CryptoKitties is Ethereum's hit game, but it's threatening the entire network

There's a new craze in the world of cryptocurrencies: kitties.

A game called CryptoKitties, built on Ethereum's blockchain, has exploded since its launch last week, with players spending thousands of dollars worth of ether (Ethereum's currency) on digital cats.

There's a problem, though: The game is so popular that it's clogging Ethereum's network.

CryptoKitties isn't an entirely new genre. Built by San Francisco-based studio AxiomZen, the game lets you purchase and trade digital kitties; once you start, you can also breed them to create new ones. Each kitty has a series of visual characteristics called traits, and these traits are typically passed onto their offspring. Some of these traits are rarer than others, and right now everyone is trying to figure out the game's algorithm on how to breed cats with specific, rare traits.

This is done is to get cool, unique kitties, but these rare specimens have also quickly risen in price; for example, a "generation 0" cat with a "jaguar" trait currently goes for around 70 ETH ($23,676). And on Saturday, a unique cat called the "genesis cat" was sold for 246.9 ETH, or roughly $117,000. So yeah, instead of buying, say, two Tesla Model S cars, someone bought this kitten (though it's entirely possible that the owner bought it from himself just to raise media attention).

If you're appalled that someone is paying actual money for digital cats, don't be. Paying for digital goods has been around for a while, the only difference here being that the prices have turned from somewhat expensive to outrageous in a matter of days.

Original image has been replaced. Credit: Mashable

Being based on Ethereum, CryptoKitties does have one special trait that earlier, similar games don't. Once you buy your cat, it's written in Ethereum's blockchain. Unless you sell your kitten, it's yours forever, even if the game is shut down at some point (though this article illustrates that the game is far more centralized than it seems).

There's another aspect of the game that might prove troubling in the near future. Right now, CryptoKitties is responsible for roughly 11.8% of all transactions on Ethereum's network. That's more than the decentralized token exchange Etherdelta, and the game hasn't been out a week. This is because every action in the game, including buying and breeding cats, has to be recorded on Ethereum's blockchain, and with owners buying more cats and breeding them, the number of those entries is rising with a very steep curve. Currently, partly due to the game's popularity, there's more than 10,000 pending transactions on Ethereum; typically, this number is much lower.

To alleviate this, CryptoKitties has doubled the "birthing fee" and promised it's looking into a long-term solution.

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The problem of scalability has always been real for all blockchain-based cryptocurrencies, including Bitcoin, and Ethereum's founder Vitalik Buterin admitted on multiple occasions that something has to be done to improve it. Ethereum's development team is already working on solutions to improve scalability, but they're still ways off. If the CryptoKitties fad continues, they might have to hurry up.

UPDATE: Dec. 4, 2017, 11:36 a.m. CET Ethereum founder Vitalik Buterin just shared his opinion on the game. He said he likes "digital cat games," as they "illustrate very well that the value of a blockchain extends far beyond applications that would literally get shut down by banks or governments if they did not use one."

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Disclosure: The author of this text owns, or has recently owned, a number of cryptocurrencies, including BTC and ETH, as well as a swiftly rising number of digital kittens.