smart contracts that live on the Ethereum Blockchain.
Still not convinced to spend money?
Third, your kitty can breed new ones that you can then resell. Some characteristics make new kitties more valuable than others such as the cool-down time for breeding. This is the time a kitty needs to breed a new one. The lower the better of course as you can sell kitties more often. Interestingly, characteristics that make them valuable are not hard-coded but determined solely by people buying and trading.
This all sounds a bit crazy. Still, I believe there are two important effects the game has on the Ethereum Blockchain. And these effects are contradictory.
1. Popularity
Games like CryptoKitties might first sound a bit silly, but they definitely help spread the idea about Blockchain and about the basic functionality in a practical way.
Kitties in the game are digital assets that have value because people believe they have. Sounds familiar? Unlike on a regular P2P network through the internet, on a Blockchain digital assets cannot simply be copied and assigned to multiple owners. Kitties are therefore scarce and only the owner can sign a transaction that transfers ownership with his private key. Not even the game creators could intervene and prevent people from trading kitties or even steal valuable kitties from owners. Therefore, every kitty represents a unique token.
That way the kitty game exemplifies how a transfer of digital assets without a middle-man is realized on a Blockchain. Games as such will help spread awareness and raise interest in Blockchain technology. The more people start thinking with a decentralized mindset, the more use cases will pop up. (Or perhaps more games) If you can trade a kitty worth $130.000 USD securely, why not trade other digital assets such as music, art or any ownership right? What can be possible?
2. Scalability
The second effect the game has on Ethereum is rather negative. Trading kitties requires a massive number of transactions. Currently, the game accounts for about 20% of all transactions on Ethereum according to CoinDesk. This puts high pressure on a system that is already challenged to handle the usual workload.
The result is that it can take significantly longer for any transaction to be included into a block by miners. This means that if you really need your transaction to be processed quickly, you will need to attach a higher fee than usual as so many transactions compete to be included in blocks by miners. Because miners will include transactions with the highest transaction fees attached first, processing any transactions on Ethereum is getting more expensive due to the number of kitties in the network.
As a first direct consequence of the increased transaction flood, the game had to double the fees per kitty birth transaction to 0.002 ETH (~$1.00 USD) to be included by miners in a block.
What does this imply?
As a result of the game’s popularity, the Ethereum developer community is under pressure to come up with approaches for scaling the network.
One of the ideas is the use of so called off-chain systems. These systems process many transactions off the Blockchain and group them efficiently to only include a few on the Blockchain. An approach that just went into trial mode on the live Ethereum Blockchain is Microraiden.
However, development of a solution or a combination of solutions for scaling will take more time. Still, games such as CryptoKitties raise the awareness for the scaling challenge on public blockchains. This will help push projects and eventually be beneficial for many other decentralized applications that require high numbers of transactions. Or it will simply ensure that kitties continue to be born on the blockchain and make people happy.
If you want to know more about Ethereum’s scalability challenges, see here.
