Metrics Ventures Chain Research Report on Crypto Market Secondary Fund:
Although the market's current attitude towards Web2.5 games is not positive, we believe that Web2.5 games will still attract game producers with their unique advantages in game distribution and customer acquisition, and the growth on the supply and technology sides will bring about an explosion on the demand side.
In the Web2.5 game track, we pay special attention to the game platform track. The game platform will have a stronger narrative space and life cycle, and occupy an important position in the supply and demand sides of blockchain games.
Based on the business model and token empowerment method, we divide the game platform into four types: strong binding type, medium binding type (public chain type), medium binding type (investment type) and weak binding type. We believe that the medium binding type is a healthier and more horizontally expandable way, and has a benign interest binding with the game.
We analyze high-quality gaming platform projects in the industry from three dimensions: strategic narrative, business capabilities, and token economics. After comparison, we believe that Merit Circle is a relatively bright project in this track and a project with high investment cost performance. Merit Circle has transformed from a gaming guild to a gaming platform and then to a gaming public chain. It has strong strategic narrative capabilities, product development capabilities, and gaming resources, but its valuation is still at a low level in the track and still has a lot of room for development.
Metrics Ventures Chain Research Report on Crypto Market Secondary Fund:
1 The beginning of the story: Why are we optimistic about the gaming platform track?
Although the dominance of blockchain game users has continued to decline after the Gamefi wave receded, we see that games are still the most active part of the entire industry. According to DappRadar data, as of the second quarter of 2023, the number of daily independent active wallets in the game industry was 699,956, accounting for 36% of the total industry participation, which is the lowest level since the third quarter of 2021, but still ahead of other types of applications.
Crypto Games can be divided into multiple categories based on the degree to which the game is on the chain.
From Web2 games to complete Web3 games (full-chain games), multiple links need to be crossed in the middle, including asset chain, transaction chain, achievement chain, economic model chain, core logic chain, etc. Now many blockchain games have completed the chain except for core logic, and are called Web2.5 Games.
In the recent market, the development and prospects of full-chain games have been widely discussed and have become one of the hottest narratives in blockchain games. However, with the widespread pursuit of full-chain games, we see that the business model of Web2.5 Games is still of great significance to the entire game industry, even if Web2.5 games fall to the freezing point. Web2.5 games reduce the cost of game distribution and customer acquisition through NFT and token incentives, while breaking regional restrictions, so that games have global traffic and global capital liquidity on the first day, and have a strong advantage in improving the efficiency of game distribution.
(For the full life cycle of Web2 and Web3 issuance, please refer to the following figure from Folius Ventures’ research, original text)
The customer acquisition cost of game distribution using NFT is close to 0. In contrast, the customer acquisition cost of Web2 games is relatively expensive: the customer acquisition cost of RPG and SLG games is 60-150U/person, and that of strategy, casual, and midcore games ranges from 6-20U (data comes from interviews with practitioners and may deviate from actual statistical data).
These advantages will have a strong appeal to traditional game producers. The continued appeal of Web2.5 games on the supply side will promote the richness of content produced in this field, and truly playable and sustainable games will be born in the Web3 world. With the development of AA wallets, high TPS, low gas fee layer1, layer2 and even layer3 application chains, the threshold of the Web3 world will be further lowered, becoming more user-friendly, and the on-chain operations will gradually be hidden in the game world, bringing a smoother experience.
The rich game content brought by the supply side and the optimized user experience brought by the technical side will affect the demand side of Web2.5 games, and will most likely drive the next explosion of the entire industry. However, this point cannot be achieved in the short term in the immature full-chain games, whether from the supply side or the demand side. Therefore, we believe that this is a unique advantage of Web2.5 games, and it is also a good time to layout from a cyclical perspective.
However, we still need to pay attention to the problems of Web2.5 games and the difficulties they faced after the last round of P2E wave. The life cycle of these games is generally short, especially P2E games. The main reason is that the life cycle of their assets is short, the economic system in the game is too simple and crude, lacks a balance mechanism, the capitalization process of the entire game is too obvious and too fast, the monetization is too early, and the players participating in the game are too speculative.
