How the NFT bull market is on the way to screen the “most promising” GameFi projects
In July, Axie’s single-day income explosion “Glory of the King” became a thunderstorm in the crypto circle, and then GameFi projects came in droves, dazzling investors, a crypto bull market related to NFT seems to be waving at us… Then, how should investors screen? Excellent GameFi project? On August 20th, the Ouyi OKEx Intelligence Bureau invited REX, the head of the chip department of the investment institution Volatile Technology, and Bluce, the head of the NFT track, to talk about the topic of “how to screen GameFi projects” for institutions and investors.
Why follow GameFi
Since the DeFi summer last year, various investment opportunities have continued to emerge in the DeFi field. However, after months of lively activities, the real gains are actually very limited. On the other hand, from the end of last year, the Ethernet Square congestion problems are very serious, gas costs at least $ 100, investors become one of the biggest pain points. So, where will the large number of new users and funds go in the future?
Before May 2021, excellent data on the overall market and DeFi will always dominate investors’ eyes. However, since the second quarter, NFT games have grown rapidly, and the GameFi field, led by P2E (Play to Earn) game Axie Infinity , is more active than ever. Along with the astonishing increase in the price of AXS, the concept of blockchain games has completely ignited. The word GameFi has begun to appear frequently on the Internet. At this time, industry insiders have clearly felt that GameFi may bring to the entire blockchain game industry. A disruptive change.
REX said that Volvo Technology believes that blockchain games can lead a wave, and the P2E model has brought different things to the entire blockchain game field.
Before talking specifically about the far-reaching impact of GameFi on the industry, we might as well recall the familiar DeFi that everyone is familiar with. The underlying logic of DeFi is disruptive to the entire global financial system, but it must be said that if the fire of DeFi is not finally ignited by Liquidity Mining, the process of the entire industry will be greatly slowed down.
And now we realize that P2E is likely to be the introduction to GameFi . This model will greatly promote the blockchain game industry to enter a period of rapid development. In this process, we will see major changes and major changes in the entire game ecosystem. develop. In REX’s view, mainstream blockchain games in the future will all introduce P2E mechanisms, otherwise there is a high probability that they will not be able to achieve better development.
The following picture summarizes some of the characteristics of DeFi’s liquidity mining and GameFi’s P2E.
GameFi and DeFi are also very similar, that is, in the early stages of development, many people sneered at it, simply and rudely thinking that it was a capital market and unsustainable. But later, DeFi proved its significance to the world and created a new era of blockchain. For GameFi, we believe that its characteristics will definitely bring changes to the entire game industry and will step by step toward prosperity.
So, in the face of many new GameFi projects, as an investor, how do you identify the quality of these projects and judge their development trends in the early stages of the project? In this regard, REX said that as an investor, you must observe more, record more data, and don’t draw conclusions lightly. In the GameFi field, the economic design model of the game is the most important part.
Axie’s success detonated GameFi
This time, the play-to-earn model is not only changing the game world, it also allows the blockchain to quickly enter the lives of ordinary people. At the same time, it is accelerating the introduction of game mechanisms in the Defi and NFT fields. We see a trend: the next generation of encryption Assets will maximize financial attributes, playability, and Meme characteristics at the same time.
Taking Axie Infinity as an example, Volvo Technology shares the success logic of the most popular GameFi project at the moment.
First of all, Axie Infinity’s team Sky Mavis was established in 2018. The game took a year from project approval to launch of the alpha version. After it went live in 2020, it took one and a half years of painstaking management to usher in the current outbreak. Judging from the resume of the founder team, most of them have experience in the game and blockchain industries. In addition, from the details of the game’s economic model design, playability, Axie elf game attribute design, and art design, Axie can be regarded as an excellent work, and it is by no means a simple DeFi gameplay applied to a web game. Perfunctory work like the shell.
