What CryptoKitties Reveals About Ethereum Scalability Issues

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In case you thought 2017 couldn’t get any weirder, the world is now obsessed with virtual cats. CryptoKitties is a virtual game that allows players to collect and breed digital cats. In the game’s short lifespan (it launched on November 28th) it has already drawn interest from players across the globe. Many users are drawn to the game because it is completely personalized.

The “cats” an individual breeds or collects are uniquely their own and cannot be cloned by other users. When users breed their own cats they can add distinctive colors, facial features, or backgrounds to distinguish their cats from other users’ on the marketplace. Once a cat has been bred, its creator can sell it on the marketplace. As of December 11th, 2017, these virtual cats had generated an estimated $12 million in sales.

Although the trading of virtual cats might seem like a silly, fleeting trend, the transactional aspect may have long-term implications. What really sets CryptoKitties apart from other addictive online games is its Ethereum foundation. The marketplace, developed by AxiomZen, was built on Ethereum’s blockchain ledger, and users buy and sell cats on the protocol using Ethereum’s proprietary token, Ether.

CryptoKitties has quickly become the most popular smart contract on Ethereum, and as of December 10th, 2017, the marketplace accounted for almost 15% of Ethereum’s total network transactions.

In many respects, the mass hysteria surrounding these kittens is a win for the blockchain industry, as a whole. The game has brought blockchain technology–specifically Ethereum–into mainstream media. One of the biggest issues hindering the progress and dissemination of blockchain is its perceived inaccessibility, but CryptoKitties serves as an uncomplicated entry point for users of all backgrounds to get acquainted with blockchain.

In fact, one of the driving forces behind AxiomZen’s decision to develop this type of game was to offer consumers easy access to blockchain technology. The more user-friendly blockchain is perceived, the faster its development and widespread adoption will occur. Now, even individuals who are not interested in Bitcoin, cryptocurrency, or decentralized ledgers are aware of the types of applications these protocols can power. Despite its global popularity, the overnight success of CryptoKitties has also revealed weaknesses within Ethereum.

These CryptoKitties have single-handedly overwhelmed Ethereum’s network, which means slower transaction times for all applications running on the decentralized architecture. CryptoKitties is encountering speed scalability issues, meaning the issues that are arising from the Ethereum network are related to an inefficient consensus algorithm. It is too hard and takes too much work to move information (or, in this case, virtual kitties) around, and thus the cost and time needed to conduct those kitty transfers grew out of control.

The Ethereum network is designed to store all data within the blockchain, which means that accelerated growth of an application adds an exponential amount of data to the chain’s storage burden. As more developers begin building Ethereum applications, and more data is stored on the protocol, the increasing on-chain storage demands will continue to clog the network and reduce transaction times. Oddly, rapid growth is becoming a double-edged sword.

Potential Solutions to the Madness

One of the most effective ways to grow blockchain-based applications without sacrificing accessibility or transaction speed is to store data off the chain. Companies are jumping at the opportunity to solve kitten congestion and prevent another massive and widespread outage.

For example, Dispatch Labs, a blockchain-based venture, has developed its own business-ready blockchain that addresses the storage weaknesses of existing protocols. New consensus algorithms, like the Delegated Proof of Stake model which Dispatch is utilizing, allow for faster and cheaper transactions on a blockchain. In the case of CryptoKitties, this would mean kitties could be transferred more quickly and effectively. Also, it would cost less to transfer, than on the Ethereum network.

Regardless of whether or not the cat craze dies down, the CryptoKitties explosion has revealed a weakness in the Ethereum ecosystem that developers would be wise not to ignore. Some even call it an important hurdle in Ethereum’s roadmap.

As blockchain technology grows in user recognition and enterprise adoption, network congestion may become a persisting problem. For developers who are eager to launch an application that sparks mass transactions, it could be beneficial to explore blockchains that utilize consensus algorithms to accommodate faster, cheaper, and more efficient transactions.

Featured image from YouTube.

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Jared is a former FBI analyst now working for Time Inc. An avid blockchain supporter and overall crypto enthusiast, he now writes primarily about the industry. Jared holds a master's degree in finance and lives in NYC.