Just another crazy day in the cryptocurrency world

The market capitalization of cryptocurrencies has gone crazy, widely passing the quarter of a trillion mark. Many believe that this is (still) just the beginning.
Computer antivirus founder John McAfee recently declared that bitcoin could hit the valuation of $500,000 sooner that anyone could have imagined. It in fact sounds crazy, that in August 2017, imagining of a $20,000 bitcoin price was purely a fantasy.
However, today, it is reality. The speed of growth is extraordinary. So is the oscillation. In a few minutes, Bitcoin price could jump up and down by several thousand dollars. It is not a “game” for the weak hearts. It is not a game for anyone in my opinion, but rather something to take very seriously and be very careful about at the same time.
There are some crucial technical aspects that prevents the technology from being fully exploited at this stage. The Ethereum network suffered terribly and all users experience slowness because of one website alone. Crypto Kitties. A very obvious example that there is still way to go (and grow) for all blockchains. For those who barely can cope with understanding cryptocurrencies, I promise you, crypto kitties are even more difficult to understand.
Especially on a rational level. For those who are already familiar with some crypto ideas, well, the crypto kitties could still be considered the craziest thing that they have ever heard of.
So let us move one step back, before we get into crypto kitties. A crypto currency is basically a virtually currency exchanged on a distributed ledger called blockchain. Each transaction is validated through a process called mining, that rewards the miners with little tokens of appreciation.
The cryptocurrencies are moved from one digital wallet to another, without leaving any track in the traditional finance world.
Crypto kitties are very similar. They are virtual cats, randomly generated on the same underpinning distributed ledger that runs a very popular cryptocurrency called Ethereum (ETH). New cats are born from parent cats, (re)producing million of worthless images of cats. Have I said worthless? I was wrong.
New kittens are purchased by anyone who wants to buy a digital collectible, starting from ETH 0.025 (approximately $10 today) all the way to hundred of thousand of dollars. Yes. You read it right: hundred of thousand of dollars. For what? The drawing of a cat.
With absolutely no value, but the value that the buyer (and the seller) decide to attribute to it. It is a free market, right? So anyone can buy or sell anything. Including 6 digits worth(less) of virtual cats. In fact, in 48 hours, cryptokitties.co managed to sell $2.5 million of nothingness.
But where do the money come from? Some of the big spenders of cryptocurrencies are those who have gained access to them through extraordinary growth.
So if a 20 years old boy bought $100 worth of bitcoins in mid 2010, would now, at the age of 27, hold a portfolio of approximately $15 million. Hence, after buying a Ferrari, a villa to live in, 2 apartments to rent, a trip around the world… what else is left? A crypto kitty, of course!
Many new cryptocurrencies are released almost weekly, and each of them requires some sort of transaction validation, and that is where mining become crucial for the survival of small players.
The mining process is a competition based on power consumption, where each miners try to outbeat the other. Although the profits are minimal when measured in USD, once they are harvested in cryptocurrency, they shoot up on the sky with unbelievable growth.
One of the most famous mining aggregators, NiceHash, was recently hacked. Or at least they labelled it as a hack. In fact, simply, an intruder logged in the system with the username and the password of one of the team’s engineers.
Then he or she went straight to the NiceHash BitCoin (BTC) wallet, and sent to himself or herself the balance of BTC 4,700, which corresponded to approximately $60 million. In a Facebook livestream, the CEO and CTO of NiceHash tried to explain what happened and promised to fight for it. But the harsh truth is that once the BitCoin are stolen, there is no insurance to claim. They are just gone.
It was just another crazy day in the crypto world.

Stefano Virgilli
stefano@virgilli.com