We believe that Web2.5 games should focus on two core logics:
First, playability and game play
Second, the advantages of game distribution and customer acquisition compared to Web2 games
The last round of P2E paid too much attention to the second logic and neglected playability. A healthier and more sustainable Web2.5 game should have both, richer content, stronger playability, and a scientific and complex economic system design to avoid the early asset structure of the game being too single and capitalization too fast. Under such a game design, we believe that the development of the content supply side and infrastructure side mentioned above can bring about the growth of the demand side, thereby promoting the development of the Web2.5 game industry, and now blockchain games are also developing in this direction.
In summary, we believe that Web2.5 games will still have relatively high growth space and development potential. As mentioned earlier, there is a certain gap between this and the current market perception of Web2.5 games. The market generally underestimates the valuation of Web2.5 game projects, and negative and pessimistic sentiments dominate, believing that P2E is dead. Especially in the market environment where fully on-chain game narratives are generally sought after, Web2.5 games seem to have become the outcasts of the market.
There is a certain gap between our understanding of Web2.5 games and the general market understanding. This is the important reason why we believe that this track has investment potential and ambush value.
In the development of Web2.5 games, we are particularly optimistic about the game platform/game ecology track for the following reasons:
Every Web2.5 game has its own life cycle. On the one hand, the game itself (whether it is a Web2 or Web3 game) has a life cycle, and on the other hand, the token economics of the Crypto project also has its own life cycle. Compared with a single game project, the game platform and game ecosystem have a longer life cycle, and will be less affected by the life cycle of a single game. They have stronger resilience and risk resistance, and have more trial and error space and time to find truly healthy and fun game projects. The recently popular game project Parallel TGC released a proposal in January 2022, announcing that it will integrate into the Echelon Prime Foundation ecosystem and transform from a single game to a game platform, which is also an example of this trend.
From the perspective of game makers (supply side): game platforms and game ecosystems have multiple game resources such as funds, Web3 player communities, incubation capabilities, etc., covering multiple links in the game industry chain, and will become an important entry window for new games. In the bear market where the NFT market is generally sluggish, it is more difficult to achieve a cold start by selling NFTs with a single game, obtain early financing, and reduce customer acquisition costs. The resources of the game platform can further reduce the customer acquisition cost of new games, and the game platform will also capture part of the value of many single game projects in the Web2.5 game track through the design of the token economic system.
From the perspective of game players (demand side): Whether it is Web2 users or Web3 users, the guidance of the chain game navigation page is necessary and valuable, which can enable users to find games that better meet their needs. More importantly, the painless blockchain infrastructure provided by the game platform can reduce the loss of users in the process of converting from Web2 to Web3, lower the threshold of games, and optimize the game experience.
In order to break out of the P2E vicious circle, it is necessary to separate content creation and user acquisition, reduce the financial attributes of game content production, and extract the financial attribute of customer acquisition as much as possible, that is, to professionalize the Web3 game platform and reduce the customer acquisition cost of the game through a token economic circulation system that has no direct relationship with the game content. Although the current game platform has not completely separated the two, the blockchain game field is the most likely track to develop in this direction.
At present, we believe that this track mainly includes the following categories:
- Game Production
- Issuing Platform and Ecosystem
- Post-P2E Gaming Guild
- Game public chain
Among them, we divide these projects into four categories according to the strength of the binding relationship between the game platform and the individual game project, especially the strength of the binding relationship between the business model and the token economic model and the game. Among them, Xterio has not yet issued tokens and token economics, so we will not classify it here, but only introduce the project fundamentals.
From the perspective of the industrial chain and business model, the game platform should play the role of helping games with early development, design, testing and customer acquisition, becoming the infrastructure of the blockchain game industry and obtaining corresponding value for this part of the service, rather than being deeply bound to the game and becoming part of the game's economic system.
In addition, the economic system of early games is too early to be bound to the game platform tokens, which is more likely to strengthen the speculative and financial attributes of the game and accelerate the life cycle of the game. In the various games of the existing strongly bound game platforms, in addition to sharing the underlying tokens, the interoperability scenarios between games that we can see are still relatively limited, so it is too early to call it an integrated ecosystem. Of course, if the game basically lacks the ability to empower the platform tokens, and the business and token models are separated, it will also lack the narrative ability to attract investors.