One of the most important points is the economic model design, which can determine the survival of a game project. Axie Infinity’s economic model was designed by the team and Delphi, a well-known venture capital in the industry, spending a lot of time together, including the team’s ability to create foam and economic regulation. Friends who have played the game should know that the economic circulation of Axie Infinity is similar to the cycle of a real economy, and has a strong margin of regulation. The project party can better control the healthy development of the game .
The Axie Infinity economic model contains 4 main elements: in-game asset tokens, including dual tokens (AXS and SLP); NFT assets, including Axie wizards and land.
- First of all, SLP is an unlimited total number of game tokens issued by Axie Infinity. You can get SLP rewards when you win a battle. At the same time, this token also has a consumption model. For example, you need to consume SLP when breeding Axie wizards. In addition, we found that there are many market makers in the Philippines, who have opened a channel for SLP to exchange legal currency. At this time, in the Axie Infinity economy, SLP is equivalent to assuming the role of currency in the real economy. It can be issued without a limit, will generate inflation, and has output and consumption models, so SLP can simulate games well In the economic cycle . Currency injection is actually very particular. If an economy develops at a high speed without corresponding currency injection, it will also hinder economic development.
- The second economic factor is AXS. AXS is the platform token of the project party. It has a total amount limit and an issuance limit of 270 million. This token also has a reward consumption model in the game and can also be traded on the secondary market exchange. , This is similar to external investment, a large number of users flooded into the market to buy AXS. AXS corresponds to the GDP in the real economy. When an economy is prosperous and everyone has money to make money, GDP will inevitably develop at a high speed, and the corresponding AXS unit price will also show an upward trend.
- The third economic factor is Axie elves. The number of Axie elves is also unlimited, and they are gradually produced through reproduction. But breeding Axie sprites needs to consume SLP, which means that its breeding has a cost. The Axie wizard is equivalent to a productivity tool in the game, making money through breeding and fighting, similar to the “population” in the real economy. In real life, a child needs to spend a lot of money in the process of being born and growing up, but when the child grows up, he can work and earn money, and he can also get some extra income through investment. It can be seen from this that Axie Infinity’s simulation of the real economy is very in place.
- Finally, Axie Infinity will launch a land project in the near future. The total amount of land is limited, and land is also a productivity tool that can generate cash flow. Specific play land we do not have conceivable , but it appears that the land is definitely a thing of the foam carrier. If there is a bubble in the economy and everyone exchanges all tokens to hit the market, the entire game will collapse; but if there is a scarce resource like land, it can carry some bubbles. This is also very similar to the real economy. The real estate in the real economy is like a reservoir. It can carry the over-issued currency. If the over-issued currency does not enter the reservoir, it will continue to flow in the economy. , It will lead to severe inflation and the entire real economy will collapse.
Overall, the design of Axie Infinity’s economic model is very sophisticated, which well simulates some of the structure of the real economy , allowing new players to constantly influx. Moreover, old players will feel that SLP and AXS have many similarities with algorithmic stablecoins. One of the well-known reasons why the algorithmic stable currency has not been a big fire in the DeFi field is the lack of application scenarios-it does not have a powerful consumption model. However, SLP and AXS in this small game world, the application scenarios are directly built and solidified, it is natural for players to use SLP and AXS. Now SLP can basically be used directly as currency in some parts of the Philippines, which is particularly convenient.
There is also an issue of Axie Infinity’s token economy. May to July is the period of rapid development of this game. A large number of new users and capital poured into Axie Infinity. At this time, SLP and AXS ushered in a double increase, and SLP was issued ten times in one month in July. At this stage, many people predict that SLP may fall, but in fact, SLP is also slowly growing at this stage, and the over-issue of tokens has led to an increase in inflation. At this time, some players may change the SLP to Ethereum or USD because the payback cycle is too long, which will cause the price of SLP to fall sharply, and at the same time, it will be accompanied by inflation. From July to August, SLP’s over-issued rate has exceeded 10 times, facing the risk of collapse, which is not friendly to players and capital. Therefore, on August 9, the project party adjusted the SLP inflation mechanism and directly halved it. Since then, the inflation rate of SLP has dropped, and at the same time, the token consumption mechanism is still operating.
