My token killed my blockchain game

Market forces at cruel work

Everyone needs a thesis and mine is deceptively simple.

The blockchain game sector will be entirely disruptive to traditional gaming, but despite this almost every blockchain game will fail.

The fulcrum of this argument is the advantages provided by blockchain technology are so overwhelmingly positive for players (and developers) that there’s no possible way they won’t come to dominate the sector.

However, the many and varied features provided by blockchain technology are so complex, interlinked and fundamentally unstable that almost no product can integrate a significant number of them without external capital flows blowing up its economy i.e. notably its token price.

Out of many

Brutally put, if there was only one blockchain game, it would be the most successful game in history, but instead there are hundreds and each one fragments and dilutes the market, at least until the market self-selects winners.

And the proof of this argument can clearly been seen when we look at the token performance of what I considered the best and most popular live games (table quickly generated from the Big List of Blockchain Games).

Of course, there are some sampling issues given that I’m taking the raw data from Coingecko. It’s not always clear what initial token price it generates these numbers from.

Equally, in current crypto market conditions, the vast majority of all tokens are at least 50% down from their all-time highs, which often were only experienced for very short periods of time in late 2021.

As a broad comparison, ETH is -41% ATH while BTC is -42%.

More critical, however, is the comparison to the all-time low, with ETH is up 66,7297% and BTC 58,032%, and it’s this class of five digit percentage rises that are key.

In this context, only Axie Infinity’s ASX token can be viewed as a real success — up 34,411% from its all-time low of $0.12 back in November 2020, (although Arc8’s GMEE token up 8,030% is worth some consideration).

It’s this sort of price volatility that underlines another of my oft-mentioned crypto phrases — “everything either goes to 1 or 0”. By this what I mean is the vast majority of projects will be eventually be priced at zero, but a small percentage will not.

This is why one outcome of the thesis is not to take a tracker fund approach to blockchain games, whether in terms of time or capital spent. This just dilutes returns. Instead you have to be very focused on what you consider the best projects to the exclusion of almost everything else.

As for blockchain game developers, the corollary is be very, very careful about launching a token. Delay it for as long as possible and design it to be as anti-extractive as possible — both in terms of players and investors — because once your token is live, your project’s success is almost totally out of your control.

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Funding news

• US/China crypto VC Dragonfly Capital has announced its $650 million Fund III, which takes total assets under management to over $3 billion. LPs in the fund included Tiger Global, KKR and Sequoia China.

Founded in 2018, Dragonfly has been mainly active with blockchain L1s and DeFi, making investments into the likes of Avalanche, Cosomos, Near, MakerDAO, Dune, dYdX, and Compound.

Its blockchain game investments to-date include Animoca Brands, Sipher, Polygon, Lava Labs, DeHorizon and Ancient8.

• Blockchain gaming OG dev Double Jump.Tokyo has announced a $25 million Series C round, which was led by Amber Group and Jump Crypto. Other participants to the APAC-centric round included Access Ventures, Circle, Com2uS, Dentsu Ventures, Fenbushi Capital, WeMade and Polygon Ventures.

Back in 2019, Double Jump was riding hiding with the success of My Crypto Heroes — then the most popular blockchain game with around 8,000 onchain DAUs. The rise of Ethereum gas fees in 2020 combined with the game’s complex UX meant it didn’t see widespread adoption in the boom years, however.

Double Jump has since been working on its N Suite platform (previously MCH+) and has partnerships with companies such as Square Enix, Bandai Namco and Sega.

• Belgium onboarding and wallet platform Venly has announced a $23 million Series A round. It led by Courtside Ventures, which previously invested in Nifty Games, Mystic Moose and 100 Thieves in the games space.

Other investors included Transcent Fund, Coinbase Ventures and Alpaca VC, plus local investors such as Tioga Capital, High-Tech Grunderfonds and Fortino.

As part of the funding, Venly will launch an accelerator for game studios and web3 startups to build out its ecosystem, as well as launching its own non-crypto VENS token. Venly provides simple wallet onboarding for products such as The Sandbox and Shopify using social sign-on for multiple blockchains including Ethereum, Polygon, BNB and Hedera. It also operates its own NFT marketplace.

• Crypto gaming rewards platform GamerGains has announced a $5.8 million seed round, which was led by Cadenza Ventures. Other investors included Winklevoss Capital, Tiger Global, Lightbank, FTX Ventures and BlockFi. (CEO Jon Brovda previously worked at BlockFi.)

Running on Solana, GamerGains enables players of traditional games such as CS: GO, PUBG, GTA V, Destiny 2 etc to link their Steam, Xbox and PlayStation accounts to earn rewards, complete challenges and compete in wager contest and esports for its GAMER token.

• UK startup Playmint (disclosure I’m an advisor) has announced a $4 million seed round led by Bitkraft, with participation from 1KX, Cherry Ventures, Ethereal Ventures and Play Ventures’ Play Future Fund.

Playmint’s first game has been live since January: fully on-chain Ethereum dungeon crawler The Crypt has been built using the Loot NFT system with players deploying their NFTs against dungeons for Relic NFT rewards. It’s now onto its third chapter.

Product news

• Following its first Habbo NFT avatar drop in September 2021, Sulake has announced it’s going to launch a full blockchain product called Habbo X later this year.

This will be a standalone social space in which users will own their own rooms and be able to monetize the experiences they create. There will also be a play-to-earn element. Habbo currently has around 850,000 MAUs across 115 countries and is owned by adtech outfit Azerion. Currently its avatars run on Ethereum with its Habbo NFT furniture running on Immutable X.

Do Your Smart Code Audit news

• Despite multiple issues with its auction minting smart contract, which have resulted in around $34 million of locked ETH, it looks like the 15,000 Akutar NFT collection is maintaining a 2 ETH floor price.

The collection is the latest from ex-MLB player Micah Johnson’s Aku series, based around his nephew’s questioning of whether a black kid could grow up to be an astronaut; hence the over-sized space helmet on a child’s body template.