Ronin: Retail Beta + Outstanding Fundamentals + Undervalued + Catalysts for Multiple Upgrades
Retail is slowly coming back. Even as Bitcoin prices approach all-time highs, a full retail recovery appears to have yet to materialize. We think there's a good reason behind this - mainstream streaming coverage and traction in retail take time. This creates an empirical lag of approximately 2-3 months between Bitcoin price and cryptocurrency Google search volume (which we believe reflects a proxy for retail interest).
Source: Ouroboros Research
We have a soft spot for games. We’ve been digging into which investment ideas are good for the long term and have strong ties to the retail sector – gaming being our top choice (Meme coins have their place, too, but that’s a topic for another article).
Choosing the right strategy is crucial. While advocating for the resurgence of Web3 gaming is relatively simple, picking winners in a winner-take-all market has historically been challenging. We could theoretically consider picking a range of gaming tokens, but we believe infrastructure projects offer a better risk-to-reward ratio by being subject to fewer specific factors and broadly covering a large number of games.
We’re becoming increasingly bullish on $RON, which stands out in a number of ways:
Ronin's network effect is the best among its peers, and its indicators far exceed those of competitor chains, reaching 50-1,000 times. Still, $RON is priced relatively low.
The chain is witnessing strong and continuously growing UAW indicators, and its growth potential is even greater as more games are accessed.
$RON has several catalysts that could prompt a revaluation, including 1) increased launchpad appeal and airdrops, 2) changes in token economics, 3) listing on CEX, and 4) the launch of its ZK Layer2.
investment thesis
#1 Top gaming chain at a reasonable price
The gaming platform is essentially a two-sided market. New platforms often struggle to attract both gamers and developers, as both parties want to see the other active before joining the platform. Game developers desire immediate mass adoption, while gamers expect access to high-quality games (and/or incentives).
Ronin has built a network effect. Built by Sky Mavis, the creator of Axie Infinity, Ronin cleverly circumvents this conundrum by bringing Axie’s massive user base on-chain. This brings instant network effects at a scale not seen on other crypto platforms.
Source: Ouroboros Research
Unique metrics that are 50-1,000 times greater than other gaming networks. Ronin has 1,000 times the number of active wallets, 80 times the number of transactions, and 50 times the DApp transaction volume of its peers. We believe this in itself should provide a higher valuation for $RON. However, in comparison, $BEAM has a market cap premium of 60% and $IMX has a market cap premium of 260%.
#2 The number of users is at an all-time high and is expected to continue to grow
Ronin hosts the largest Web3 games. Although the Web3 gaming community is still in its infancy, a handful of games have reached over 1,000-10,000 daily active users (DAUs). Here are some games hosted on Ronin, marked in yellow:
Source: Ouroboros Research
Axie Infinity ($AXS): Peaked at 2 million users in 2021 and currently has over 350,000 active users across its Axie Classic and Axie Origins games.
Pixel ($PIXEL): Recently launched, it had 260,000 daily active users before its token debut, growing to around 700,000 now, and is poised for more growth from Chapter 2.
Wild Forest ($WF): This real-time strategy (RTS) game had over 10,000 daily active users prior to the token launch.
Apeiron ($APRS): This upcoming game completed a $3 million worth of token sales last week, with over $75 million in $RON allocated.
Kaidro: This upcoming game received over 346,000 mints in its first NFT mint (maximum 1 NFT minted per wallet).
The symbiotic relationship between Pixels and Ronin will attract more gaming partners. Historically, Ronin has had a large number of users due to Axie. Pixels' exponential DAW growth since joining Ronin (migrating from Polygon) shows that non-Axie games can be successful too. In fact, this shows that Ronin not only benefits from the existing user base joining the game, but also promotes the growth of the game's user base, forming a mutually beneficial relationship.
Source: Ouroboros Research
Source: Ouroboros Research
Ronin flywheel effect. We believe that other game developers have noticed this "Ronin effect" (the growth of users after joining the chain) and will be happy to migrate to the Ronin platform to gain more users. We believe this will trigger a flywheel effect:
Excellent games are transferred to Ronin → Grow the user base → Verify the “Ronin effect” → Attract more games to join
As the list of upcoming games continues to grow, we wouldn't be surprised to see top AAA games join Ronin as a way to reinvigorate its user base. Upcoming games include: The Machine’s Arena, Axie Champions, Tribesters World, CyberKongz, PlayFightLeague and more.
#3 Multiple Catalysts: Launchpad, changes in token economic structure, listing on centralized exchanges, implementation of Layer2 ZK technology
Ronin occupies a substantially stronger position against the competition and we foresee continued growth. In addition, we see four major catalysts that may help realize the value of its tokens:
Ronin Launchpad: Staking Earn = Demand for $RON + Airdrops to $RON stakers. Ronin has partnered with Impossible Finance to launch on-chain games in the future. In order to obtain the new gaming token, $RON holders will need to stake their tokens, which will naturally drive demand for $RON. Pixels also set an airdrop precedent for $RON stakers, resulting in $RON value growth ranging from 10% to 3,700% (based on current $RON and $PIXEL prices).
Given the long list of upcoming games, we expect $RON to face increased buying pressure as users seek to obtain these games.
