Data analysis: GameFi economic model and P2E NFT asset holding trends

Key Takeawaay

The value of GameFi Token is partly determined by the user’s daily active growth (DAU) and burn/minting ratio (Burn/Minting Ratio).

Practicality is related to the burn/cast ratio.

According to the market value ranking of the NFTGo.io subdivision track, GameFi ranks fourth in the NFT industry, with a total transaction volume of US$3.29 billion.

Investors hold P2E NFTs in the medium to long term.

Currently, most P2E is on Ethereum (ETH) or Solana (SOL). Unlike traditional games, the owner of P2E in-game assets is the player, not the company, which is one of the reasons GameFi may disrupt the gaming experience.

In traditional games such as Counter-Strike, Fortnite, GTA, FIFA, and LOL, players rely on game studios to acquire equipment and buy skins. The term “dependent” refers to the fact that the player’s custody of the asset is entirely at the studio’s discretion, and the studio is able to do anything with the asset.

Plus, most average gamers don’t have much chance of earning real money in real life by selling assets or creating new items. In traditional games, there are only a few community marketplaces that are profitable, and the Steam Community Market is one of them.

Token economy

A new economic model is being born in the digital world. Players can earn tokens, create their own digital assets (some P2Es have a “nurturing” system), and hold custody of digital assets. Token economy has a certain supply and demand relationship and acts on players/users and investors in the game environment.

Most GameFi platforms have two or more tokens. The first type of Token is governance Token. The second kind of Token is like a “FIAT scheme”, which is used to upgrade game characters. We can think about the P2E game Token economic model from the following dimensions:

1. Market Cap & Supply

Market capitalization is a key indicator for measuring the total value of Tokens, measured in US dollars. The market value is calculated based on the size of the capital pool that has been invested in the project. The calculation method is “the product of the circulating supply and the current price of the Token”. Paying attention to the market value can better understand the future value of the Token.

The high price of a token does not necessarily mean that its market value is higher than other tokens.

For example, the price of Token A is $1, and the circulating supply is 100; the price of Token B is $2, and the circulating supply is 25. One might generally think that Token A is less valuable. Let’s calculate the market value of the two:

Market cap = Token price x Token circulating supply

A’s market value = $1 x100=$100

B’s market cap = $2 x25 = $50

The truth is that A is more valuable because A has a higher market capitalization than B. Therefore, market capitalization is a metric that helps you know the growth potential of a digital asset. The most common ways to divide the market value of Tokens are as follows (*B: Billion):

Large Cap: +10 B

Median Market Cap: 1 B-10 B

Small Cap: Below 1 B

・It should also be noted that, just like the market situation in recent days, the market capitalization of most digital assets will fluctuate greatly. In addition, it is recommended that you pay attention to the supply of tokens in circulation. Some Token wallets may be locked or burned, and will only be held in smart contracts/wallets and not circulated in the market.

2. Token

Digital assets have two economic models: inflation and deflation.

Inflationary tokens refer to tokens with a net increase in circulation, while deflationary tokens are tokens with a net decrease in circulation.

Inflation Token: As mentioned above, GameFi has a Token that can be used as a “FIAT scheme” (Fiat-to-NFT), that is to say, Token is used in an inflationary manner, and there is no maximum supply. When players play the game, It will be re-released for circulation. In the real world, the printing of money by the bank will lead to inflation, and the same is true in the virtual world. Sometimes there is no upper limit on Token, and its supply is unlimited. As long as players keep playing the game, Token will be continuously minted.

Tightening Token: Contrary to inflationary Tokens, the biggest difference between the two is that Tightening Tokens have a maximum supply cap when they are launched, and not all of them have to be released into the market on the day of launch; or the supply of Tightening Tokens can be released with the help of a burning mechanism. decrease over time. The operation of the burning mechanism usually relies on burning wallets – withdrawing a fixed percentage of tokens from the market at a specific time.

3. Allocate

When the project is about to start, there is one key point to observe—allocation. Allocation refers to the allocation of Tokens between the core team and private investors related to the project.

Each project has its own distribution pattern, and there is no one-size-fits-all solution. In most cases, the distribution ratio of the core team (founders) is 5%-20%, and private investors account for 3%-32%. The number fluctuates depending on how much funds the team hopes to raise for project development. Funds used to circulate supply in the beginning tend to be only 10%-20%, and eventually, all supply will be released. In addition to the above ratio, the remaining part will flow to two places, one wallet is used to lock funds, and the other is used for other purposes such as marketing, promotion, etc.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

Common project Token distribution schemes; data source: NFTGo.io

4. Utility and Growth

The value of Token also depends on the practicability and growth of daily active users (DAU), which is correlated with the price of Token. If a Token has a wide range of users, the daily Token minting/burning ratio will also be high, but if the utility is not enough, the token price will eventually drop, because the minting and burning ratio will bring high inflationary pressure to the Token.

