CryptoKitties Bring Ethereum Network to a Standstill.

CyrptoKitties, an Ethereum based Dapp (Decentralized App) went live on November 28th, and by December 5th both services were been pushed beyond their limits. CyrptoKitties is a collectibles game, with similarities to Pokemon and Beanie Babies, that uses the Ethereum block chain in order to securely trade unique, one of a kind, kitten avatars. Once players own a kitty, they may breed (sire or carry) new kitties or attempt to sell them in the “Dutch auction” style kitty marketplace. All of these functions rely on the Ethereum network to validate their authenticity, and the popularity of CyrptoKitties has exposed major shortcomings in the budding technology.

Ethereum, which promotes its product as “a decentralized platform that runs smart contracts: applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference” is not meeting the expectations of users. The following link, found at etherscan.io, shows the rapid increase in demand for the service over the past year. https://etherscan.io/chart/tx You can see that while demand had been growing throughout the year, the exponential growth in the last two weeks is unprecedented, and has disrupted the network. So much for “without the possibility of downtime,” but what does this really mean for the future of smart contracts and Ethereum?

While there might have been an immediate instinct to flee the cryptocurrency, users are noting that they are unable to “sell out” of their positions. Popular wallet Jaxx, which features Shapeshifter, the coin trading tool, currently warns users that “the Ethereum network is experiencing much higher traffic than usual. Congestion is affecting all ETH & ERC20 transactions.” Even if the marketplace is primed for it, Ethereum cannot have a sell-off if no one can sell, and the coin price remains relatively flat through this period of disruption. A pending sell-off remains to be seen, but CyrptoKitties and the mess the dapp has created, may actually be a blessing in disguise.

CyrptoKitties has turned more mainstream attention towards Ethereum, cryptocurrency, and Blockchain than ever before. Nonetheless, the entire crypto-market remains quite small compared to mainstream industries, and this might just be the wake-up call the industry needs before expanding to the masses. By encountering (and potentially overcoming) these difficulties now, the Ethereum network (and others like it) has an opportunity to address the scalability issues currently plaguing the system before most consumers ever attempt to use the service. The future of smart contracts, Dapps, and the entire Ethereum network may very well depend on how well the distributed ledger recovers from the cutest problem riding on blockchain.

Disclosure: The author owns Ethereum, Bitcoin, and Iota.