Everybody is talking about cryptocurrencies these days, but very few actually understand the concept and the technology that underpins digital money. The latest craze in this space is a game called CryptoKitties which has players spending insane amounts of money on... well, virtual cats. According to some estimates, more than 6,000 people are trading in electronic cats, with the total transaction volume exceeding $7 million as of last week. And these are figures for a game that debuted as recently as November 28!
CryptoKitties is the creation of Axiom Zen and runs on the Ethereum platform. Ethereum, the second-most popular cryptocurrency after Bitcoin, is having a bit of an infrastructure problem because the kitty mania is putting a severe strain on its network. The rabid interest in CryptoKitties has led to a spike in traffic, accounting for more than 11% of the total at present. And some of the cartoon-like felines are changing hands for eye-popping amounts, the record belonging to one that sold for the digital equivalent of over $117,000.
Players use Ethereum's token (a digital coin called Ether) to pay for the kitties. When they buy cats, they can breed them and produce new ones. The value of an animal is determined by its traits, as well as its generation, "generation zero" being the original one created by Axiom Zen. Every cat comes with a unique identity recorded on the Ethereum blockchain. For those clueless about crypto matters, blockchain is the technology on which cryptocurrencies are based and represents a decentralized digital record of transactions.
The price of the cats ranges from $20 to more than $50,000, with some players making impressive profits on their trades. An animal called "Kitten number 23" first went for more than $4,000 and was sold two days later for more than $32,000. The following day somebody paid $63,000 for it.
Most will find outlandish the idea of spending crazy money on digital pets. But the whole thing was conceived as a way of promoting blockchain, which many believe to be a technology that can deliver various useful applications due to its decentralized nature, anonymity, and security.
"We wanted to make blockchain technology accessible to the everyday user, as we believe this is a key step in otherwise seeing the technology adopted. We wanted to explore blockchain applications outside of ICOs and cryptocurrencies," Axiom Zen's communications manager Bryce Bladon told Bloomberg.
Right now, the problem for Ethereum is that the massive popularity of CryptoKitties is choking its network and slowing down transaction speeds. On the bright side, this might prompt the platform developers to step up their work on solving the scalability problem, which is an issue that founder Vitalik Buterin has acknowledged on multiple occasions