In summary, from the perspective of business types and token empowerment methods, we believe that the mid-bound game platform is the healthiest type. It has an independent set of economic and business cycle logic, and is a truly independent Web2.5 Game infrastructure and service provider. The ecosystem has a strong ability to expand horizontally. At the same time, its economic model also ensures that it can directly benefit from the success of the game ecosystem. It is a benign interest binding relationship.
Furthermore, we will conduct a comparative analysis of the above-mentioned gaming platforms from several aspects, including strategic narrative, business capabilities, and token economics, and give some of our thoughts and judgments at the end of the article based on project valuation.
2 Strategic narrative and business capabilities: continuous development or stagnation?
2.1 Strategic Narrative and Fundamental Analysis
TreasureDAO and Echelon Prime hope to tell the story of an integrated gaming ecosystem with a unified base token and interoperability between games. TreasureDAO has been called the "Nintendo" of the crypto world in many research reports.
Specifically, TreasureDAO was born in the Loot ecosystem, and later developed independently into a decentralized game ecosystem built on Arbitrum, built around MAGIC. Each project in the TreasureDAO ecosystem is built around the MAGIC token, and on this basis each project can launch its own token. As a project born out of the Loot ecosystem, TreasureDAO had a firm community consensus in the early days. In the later development process, it developed a series of high-quality games by developing development kits that were friendly to game developers. Its ecological popularity also reached a peak in the short term with the birth of The Beacon's hit game.
Echelon Prime Foundation is an ecosystem dedicated to the development of games and P2E businesses. It will provide infrastructure and common basic tokens PRIME for games within the ecosystem. It aims to provide infrastructure (including Inb0x for secure communication and end-to-end encryption on the wallet side, bond for creating groups across multiple game users, dedicated NFT distribution mechanism, oracle, etc.) to support a larger game ecosystem. The structure of the Echelon ecosystem is shown in the figure below.
Echelon Prime was born out of Parallel TCG, which has the investment of Paradigm and the endorsement of developers and designers from a number of major game companies. It is also a hot spot in the blockchain game field that has attracted much attention and expectations recently. The Parallel Colony it is developing also has the narrative of an AI game, but it still focuses on the P2E narrative logic, which may have certain limitations on the expansion of its subsequent narrative space. Currently, there are only two games in the ecosystem, Parallel TCG and Parallel Colony, and there is still great uncertainty in the business. It can even be said that the current hype about PRIME is still about the narrative of the game rather than the narrative of the game platform.
Gala Games is a game aggregation and distribution platform on Ethereum, and was also the leading platform in the last round of blockchain game bull market.
The ecosystem mainly includes five parts: game platform, games, database, random algorithm and node network. Among them, the decentralized node network is the foundation of Gala Games. By holding the Genesis Node of Gala Games, users can vote to decide which games Gala Games will launch and obtain the operating income of Gala Games and games. According to the official website data, there are currently 44,433 Genesis Nodes online. In addition, through the random allocation algorithm, the NFTs of the games on the platform are airdropped to the Genesis Nodes as rewards. Gala Games obtained development funds through the sale of Genesis Nodes and obtained the start-up funds for the project without financing. On September 4 this year, it was announced that the Gala platform will be fully migrated to GalaChain by the end of the year. Subsequent progress still needs to be observed. The ecological progress on its platform is also relatively slow, and the subsequent business capabilities remain to be observed.
Xterio is a game production and distribution platform that provides developers and players with painless tools and infrastructure to facilitate the production and distribution of blockchain games, and is committed to building a GaaS platform.
Xterio's technologies include CPDM (using ZKP technology to achieve interoperability and privacy protection of NFTs between different games), AI (cooperating with Palio to integrate AI into games and providing AI toolkits for developers), etc. Xterio has its own game development team and also publishes and supports third-party games, including investments in Web3 game studios Overworld and GamePhilos, and has game resource support from FunPlus, Com2us, and XPLA.
Game public chains are an important category within the game platform. The public chain-level narrative also gives these projects a higher valuation, providing soil for games with high TPS and low gas fees. Technically, they include L1, Ethereum L2, Avalanche subnet, and the developing L3, but the game resources that can be mastered and attracted are the moat of their development. We take stock of the currently well-developed game public chains.
Wemix and Oasys are public gaming chains from South Korea and Japan respectively.
