Digital cats postpone launch of Kik’s online currency
Cuddly, adorable digital kitties trading on the Ethereum blockchain are to blame for a delay in distributing Kik Interactive Inc.’s new cryptocurrency to users of the Waterloo, Ont.-based messaging app.
In a Q&A streamed live online this week, Kik chief executive Ted Livingston said the network congestion caused by the Crypto-Kitties craze is an example of deeper reliability issues with Ethereum, a platform for making decentralized applications based on blockchain technology. Kik still plans to introduce Kin, its new Ethereum-based cryptocurrency, to a small group of users in the next few weeks, but Livingston said he’s planning to move the token to a different network called Stellar before introducing it to everyone else.
“We’ve been using Ethereum today, and to be honest, I call it the dialup era of blockchains,” Livingston said. “The scale is very low. Even at 10,000 users, we’re starting to push the limits of what the Ethereum blockchain can handle.”
Cryptocurrencies are collectively worth more than US$500 billion and evangelists are touting the blockchain technology powering them as having more economic potential than the internet. Kik was the first mainstream, established company to announce plans to raise money by issuing a cryptocurrency using a mechanism known as an initial coin offering, raising almost US$100 million from accredited investors and the public in September.
Since then, Kin’s market capitalization has fallen to US$51.4 million, with investors taking to Reddit to express their frustration with the project’s delays and the company’s decision to move away from Ethereum.
Ethereum provides developers with a programming language that allows them to build apps on its blockchain, with the ultimate vision of eliminating the need to trust any one company, person or government to keep massive amounts of money and data safe and secure. Achieving that vision is going to require a significant amount of technological progress, however, since a single popular app involving the breeding and trading of tamagotchi-like digital cats has managed to clog the network so badly that other transactions are being delayed.
Because CryptoKitties operates on the blockchain, the digital cats created by the game will continue to exist even if its creators disappear, making them permanent collectible digital objects. The most popular CryptoKitties have traded for six-figure sums, with users spending a total of about US$16 million on the game.
Sid Kalla, a cryptoeconomics expert and cofounder of Turing Group, a crypto protocol development and advisory firm, said it’s fair to ask whether it makes sense for valuations to be so high for a technology that has a lot of potential, but can’t currently even handle a popular game without causing glitches.