What a Cryptocurrency Game Says About Ethereum’s Potential

By amanda-gutterman

Dec. 15, 2017

Did the blockchain revolution just start with a cat meme?

Millions of dollars worth of ether, the cryptocurrency of the Ethereum blockchain, have poured into CryptoKitties, a game by Axiom Zen that enables users to trade digital cartoon cats.

THE TAKEAWAY
CryptoKitties represents a healthy development for the Ethereum ecosystem, despite the fact that it has caused some network congestion.

The game releases a new cat meme every 15 seconds that users can purchase with ether. Owners can either trade their kitties or “breed” them. Each crypto feline has a distinct “genetic” identity that when combined with another, produces a new kitty with distinct DNA. The kitty phenotypes range from classic tabby, to aqua and magenta swirls, to outsized bug-eyes.

To some users, CryptoKitties is all fun and games. Others are making a genuine effort to turn a profit on their cats. Meanwhile, technologists monitoring the development of Ethereum and institutional players that increasingly use it as part of their business have watched while CryptoKitties doubled the traffic volume on the Ethereum network. Several have expressed concern that the traffic increase from CryptoKitties has made it more expensive to execute transactions quickly. That highlights the need for Ethereum to pursue ways of scaling.

Despite the congestion from CryptoKitties, Ethereum is still cheaper and faster than bitcoin, the most widely known blockchain. An Ethereum transaction costs well under $1 (even with CryptoKitties) and typically is confirmed within 15 seconds, while a bitcoin transaction can cost $18 and take up to 20 minutes.

Bitcoin emerged in 2008 as an experiment in monetary theory, enabling users to move a digital-only currency between holders on a decentralized, peer-to-peer network. Barely two years old, the Ethereum blockchain has grander ambitions, offering not just a currency, but a decentralized computing platform that is fully programmable using smart contracts.

Many technology experts consider Ethereum the substrate for building a next generation web that provides a higher-quality experience to users. With this in mind, it makes sense that Ethereum is encountering a few of the same growing pains as the early internet, which struggled with bandwidth issues from the start. Similarly, while the internet has obviously offered enormous benefits to large institutions and individuals, in its early days, many users discovered the Internet through games.

Ethereum enthusiasts find it encouraging that though the technology is very new, it has already seen adoption by a wide variety of stakeholders beyond developers and gamers. For example, members of the Enterprise Ethereum Alliance, the largest blockchain industry group, include such established firms as Intel, Deloitte, JP Morgan and Infosys.

At first glance, CryptoKitties sounds like a far cry from Ethereum implementation by large institutions and huge swaths of mainstream commercial users. In fact, the game employs this next generation database technology in a way that mirrors enterprise use cases. One such use case is provenance. Users of CryptoKitties can track the chain of custody and authenticity of a cat’s DNA, similar to how a pharmaceutical company tracks the raw materials that go into prescription drugs through each step along their supply chain.

The game is also a perfect use case for smart contracts—programs that run on the blockchain, a core feature of Ethereum. When CryptoKitties users buy and sell their digital assets, they interact with a smart contract that enables them to transfer ownership directly and almost immediately. The smart contracts, which automatically execute once users place the order to buy or sell, amount to a far more efficient system, free from the need for lawyers, escrows, paper documents or notaries. This benefits the CryptoKitties game developers as much as the users. Smart contracts lower the barrier to entry by performing functions that traditionally require engaging the legal system.

The wave of popularity ushered in by CryptoKitties has proven healthy for a variety of players in the Ethereum ecosystem. Infura, the scalable infrastructure layer that is used nearly universally across blockchain applications, has seen its daily requests increase by about 2 billion per day, or 183%. At the time of writing, MetaMask, a plugin that allows users to interact with Ethereum applications on the Chrome and Brave browsers, has seen over 93% user growth.

Undeniably, CryptoKitties has brought new users to the Ethereum platform. Its effect, far more powerful than “clogging up” the network, has been to catalyze broader adoption of Ethereum and introduce the public to its features. It’s the equivalent of the earliest Internet game imaginable. With so much further to go, Ethereum has many viral games in its future, some sure to annoy network users more than this one, while helping countless others by elevating the ecosystem.

Ms. Gutterman is CMO of ConsenSys, which builds blockchain software on the Ethereum platform.