Wemix was created by Wemade, which released the flagship game "MIR4", and the founding members of Oasys include the co-founder of YGG, the CEO of blockchain game company double jump.tokyo, the president and CEO of Bandai Namco Research Institute, the co-chief operating officer of Sega, etc. There are 21 institutional nodes to maintain the operation of the network, most of which are well-known game companies and crypto investment institutions in the industry.
Ronin Network was launched by Sky Mavis, the producer of Axie Infinity, and is an EVM blockchain built specifically for games.
Immutable, the developer of the blockchain game Gods Unchained, has developed two Ethereum Layer2s for NFT and Gamefi projects, namely Immutable X and Immutable zkEVM. Immutable X is an Ethereum Layer 2 that uses StarkWare's solution and ZK-STARKS, while Immutable zkEVM is a game-specific chain that provides EVM compatibility, low cost, and high scalability. The testnet was launched in mid-August 2023 and is an Ethereum ZK-Rollup Layer2 built using Polygon Edge.
Merit Circle's strategic direction has undergone a huge change since the last round of Gamefi bull market. It has transformed from a guild with an untenable business model to a gaming platform that integrates investment business and gaming public chain. Its narrative transformation is resolute and decisive, with a clear strategic development plan and high execution capabilities.
Merit Circle's current business lines mainly include four parts: Investments/Gaming/Studios/Infrastructure, covering multiple links in the game industry chain from incubation, investment to infrastructure. It has also announced that it has completely closed its scholarship program, demonstrating its strategic determination to transform from a game guild to a game platform.
Among them, investment is the most important business of Merit Circle, and its investment targets include tokens, NFTs, equity, and staking operations; Studios is committed to incubating and promoting innovative projects with breakthrough concepts; Gaming, as a game aggregation platform, also provides incentive community activities, member education and practical tools; the core part of Infrastructure is the recently launched Beam subnet. Merit Circle has also approved the proposal to exchange MC tokens for BEAM tokens. The narrative of the game chain will become its main strategic direction in the future.
YGG and GuildFi have transcended the initial limitations of gold-making guilds and currently still maintain the narrative of gaming guilds, focusing on investment, cooperation and incubation of gaming projects, as well as player education, expansion of guild members and community networks.
In addition to the scholarship program and cooperative incubation of game projects, YGG has also established Web3 Metaversity in cooperation with creator education platform Nas Academy, which enables YGG guild badge holders to learn new skills and discover income and career opportunities. The launch of GAP (Guild Advancement Program) is also committed to motivating and uniting guild members, while developing the gaming community through the expansion of SubDAO, and developing e-sports. GuildFi has evolved from the largest gaming community and guild in Thailand. In addition to investment business, it has also developed an achievement system and Metadrop Launchpad to motivate players to participate. The resources and industrial chain status of the two major gaming guilds in the field of blockchain games are still very important, especially YGG's leading position in blockchain games cannot be underestimated, but as analyzed in the previous article, the narratives and businesses of the two projects are not directly related to token empowerment. Whether their business growth can drive the price of the currency is an important consideration.
2.2 Business Capability Analysis
This article compares the business capabilities of gaming platforms based on the number and development of gaming ecosystems. For the three investment platforms, Merit Circle, YGG, and GuildFi, their returns and risks are greatly affected by the stability of treasury funds, so we need to further compare their investment returns and treasury management capabilities.
2.2.1 Game Ecosystem Development
At present, the number of games in each project ecosystem is shown in the table above, and the specific analysis is as follows.
TreasureDAO's official game platform exhibited 27 games, among which the more popular games include The Beacon, Realm, BattleFly, etc. The current infrastructure in the ecosystem includes the ecological hub Bridgeworld, Trove, MagicSwap, TreasureTag and the achievement system. TreasureDAO emphasizes cross-game connectivity within the ecosystem. The most direct way is to use MAGIC as a common underlying token. A more advanced way is to connect multiple games, such as the attempt made in Bridgeworld Harvester to incorporate The Beacon and Knights of the Ether into Bridgeworld, but there are relatively few such gameplays at present.
TreasureDAO's daily active users dropped significantly after the craze of The Beacon faded, with MAUs of only about 10,000 in July, compared to about 90,000-100,000 by the end of 2022. Marketplace Volumn's monthly data was about $1M in July, which shows that popular games have indeed brought a large increase in users, but the life cycle of the game itself is extremely short, and the game's expansion capabilities are limited, so users will quickly churn.