Value accumulation and changes in token economics. Currently, Ronin collects fees from several DApps, including Katana DEX (0.05% commission on trading volume), Mavis Marketplace (NFT market, 0.5% commission on trading volume), and Ronin Name Service (30% commission). These fees are currently charged in $RON and deposited into Ronin’s vault. While $RON holders are not yet receiving direct value accrual from it, co-founder Jiho stated that value accrual is possible through staking rewards and/or buybacks, which we believe could prompt a revaluation of the token.
Listed on a centralized exchange. Ronin recently listed on Binance and completed its listing on Coinbase. We expect the Coinbase listing to significantly expand Ronin’s presence in Western markets (current exposure is primarily Asia-centric). At the same time, we also see the possibility of listing on Korean centralized exchanges - $AXS and $IMX are currently listed on Upbit, while $RON is not yet listed.
Not just a chain, but a game ecosystem. Phuc Thai, lead researcher at Ronin, hinted at a Layer2 ZK implementation, R2, that would allow Ronin to not only increase its performance and capacity, but also introduce more blockchain-focused games (such as Maplestory on the Avalanche subnet).
Valuation + Conclusion
Basic scenario target: Considering its superior indicators, we foresee that the market value of $RON can at least reach the level of $BEAM and $IMX, that is, there is 60% and 260% growth space, or the price can reach $6 and $13.5 respectively.
Bull Case Target: If the various catalysts materialize, Ronin is expected to become the platform of choice to drive Web3 gaming and compete with major game publishers and distributors such as Valve, Epic Games, and others. Considering that Web3 games have significantly higher user monetization capabilities than traditional games, we expect $RON to be valued more than these companies (Valve is valued at $7.7 billion, and Epic Games was recently valued at $7.7 billion, based on Bloomberg data $22.5 billion).
We conclude this investment report by highlighting the following key points:
Ronin clearly outperforms its peers on metrics, but its valuation is significantly lower.
Ronin has introduced high-quality games → attracted users → formed a flywheel effect, and this process has just begun.
Although fundamentally undervalued, multiple catalysts are expected to help it achieve a revaluation, including increased launchpad appeal, structural changes in the token economy, centralized exchange listings, and the launch of ZK Layer 2.
We believe that the Ronin ecosystem has launched a powerful flywheel effect that attracts gamers and games, and the next generation of Web3 games that will disrupt the industry will emerge from this "king maker."
Appendix #1: References and Acknowledgments
We are especially grateful to the Sky Mavis team (especially Bailey.ron) for their support in our research, and to other colleagues who have provided us with valuable information and feedback: @s4msies (Ronin: A New Era), @DarkForestCap, @JavierAng_, @ahboyash, @NotSoAnonJoo, @isaac_mung, @0xMize.
Addendum #2: RumorBusters
Rumor #1: Ronin suffered a huge cross-chain vulnerability in 2022. Is the Ronin chain still healthy?
The answer is yes. Although validators’ private keys were leaked, allowing attackers to successfully steal $600 million across the chain, some of the losses were recovered and fully reimbursed by Sky Mavis’ balance sheet, leaving users fully compensated.
Axie Infinity sidechain Ronin vulnerability was hacked, resulting in a loss of US$625 million
Ronin has since moved to a delegated proof-of-stake model, and Sky Mavis has only one of 22 reputable validators, showing their commitment to decentralization.
Rumor #2: Ronin’s Inflation Is Worrying.
In fact, approximately $500 million of RON will be gradually released over a long period of 7 years, while most other projects have a release period of less than 4 years.
Source: Ouroboros Research
Rumor #3: FTX Estate still holds $RON and could lead to further selling pressure.
Since Ronin was listed on Binance, FTX Estate has completed a sale of $RON through Binance. As of the time of writing, they have sold a total of 10.2 million $RON and sent the last batch of 1.2 million tokens a day ago.
Addendum #3: What is Ronin?
A sidechain designed specifically for gaming. Ronin is a blockchain platform developed by Sky Mavis in 2020-2021 to solve the scalability and cost issues of traditional blockchain networks. Focusing on blockchain games and NFT markets, it serves as an EVM-compatible blockchain that provides an optimized environment for a large number of low-cost transactions, making it an ideal platform for its flagship project Axie Infinity and other Web3 games.
Ronin is not only a game platform, but also brings together player communities and guilds. With the initial success of Play-to-Earn (P2E) games in 2021, the Ronin ecosystem has established a strong foothold in the gaming community in emerging markets. This is due to strong partnerships with various P2E guilds (notably Yield Guild Games (YGG)), which drive user onboarding through the guild's extensive network and content localization.
Ronin also offers a mobile wallet designed for mass adoption. One of the key factors in Ronin’s ability to effectively penetrate the mass market is integrating Ronin wallets into mobile devices and making them the norm. This experience is particularly important in emerging markets with high mobile penetration, providing users with convenient access methods.
Disclaimer: This article does not constitute investment advice. Users should consider whether any opinions, views or conclusions in this article are consistent with their specific circumstances, and abide by the relevant laws and regulations of the country and region where they are located.
This article is reprinted with permission from: "MarsBit"
Original author: 0XYARO, 0XRAMEN, OUROBOROS CAPITAL