In summary, in the past period of time, the output of SLP was much higher than the consumption, and the inflation rate was extremely high. Therefore, the selling of SLP was particularly turbulent, but recently, the consumption and output of SLP may have reached very good levels. We believe that Axie Infinity’s economic and monetary policies have been adjusted successfully, and this economy can continue to operate well.
SLP price trend since May 2021
Re-recognize YGG Game Guild
YGG (Yield Guild Games) is also a hit with the outbreak of Axie Infinity. The emergence of this kind of game guild is really impressive.
The Game Guild has brought many out-of-circle users to GameFi games and taught many users who have no relevant experience to play games and trade tokens. Compared with DeFi, many people in the industry also took a lot of time to get started. But now many elderly people in the Philippines are playing Axie Infinity, which is enough to show that YYG has done a good job. YGG now holds the NFT assets of many game projects and leases these assets to those who cannot afford these NFT assets, let them play the game, and then divide them. The current YGG share ratio is: game users get 70% of the income, community managers get 20%, and YGG only draws 10% . This is YGG’s business model.
For the YGG Association, REX put forward four points. First of all, he believes that YGG is a bridge connecting the chain and the chain, and it is a new industry species . As a bridge, YGG can enjoy the growth of the three markets, one NFT market, and second, De F i market and the third is the gaming market . Therefore, in its development process, we can imagine that YGG will build a game-centric platform relying on its huge amount of on-chain NFT assets and the number of off-chain game players in the future. This platform will be very strong in the entire blockchain game ecosystem. Status.
Second, YGG is a machine gun pool in Game F i, and this model involves off-chain business operations. It is easy for imitators to plagiarize, but it takes time to build an advantage of scale . YGG is similar to YFI in DeFi. YFI pools funds to mine and pays dividends. YGG pools users’ time to play-to-earn and then pays dividends, but this model is very easy to replicate, but YGG has built some early scale advantages , So I think its future development will be faster than plagiarism.
Third, at present, YGG tokens can be regarded as the ETF index fund of the blockchain game industry . Because YGG now holds not only the NFT assets of Axie Infinity, but also the assets of many other game projects, some of which have not yet been officially launched, and are currently in the development and testing stage. As a well-known game guild in the GameFi industry, YGG has the ability to obtain the NFT assets of these games in advance and participate in the testing of these games. In the future, YGG will gradually expand these advantages, although these assets are not worth the money. However, once the project goes online, users flood in, and the guild members start up, the value-added may exceed 10 times. For YGG’s competitors, this cost is unimaginable.
Fourth, YGG’s business model has a moat . Compared with the actual labor service company, the traditional labor service company is a light asset company, which is only responsible for connecting the company and job applicants and charging intermediary fees. This business model does not have a moat, but YGG is different. First, YGG is an asset-heavy operation, with huge NFT assets as a production tool to generate cash flow; second, YGG can connect the world on-chain and off-chain, off-chain testing the ability of community managers to push the ground, and testing assets on-chain Operational capabilities, as the traffic portal for most people to log on to the chain for the first time in the future, YGG will share the revenue generated by this huge traffic.
Therefore, in summary, YGG currently has four core competencies:
- It has already created its reputation and IP, and has an early scale advantage.
- Participate in the early testing of each game and purchase the NFT assets of the game in advance. The cost of YGG in this part will be much lower than that of its competitors.
- The community manager’s ability to push the ground is very strong, which is particularly evident in the Philippines and Vietnam.
- The first one completed the capitalization, which will allow YGG to participate in higher-dimensional competition.
YGG’s business model is actually very simple, but why is this simple model being so high now? REX believes that one is because of the bull market, the other is because of Axie Infinity, and the other part is that the capital side may have seen YGG’s position in the entire blockchain game ecosystem, which can bring greater imagination to the future. REX predicts that YGG may have four profit models in the future:
- A gathering place for social digital assets and network traffic: YGG has encrypted assets and network traffic, which can become a social platform.