There are only two games in the Echelon ecosystem, Parallel TCG and Parallel Colony. Currently, TCG is in the Beta testing stage, and Colony is still in the R&D stage. Parallel TCG is a collectible sci-fi NFT collectible card game based on the ETH chain. Players can purchase and collect cards, and flexibly use different cards to combine decks that meet the rules to play games and get rewards. Parallel Colony is a narrative game that integrates artificial intelligence, ERC-6551, and similar to The Sims.
There are 18 games on Gala Games, but only 6 of them are live, and the remaining 12 are under development. Relatively speaking, the game ecosystem of Gala Games is expanding slowly, with neither continuous new games nor well-known hit games. Gala Games announced in February 2022 that it would develop its own game Layer 1 Project GYRI, or Gala Chain, but there is currently little information about the project's progress.
Xterio has currently announced 25 projects, including 4 self-developed projects and 21 cooperative projects. Most of the games are still in the pre-registration and development stages. In particular, the 4 self-developed projects are not fully open, and further market testing is needed for their self-developed games.
There are 6 Verses in the Oasys ecosystem, which is Layer 2 where Dapps are deployed. There are 31 games in total, and 17 games are now playable.
Immutable's gaming ecosystem is developing rapidly. Immutable has established partnerships with GameStop, Warner Games, iLogos, Mineloader, and Secret6. There are more than 150 NFT and game projects in the ecosystem, and 74 are listed on the official website. Some of them are new projects that have reached cooperation after the launch of Immutable zkEVM and are not yet open to the public. In addition, the ecosystem has out-of-circle games including Illuvium, Gods Unchained, etc. According to Footprint data, the transaction volume of games on ImmutableX has maintained a relatively stable leading position in the past three months. After the introduction of Immutable zkEVM, the Immutable ecosystem will also expand further.
Ronin is still more like an application-specific chain for Axie Infinity. The official website only displays 6 games including Axie Infinity, but according to DappRadar data, only Axie has a relatively high UAW. With the huge traffic of Axie, Ronin's transaction volume still maintains a good position in the game public chain, but new game public chains are already squeezing Ronin's space. If there is no introduction of new projects, it will also face a lack of subsequent development.
The Wemix ecosystem currently includes 47 projects, including 32 game projects, 5 DeFi projects and 9 NFT projects. In addition, the WEMIX PLAY platform has more than 30 game pipelines.
Merit Circle currently has 78 game projects covered by tokens and equity investments, including single games, game infrastructure and game platforms, including projects endorsed by major institutions such as OhBabyGames, Gameplay Galaxy, Delabs Games and Roboto Games. It is worth mentioning that Merit Circle recently disclosed the product details of its Avalanche gaming subnet Beam. Beam cooperated with Openfort to develop account abstraction, launched the Beam Companion mobile app to help users manage in-game assets, and the Sphere NFT market to trade NFTs within the ecosystem. At the same time, it provides Beam SDK to help developers quickly build in the ecosystem. A series of painless infrastructures are of great help in introducing game developers, improving the game player experience and achieving user retention, and provide a foundation for the ecological development of the Beam subnet.
YGG has currently established partnerships with 83 projects, including 57 games, 17 P2E infrastructures, and 9 game guilds. It is worth noting that as of June 30, 2023, the game guild has the highest share and also brought the highest return ratio to YGG.
GuildFi has not disclosed the specific number and details of its early-stage investments and strategic cooperation games, but its Games Portal only lists 25 games, most of which are earlier projects. Compared with other projects, its ability to cooperate externally and expand the ecosystem is slightly inferior.
2.2.2 Comparison of investment business capabilities among Merit Circle, YGG, and GuildFi
We conducted a horizontal comparison of the investment capabilities of the three investment platforms: Merit Circle, YGG, and GuildFi.
