The Kitties That Took Down Ethereum

What a week for digital currency.

Bitcoin soared to a new all-time high, smashing through $18,000 like a bull in a china shop.

IOTA, one of our earliest Wealth Daily spotlights, forged a partnership with Microsoft. Since we spotlighted it, the digital currency has experienced gains over 800%.

Considering that our research team was talking about both these digital assets pretty early, I am going to give them a pat on the back.

But there was one event they didn’t predict.

That event was CryptoKitties, an adorable blockchain-based game that wreaked havoc on the Ethereum network.

Now, CryptoKitties taught a whole new audience about blockchain technology. It also demonstrated exactly how far digital currencies have to go.

That is why I want to talk about CryptoKitties and the future of the Ethereum network. 2017 was the year of digital currency, but 2018 will be the year people finally start to understand it.

Blockchain-based games like CryptoKitties — as ridiculous as that sounds — can help investors understand the steps left for these technologies before mainstream adoption.

So What is CryptoKitties?

CryptoKitties was one of the most talked about events of the week, covered by TechCrunch, BBC News, and CNBC.

In truth, I think I was pretty late to the game on this one. As soon as the application hit, my Twitter started blowing up — and not from the usual traffic. Friends who knew nothing about digital currency were asking me about Ethereum and blockchain.

They were willing to learn about something they considered complex and bewildering to get their hands on a “CryptoKitty.”

So I checked it out.

Long story short: CryptoKitties are really just glorified digital Beanie Babies. I took a screenshot of one of my favorites:

Isn’t he cute? The CryptoKitty above was only $4. With him, you receive details about his genetic makeup right down to specific character traits. And if $4 seems like a lot for a digital cat, then I have news for you.

This is actually a “discount” cat. Some CryptoKitties are selling for over $20,000. The first cat ever created — known as the Genesis cat — sold for over $100,000.

And, in fairness to its buyer, it is really cute, and I am a bit jealous.

Still, to most people, these are outrageous prices for digital cats. Yet, like all collector items, they have gathered their own audience.

Online digital pets aren’t new. When I was a kid, I bought a stuffed animal called a WebKinz.

It had a digital counterpart that I could interact with online. We also had Neopets and Tamagotchi. These were virtual pets, but people spent real money on them.

Now, CryptoKitties is a bit different. The information surrounding these digital cats is all stored on a blockchain. That means there is no central company. Nothing can truly shut CryptoKitties down. The cats are decentralized.

That said, the game did create some mayhem.

Demand was so high that at one point it consumed a good portion of the traffic on the Ethereum network.

This congestion caused outrage for other Ethereum users, inciting complaints about slower transaction times. It also raised some legitimate concerns.

Can Ethereum actually handle an increased user base?

Or will it fall into the same trap as Bitcoin?

Bitcoin is now valued above $15,000. Yet, in the last several days, it has taken up to 141 minutes to confirm a transaction. Now does that sound like an effective decentralized network to you?

Luckily for Ethereum, congestion may be a thing of the past.

Big things are coming down the pike for the digital currency.

Ethereum’s Next Important Steps

When I talk to people about Ethereum and Bitcoin, most people agree that Ethereum is the smartphone to Bitcoin’s calculator.

Despite Bitcoin’s meteoric rise, the actual Bitcoin network is far slower and less suited for transactions than the Ethereum network. Some efforts have been made to fix this, including the Bitcoin Lightning Network, which is still being rolled out.

That said, with Bitcoin’s multiple scaling issues, users aren’t so certain that these upgrades will be made anytime soon.

Ethereum, on the other hand, has some things planned.

The first of these things is the Raiden Network, which will allow Ethereum to process smaller transactions off-chain. The Raiden Network held its ICO this October, and now Ethereum supporters are waiting to see how this scaling solution will help Ethereum in the coming year.

Another big step for Ethereum will be the Casper PoS (Proof of Stake) protocol. If PoS is implemented correctly, it should speed up transactions. 

We explore the benefits and risks of PoS in our digital currency educational service, which you can learn more about here.

All this technical information aside, just know that either Raiden or PoS could change the Ethereum network for the better, positioning Ethereum ahead of the competition.

Looking Forward to 2018

I don’t know about you, but I am looking forward to 2018.

2017 was the year digital currencies broke through to a mainstream audience. And, while that breakthrough brought a lot of irrational exuberance and dumb investing, it also introduced a whole new technology market with immense profit potential.

Heading into 2018, the Wealth Daily team is going to continue to monitor digital currencies. We are expecting 2018 to be a hot year for digital assets, especially smaller tokens currently dwarfed by Bitcoin.

And we are not alone in that belief.

The MIT Technology Review published content stating that, while Bitcoin dominates the market today, its hold on the market “will drop significantly in the next few years.”

That means now is the time to start looking at other digital currencies.

If you’re interested in learning more about digital currencies, can you check out our FREE digital currency education service.

With this service, you get multiple videos, reports, and a 44-page e-book breaking down the value behind some of the top digital tokens — tokens that could potentially skyrocket in value in the coming year!

You can learn more about that service here.

Happy holidays, and best of luck with your investments.

Alexandra Perry

@AlexandraPerryC on Twitter

Alexandra Perry is a contributing analyst for Wealth Daily and Energy and Capital. She has multiple years of experience working with startup companies, primarily focusing on artificial intelligence, cybersecurity, alternative energy, and biotech. Her take on investing is simple: a new age of investor can make monumental returns by investing in emerging industries and foundational startup ventures.