- Constructing a game-centric platform: YGG can be constructed into a million-level social platform centered on games by relying on its huge amount of on-chain NFT assets and the number of off-chain game players in the future.
- Preferred sales and distribution channels, community-operated publicity centers: a large number of users and strong publicity capabilities can be favored by capital.
- Build your own meta-universe: With so many users and NFTs, YGG can build its own meta-universe project.
Analyze YGG from the data on the chain
Then, as an institution or ordinary investor, how to confirm whether a project is worth investing in and when to buy and sell can be judged by analyzing the financing situation, token distribution, and bargaining chip analysis.
First, pay attention to the financing of the project, including the completion of several rounds of financing, financing institutions, financing time, and financing amount. Among them, the lead investor is particularly important. A good lead investor can bring traffic and heat to the project, and even participate in the design and iteration of the economic model of the project. We can also take the past successful experience of the project party and the team as an important observation point. In addition, pay attention to the timing and amount of financing, such as a bull market and a bear market. The amount of financing for different projects is different. In a bull market, many projects have high valuations, and in a bear market, many projects have low valuations. Through this, we actually need to be calm when dealing with projects in a bull market, but in a bear market, we may find treasure through learning.
Take Yield Guild Games (YGG) as an example to briefly analyze its financing situation. In March 2021, YGG announced that it had raised $1.325 million in seed round financing, and most of the funds were used to purchase the wizard. In June 2021, YGG completed a US$4 million Series A financing led by Bitkraft Ventures, with the well-known institution Animoca Brands among the participating investors. On July 27, 2021, Yield Guild Games launched the public sale (IDO) of its token YGG at SushiSwap. 25 million tokens were snapped up in just 31 seconds, and the total amount of funds raised was 12.496 million USDC . A total of 32 addresses were grabbed, and the public offering cost was 0.5U. On August 19, YGG announced a strategic financing of US$4.6 million (completed before the YGG token sale), led by the venture capital agency a16z.
Second, make a preliminary judgment on the initial circulation of the project through the rules of token distribution and release. Taking YGG as an example, analyzing its initial circulation from official data, it mainly consists of these three parts: the project party unlocked more than 14.8 million pieces in the first month, the seed round unlocked 26.5 million, and the public offering round released 25 million, totaling the total amount. It is 66,302,083 million pieces.
YGG token lock-up and release rules
YGG token distribution ratio
It should be noted that it is very vague to unlock or not unlock the tokens of the project party. It is far from enough to make investment decisions with these vague data. Therefore, we need to do more in-depth analysis and tracking of these chips in the next step.
Third, mark and track the currency holding addresses of project parties, investment institutions, exchanges, and retail accounts. First, according to the creation records, the detailed addresses of the project parties and investment institutions are determined and labeled. Taking YGG as an example, only 32 addresses are shown on the Ethereum chain to participate in the snap-up purchase, and these addresses are tracked and analyzed at the upper and lower levels. Through record analysis, it is found that YGG’s IDO has scientists involved, the two addresses with the largest amount of snapping up have group buying behavior (collect USDC from different addresses, and send YGG to different addresses after grabbing YGG), and some have opened positions on the chain For YGG’s big customers, these important addresses also need to be recorded. In addition, it is also necessary to monitor changes in the exchange balance, which may mean the part in circulation.
In summary, Bluce found through statistics that, from the perspective of various platforms, the market value of YGG in circulation is 70 to 88 million, and the circulation accounts for about 7.02% to 8.8%. Calculated based on the market price of 1.1U at the time, it was actually valued at US$77 million to US$96.80 million. Excluding the address of the project party and the investor (by default, the coins of the project party and the investor are not in circulation for a short time), the actual circulating market value of YGG is actually only 27.46 million, accounting for about 2.75%, and the circulating market value is only about 30.2 million US dollars (according to 1.1U market price calculation), if the valuation of more than 80 million US dollars is calculated according to the current price, it is actually quite high.