In the P2E ecosystem, the most common solutions for Token to reduce inflationary pressure are:

Breeding

Parts upgrade

pledge

Liquidity Pool

・As long as the token has utility and the burn/mint ratio remains stable, the inflation pressure of the token will be reduced. Some projects may use capital (profit) to raise Token, which is a red flag. This approach is not sustainable in the long run. The project just uses funds to make profits for its own construction and development, creating a fictitious price.

The following figure takes some GameFi Tokens in the current market as an example, showing the relationship between DAU (number of daily active users), Token price and Utility.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

DAU, the correlation between revenue and token value; data source: NFTGo.io, CoinGecko

If inflationary pressure caused by the burn/mint ratio occurs, there will be a situation where DAU is high and token price is low. If the burning/minting ratio is too high, the Token will inevitably depreciate due to lack of practicality (burning mechanism). Some collectibles like to have low prices, high DAU, and high burn/mint ratios for a short period of time, as this allows them to have more circulating supply, but after a while, circulating supply (like skins, tiers, lands, NFT traits, etc.) ) will drop as new combustion mechanisms are created, and eventually, the price will stabilize.

Low daily income and DAU is not the worst case, as the NFT project is usually relatively cheap at such times.

To better evaluate token performance, you need to consider the following external factors:

Macroeconomic trends: digital asset market, stock market, overall sentiment in the NFT market, current game development trends, etc.

Current floor price

Return on Investment (ROI)

market liquidity

Future Token Utility

policy

P2E NFT Market Overview

The gaming industry attracts people to Web3 because of its fun and practicality. The total value of P2E games is about 1.69 billion US dollars, ranking fourth in the NFT industry by market value.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends  

Market value of various industries on the chain; data source: NFTGo.io

GameFi is growing explosively in 2021, and the popularity of P2E has also risen recently. The total transaction volume of NFT Game is as high as 3.29 billion US dollars, ranking third.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

The total amount of various industries on the chain; data source: NFTGo.io

hold trend

In order to obtain the development trend of holding time in the P2E industry, we analyzed 18 P2E collectibles on Ethereum and obtained the holding pattern. The chart below shows the 18 collectibles and their holding periods.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

The holding period of each collectible; data source: NFTGo.io

As shown in the figure, the holding period model with the largest proportion is 3 months to 1 year. Since passive income and assets may appreciate in the future, P2E NFT holders tend to make medium and long-term investments.

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

GameFi’s holding period; data source: NFTGo.io

We compared the holding period distributions of GameFi and BAYC and found commonalities:

Less than 4% sold their NFTs within 1-7 days

Mid-term investors trade in 1-3 months

The vast majority of investors want to hold assets for more than 3 months

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

Holding period of GameFi and BAYC; data source: NFTGo.io

GameFi ROI

If you want to calculate the return on investment (ROI) of P2E, you can consider the following factors:

Gas fee for buying NFTs from the marketplace

Daily value to liquidity ratio (DLV). DLV is calculated as: (Daily Value * Supply) / Liquidity

The higher the DLV, the greater the volatility of the asset

fluidity

Threshold Value Value (TLV) for market capitalization. TLV is the ratio of market capitalization to liquidity. If the ratio is greater than 1, the token is overvalued. If it is close to 0, the Token still has room for growth. The calculation method of TLV is: market capitalization/liquidity.

The following picture is a P2E with high ROI in Ethereum:

Data analysis: GameFi economic model and P2E NFT asset holding trends

Data analysis: GameFi economic model and P2E NFT asset holding trends

GameFi passive income rankings; data source: NFTGo.io

Note: The above information is for reference only. Investing in digital assets such as NFTs and digital assets carries a high level of risk and you should always consult a financial advisor before making any investment decisions. NFTGo does not provide investment advice and is not responsible for any losses caused by investing in digital assets.

Epilogue

GameFi is a video game market under the Web3 ecosystem, based on the community, for the community. GameFi allows players to earn and trade tokens in exchange for any desired digital asset. Most importantly, players have custody of digital assets.

But most importantly, hedonicity is still the most essential purpose of the game.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/data-analysis-gamefi-economic-model-and-p2e-nft-asset-holding-trends/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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