From the perspective of treasury fund distribution and treasury management capabilities, Merit Circle has a large treasury ($94.1m) and has disclosed its treasury fund distribution in detail in the Dashboard. As of June 23, 2023, AUM has decreased by 25.49% from ATH, which is a relatively low decline among many game guilds. Currently, the total amount of stablecoins in the treasury funds is $38.1m, accounting for 40.49%, and the rest is mainly primary investment equity. According to Deflama data, up to 94.05% of the tokens in the YGG treasury ($123.77) are YGG, which has very poor risk resistance. The large drop in the price of YGG has also caused the YGG treasury AUM to drop by more than 90% compared with ATH. GuildFi's treasury fund AUM is $92.68M, and the total amount of stablecoins and BTC/ETH/LP positions is as high as $71.89M, accounting for 77.57%, which is the highest proportion of stablecoins and blue-chip crypto assets held among the three guilds. According to its published wallet address and Debank data, GF tokens in the treasury account for a fairly high proportion of its total tokens.
Therefore, Merit Circle's treasury management ability is slightly better than the other three, and it has made a more reasonable allocation in stablecoin reserves and investments. The YGG treasury's reserve of more than 94% of YGG tokens is obviously unreasonable. Although GuildFi's large proportion of stablecoin allocation has extremely low risk, it makes people worry about its game investment and external cooperation capabilities (the following are the treasury reserves of Merit Circle, YGG and GuildFi, respectively).
From the perspective of investment mechanism and risk control, Merit Circle has made relatively clear efforts in this regard. MIP-6 has established a de-risk assessment mechanism so that DAO can exit its investment targets when certain conditions are met. For example, when the target reaches 10 times, the assets of the principal share will be directly sold to control risks. YGG and GuildFi do not have relevant mechanisms yet.
In terms of investment income, the latest financial report released by Merit Circle shows that its total investment in Tokens & equity (sum of purchase value) is $28,045,486, currently worth $45,471,587, with a floating profit of 62%. The total investment in NFT (sum of purchase value) is $4,834,000, currently worth $3,404,852, and is in a loss state. From the sum of the two, the floating profit is 48.65%. YGG's current total investment (sum of purchase value) is $18,369,599, currently worth $27,247,536, with a floating profit of 32.58%. The guild's investment and game tokens have brought good returns. GuildFi has not disclosed specific income data and investment targets.
Therefore, Merit Circle's rate of return is slightly better, but in the overall environment of the blockchain game track, the overall investment returns of various projects are not much different, and all have suffered losses in NFT investment, so we still value its investment capabilities and potential more, such as treasury management capabilities, risk control capabilities and game ecological accumulation.
3 Token Economics: How to get a piece of the game’s success?
In terms of token circulation and future unlocking, only TreasureDAO and Merit Circle currently have high circulation volumes, while the circulation volumes of most other projects are less than 50%. Considering the potential selling pressure brought about by future unlocking, Merit Circle and TreasureDAO face lower downside risks.
In terms of token supply and empowerment scenarios, the token supply and empowerment methods for game ecosystems and game public chains are basically the same: users obtain tokens through mining (public chain staking or game mining), and tokens are further spent as payment media within the ecosystem (NFT transaction base currency or on-chain gas fees) and game consumption tokens. Some tokens are consumed and re-enter the circulation system (such as PRIME, which is re-entered into the reward redistribution contract after consumption), and some are burned (such as GALA, WEMIX, etc.). Among them, TreasureDAO's game ecosystem is more strongly bound to tokens. MAGIC tokens will be directly issued as rewards for some games, and are also the basic conditions for the participation of multiple games. MAGIC is also regarded as a core resource that various game projects need to compete for.
The token economics of gaming guild platforms are slightly different. Merit Circle, as a gaming guild that has undergone a major strategic transformation, has a richer range of token empowerment methods. Its main consumption scenarios are as follows:
Governance: Any user holding MC tokens can propose and vote on MIPs. It is worth mentioning that Merit Circle has a very high level of DAO governance. Currently, there are 29 MIP votes, which are mainly used to determine the strategic development direction of Merit Circle. In these MIPs, we can see the key nodes of multiple key businesses of Merit Circle. MIP-2 established an investment committee and investment authorization to manage investment business, MIP-6 created a structural method to reduce risks when early tokens and NFT investments become liquid, MIP-4 determined the development of game platforms and NFT markets, and MIP-17 reorganized the structure of the DAO. The recently completed MIP-28 and 29 passed the proposal to convert MC tokens to BEAM tokens.
Investment repurchase and burning: Merit Circle will use part of the investment profit to repurchase MC tokens and destroy them to reduce the market circulation of MC. Currently, a total of 368,707,273 tokens have been withdrawn from circulation.