Of course, the overall circulation needs to continue to track the unlocking situation of the project parties and institutions, and the unlocking and circulation judgments of different addresses will affect the circulation estimation of this project. After completing the preliminary analysis and marking of chips, you can get advice on whether to buy from the perspective of chips.
How to find GameFi projects
At present, the entire NFT industry can be divided into digitally encrypted artworks, NFT trading platforms, NFT financial assets, NFT public chains, and NFT games. Each sector has leading projects, and investors can focus on them. For example, the meta-universe we often talk about, the hot projects with high attention now are Decentraland , Sandbox, and Cryptovoxels; the most popular GameFi game sector at the moment, games represented by Aixe Infinity may be in the second half of this year to the first half of next year Emerging in large numbers. The GameFi field has also spawned game guilds like YGG, which can also be invested.
In addition, there are some public chains that carry NFT transactions. We can focus on DFINITY, Flow, Immutable X, Efinity, etc. Of course, there are some NFT financial assets that have not yet become popular, such as Uniswap’s v3 market-making assets. These NFT financial assets are all ERC-721 standards and have also derived some ecology. For example, there are already professional in this field. Market maker.
The above is an overview of the entire NFT industry. Let’s take a look at how to find high-quality projects in the GameFi field. First of all, in the early stage of data collection, you can obtain public information on some websites, such as playtoearn.net, Dappradar, Discod, telegram groups, Twitter, and chain news platforms. In addition, you can also listen to some investment partners or in the circle. The opinions of friends.
The REX team recorded all the more than 40 high-quality games found on the market, and conducted in-depth investment research and tracking analysis. By tracking the experience of Axie Infinity, REX believes that analyzing a GameFi project needs to focus on the following points:
- Information about the project team . If the founder has blockchain industry experience and game industry experience, then it is basically certain that this is a team with great potential.
- Partners and investors , if a well-known venture capital participates in the investment, it will also add a lot of visibility and credibility to the project.
- Community influence . If the project has a high community influence on Twitter, Facebook, Reddit and other platforms, it can be considered that the early launch of this project will be relatively smooth.
- The project white paper . The white paper will introduce the token distribution mechanism of the entire game, including whether it is single currency or dual currency. After some experience in the Axie project, we believe that dual currency may be a better way to simulate the entire real economy. .
- The economic model of the game , this is the most important point. We must go through the economic model of the game and confirm whether there is a problem with the logic of this model.
- Game guild participation . From the perspective of the Axie project, YGG’s blessing is very important. Therefore, if there is a game guild like YGG to participate, the credibility and attention of this project in the circle should be relatively high.
- The business model of the project, that is, how the project party makes profit, these profit methods are directly reflected in the value of the project’s tokens and platform currency.
Based on the above criteria, Volvo Technology has screened out some projects as follows: Decentraland, Sandbox, Cryptovoxels, Derace, Mist, Gold Fever, Nine Chronicles, My Neighbor Alice, Aavegotchi, My Defipet, immutable X, Enjin, Efinity, Ultra, Flow In addition, there are some projects that are blessed by YGG, you can also focus on: Axie, Iluvium, ZED RUN, F1 Delta Times, Guild of Guardians, Star Atlas, Splinterlands, Ember Sword, League of Kingdoms.
Take Star Atlas, which is preparing to issue tokens at the end of August, as an example. This is a popular game project at the moment. This project has many tags, such as 3A masterpiece, produced by Unreal Engine 5, etc. In addition, the YGG Foundation has also officially announced Settled in, and now in the Solana ecosystem, even the legendary trader SBF said that the game is good enough to exceed his expectations. So the REX team will invest in this game next. In addition, this project will be IDO at the end of August, so everyone can pay attention.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/how-the-nft-bull-market-is-on-the-way-to-screen-the-most-promising-gamefi-projects/
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