What is CryptoKitties & How Could it Affect Ethereum (ETH) Prices?
CryptoKitties Becomes Ethereum’s Largest DApp
In the past one week, Ethereum prices have touched all-time highs, with daily volumes averaging between $1.5 billion to $2.0 billion. Part of this unprecedented investor interest in the cryptocurrency may be emanating from Ethereum’s first-of-its-kind, real-world use case that is garnering mass popularity. “CryptoKitties” is now Ethereum’s biggest decentralized application, having just taken the crypto-world by storm.
If you haven’t heard of it yet, you’re probably living under a rock. Let me inform you about what’s going on.
People are buying and selling rare cartoon cats with “ether” (Ethereum’s crypto tokens) on an online application to both make money and earn recognition, and the crypto world is buzzing about it.
Gaming enthusiasts are reliving the “Pokemon Go” mania all over again, only this time around it involves not a mobile app, but a decentralized blockchain app and a cryptocurrency (worth actual money) to play.
The CryptoKitties craze is turning out to be bigger than its developers had probably first imagined. The influx of new players is now outpacing Ethereum’s capacity to promptly process their buying and selling requests.
The result is that the Ethereum blockchain is now clogged. New players are coming in droves and within a week of its launch, CryptoKitties’ developers have been forced to raise fees to incentivise Ethereum miners.
In fact, there is so much congestion on the network right now that it seems like all this excess demand is serving to push prices up.
Wait, if all of my fangirl commentary just went over your head, then let me break it down in non-technical terms to help you understand how CryptoKitties may actually affect Ethereum (ETH) prices.
What is CryptoKitties?
CryptoKitties is a game built on Ethereum’s blockchain-based technology. It is one of the real-life applications of Ethereum’s smart contracts, referred to as a “decentralized application” (DApp), which requires players to use ether to buy and sell breedable cats.
Yes, cats! CryptoKitties players can buy cartoon cats and breed them to create new, rare breeds, which they can keep as expensive keepsakes or sell for a high price. Players can also put up their cats to other cat owners for breeding, and in turn earn ether.
The rarity of a kitten depends on its traits, for which buyers can bid to pay a premium once they go up for auction sale.
Because this app is built on Ethereum’s blockchain, it is decentralized, which means no outside party can interfere or manipulate it.
The players maintain their privacy in the game, without the fear of their kittens being stolen or getting digitally replicated. In other words, the game preserves the rare breeds (whose rarity is determined by the community itself).
The buying and selling transactions within the game take place on Ethereum’s platform, which means Ethereum’s blockchain validates and stores these transactions.
Because Ethereum has the capacity to process only 15 transactions per second, the countless transactions simultaneously taking place are putting a pressure on the network.
As a result, the Ethereum miners, who are busy solving the complex blockchain code and in turn providing power to this system , are seeking a better incentive to keep mining.
This is why CryptoKitties is now paying them with double the fee to tempt them to keep processing their transactions.
Phew! That’s a lot of Greek to process.
Back to the real question now: how much can this DApp affect Ethereum prices? Or can it affect them at all?
How CryptoKitties May Affect Ethereum (ETH) Prices
Absolutely, it can. But to what extent is debatable.
Since CryptoKitties requires players to first buy ether to play this game, it is obvious that demand for the Ethereum cryptocurrency is rising, just as the popularity of this game is shooting up.
Ethereum (ETH to USD) price has touched $475.00 this week and is on its way to hitting the $500.00 milestone.
Also Read: Ethereum Price Prediction 2018: $1,000 Is Our Ethereum Price Target
Whether you tie this week’s price surge to the popularity of a gaming application or an industry-wide boom, label it as mysterious market manipulation, or call it the work of God is purely up to you.
The reality is that Ethereum investors have doubled their investments in less than a month and the rally in ETH prices is continuing.
Chart Courtesy of TradingView.com
Amid this price surge, CryptoKitties has emerged as the largest application on Ethereum’s platform for adding the most transactions to its network in the past one week.
More than $2.0 million worth of transactions have already taken place on CryptoKitties. Simply put, this is the amount of money that has flowed into this app within just a week of its launch.
And this is just the beginning. The naysayers may call CryptoKitties a fad (and I confess I may not fully disagree with them), but the fact of the matter is that this gaming app is bringing average Joes and Janes to the Ethereum platform.
Many of its players may be clueless about what Ethereum is, but they are buying this cryptocurrency just for the sake of playing a game their neighbor is playing.
CryptoKitties has become the first real world use-case of Ethereum that goes beyond the boring financial and business use cases we have so far been fed.
For Ethereum, this is good news.
Although, my readers deserve a fair warning that the popularity of this game may eventually fade away, just as we saw with “Pokemon Go.”
Regardless, a gaming application running on a cryptographic blockchain and attracting the average Joe to buy this cryptocurrency serves as proof that Ethereum may have a chance at winning mass adoption as more ether-based DApps hit the market.
Needless to say, I’m bullish on Ethereum in the long run, setting a $1,000 price target for 2018.
Read more about Ethereum and our daily price forecasts here.