Gas consumption of Beam subnet: Beam is a subnet developed by Merit Circle on Avalanche that focuses on the gaming ecosystem. It will use MC (BEAM) as the gas consumption token, which greatly increases the empowerment of Merit Circle. While its investment business is progressing well, it also has the narrative ability of the gaming public chain. Currently, MIP-28 and 29 decide to convert MC into BEAM tokens at a ratio of 1:100, increasing the empowerment of the public chain narrative to the MC ecosystem.
In contrast, the token economics of YGG and GuildFi, which also originated from gaming guilds, are relatively weak. Their main application scenario is staking to obtain token income. YGG Reward Vault is the core empowerment of YGG tokens. YGG members with Guild Badge can stake YGG tokens and obtain game token rewards, including LOKA, THG, GHST, and RBW, while GuildFi rewards LP for staking.
4 Conclusion: The next Alpha in the gaming platform track
We summarize and comprehensively review the above projects here. From the perspective of token empowerment and business methods, we recognize the sustainability and health of the medium-bound game platform. Within this scope, Gala's game ecosystem is expanding slowly, and the migration of Galachain needs further observation. The controversial incidents of the team have also dealt a heavy blow to investor confidence. A similar situation also occurred with Wemix. Oasys has a good game resource background, especially among traditional game giants, but it has not yet produced a hit game. Its game ecosystem needs further observation. Its token circulation is only about 10%, which has certain potential downside risks. Immutable has established two Layer2s based on Ethereum. Its game ecosystem has more than 150 game partners. Its daily transaction volume is in a leading position in the game public chain. It is currently a relatively fast-growing game ecosystem project and has certain star projects. However, it undoubtedly has the highest valuation, even about twice as high as similar projects. Ronin's game ecosystem is expanding slowly. It is still biased towards Axie Infinity's dedicated chain and has not yet jumped out of Axie Infinity's single game narrative logic.
Based on the above analysis, Merit Circle is a more eye-catching project in this field and has a higher investment cost-effectiveness.
From a fundamental perspective, Merit Circle has transformed from a game guild to a game platform and game public chain, with a clear strategic development plan and high execution capabilities. It also has narrative space for investment-type and public chain projects, and its business scalability is extremely high. It is remarkable in terms of game ecology, treasury fund management, team strategic direction and DAO operational capabilities, and is ahead of similar projects. At present, the construction of the Beam subnet has become the main narrative of the next round of Merit Circle. This can be seen from the migration of MC tokens to BEAM tokens. Beam is currently the focus of the Avalanche ecosystem. With Merit Circle's game resources, Beam is easier to attract project parties to settle in and complete the initial launch than other game application chains.
Secondly, from the perspective of project valuation, MC’s current FDV is $317,879,400. The current valuation of game platform projects is still relatively low. Compared with its fundamental narrative and business capabilities, it is relatively underestimated and has a good investment cost-effectiveness.
Third, in terms of the token chip structure, the current circulation of MC is relatively high, and the subsequent unlocking pressure is relatively small. From the on-chain data, the number of its holders has risen rapidly since the end of 2022. The current number of holders is around 12,000, which is twice that of the end of 2022. The number of holders is still growing slightly and steadily. Basically, all chips are held for more than 1 month, and the proportion of long-term holders is very high. Among the first 100 addresses entering the market, 85 addresses still hold positions. In terms of the chip structure, the top 5 accounts for a relatively stable proportion of about 25%.
In summary, we believe that Merit Circle is a project worthy of layout and attention in the Web2.5 game platform and even the entire Web2.5 game track.
In addition, among other types of projects, the game ecosystem represented by TreasureDAO has strong crypto native attributes. With the help of The Beacon's explosive success, it has become the largest game ecosystem on Arbitrum. We will keep an eye on its subsequent ecological expansion. Echelon Prime is still in its early stages as a game platform. It uses the narrative of a card game to support FDV comparable to other platforms. Xterio has certain technical advantages and game resource backgrounds. The current primary valuation is relatively high. We need to continue to track the economic model, secondary market performance and game development after the release of XTER. As old game guilds, YGG and GuildFi have been exploring the construction of game communities and still have deep accumulation in the industry chain. It is worth continuing to pay attention to them. Their expansion in token empowerment may bring about an increase in token prices.
