#1: ERC-721R: Fighting the Rug Pull
One of the biggest issues in NFT gaming is when development results dramatically fail to live up to the hype and someone runs off with the money — a “rug pull.” Given the highly speculative nature of NFTs in the first place, there’s an inherent risk when putting money into many projects, but it doesn’t help that crypto’s default ruleset doesn’t allow for features like chargebacks or refunds. Thanks to the programmability of smart contracts, however, it’s entirely possible to build a refund policy into the code that performs the sales. A recent project, CryptoFighters Alliance, is trying to do exactly that with a new proposed standard, ERC-721R.
For those who don’t know, the ERC (Ethereum requests for comments) standard follows the same system as other kinds of internet standards like RFC (request for comments), which are formal proposals to be adopted (or not). Probably the two most well-known ERC standards are ERC-20, which underlies fungible tokens, and ERC-721, which enables NFTs. ERC-721R proposes a “refund period” within which refund requests are automatically handled according to the policy as it’s coded. Of course, as with all systems there are imperfections and loopholes to solve for, and it may not apply in every use case. With ERC-721R, there are a variety of criticisms regarding execution details and the ability for buyers / sellers to exploit certain things that need to be worked out.
This will take time to solve and get broadly agreed and/or iterated on. It’s worth remembering how long it took for ERC-721 to become the widely used NFT standard it is now. In the big picture, however, creating additional methods to help fight against and disincentivize scammers and underperformers is ultimately healthy for building trust in blockchain games (and beyond).
#2: The Sandbox is Raising $400M at a $4B Valuation
After a successful Alpha Season 2 in terms of expanding interest (325K Alpha Hub Visitors vs 200K for Season 1) and experiences in the platform, The Sandbox is looking to capitalize with additional fundraising. Currently still in an alpha state focused on demonstrating a mix of branded and user-created experiences, The Sandbox is already touting a $4B valuation.
This valuation is a large number, but it actually used to be higher! Let’s quickly compare two key stats to where they were when we first deconstructed The Sandbox back in January -
- Fully diluted market cap for SAND token: $8.3B vs $13.8B (down -40%)
- Land floor price: $5K vs $10K (down -50%)
While a large part of The Sandbox’s valuation is a function of the SAND token’s current market cap (~$3.2B), the other key factor is the high value of land plots being sold in the project and such UGC metaverses in general. As noted above, the current floor price for The Sandbox land on secondary markets sits at a little over $5K (a return to the lows of November 2021), as investors still look to get in prior to a wider platform launch. The big risk comes from whether or not the platform will be able to attract regular users enough to justify such lofty valuations come full launch, though the stat comparisons above also clearly show that the hype around The Sandbox is slowing down, and the market increasingly wants to start seeing tangible results.
The strategy to try to maintain active users during Alpha Season 2 was to steadily release new experiences throughout the month and provide opportunities for players to earn Season Pass access through in-game quests and raffles. Thanks to this approach, The Sandbox gained 500+ new users a day throughout all of March 2022, although this was a little lower than Season 1 which tended to average around 600-700 a day. The claimed total MAU for the month-long season was 350K total, but it’s hard to know true engagement versus one-time logins.
While the hype might be slowing down, there continues to be enough of it in the mix, especially with the myriad of brand partnerships The Sandbox has already built. Most recently, they announced a “Knotverse” experience with popular metal band Slipknot - a move that has a lot of parallels to Roblox recently incorporating Sonic. But unlike Roblox, building up UGC in The Sandbox requires users to build UGC on artificially scarce land plots owned by other users, which comes with issues of its own, as we explored in our deconstruction of The Sandbox.
To justify the current valuation, The Sandbox is going to have to become one of the dominant virtual world destinations for a large demographic. Luckily, Animoca Brands, the parent company to The Sandbox developer Pixowl, has been continuously raising and deploying funds into the entire web3 space and their accumulated knowledge will at least help indirectly. But all in all, it’s hard to say right now how much of the reduced hype is still healthy.
- Big Time, an upcoming action RPG, launched early access for Gold VIP Pass holders. Link
- Mirandus, a fantasy RPG from Gala Games, hosted an AMA that provided a variety of new details. Link
- Town Star, another game from Gala Games, announced some significant economy changes. Link
- Sky Mavis posted a $1M bug bounty program to help prevent a recurrence of the Ronin hack, which has now been attributed to the North Korean Lazarus group. Too little, too late. Link
- Splinterlands detailed plans for its SPS validator node program and licenses. Link
- Nakamoto Games announced its new game, Outlanders. Link
- Gods Unchained released its first new card set in some time, Mortal Judgement. Link
- Animoca Brands and its new acquisition, Grease Monkey Games, announced a partnership with Formula DRIFT for a new blockchain motorsport game called Torque Drift 2. Link
- Nyan Heroes, a Solana-based Battle Royal game, revealed details of its upcoming tokenomics. Link
- Heroes Chained, a fantasy RPG game, launched a beta version of its NFT Marketplace. Link
- Pegaxy released its Pega Fusion update along with a mobile beta. Link
- X World Games announced a partnership with the Brave browser. Link
- Monsterra announced a partnership with crypto fund Hashed. Link
- Everseed, a Solana farming game, launched Elixir NFT minting. Link
- Galaxy Fight Club released its beta for iOS and Android. Link
- Axie Infinity Origin is taking advantage of the feedback from the public alpha and introducing 75 balancing changes today. Link
- Sipher showed off a new character NFT in-game. Link
- Thetan Arena detailed some new UI changes to how tokens are displayed in-game. Link
- Blockchain Brawlers, a growing WAX-based game, begins trading a BRWL/USDT pair on KuCoin, starting April 22nd. Link
- SKALE launched a $100M ecosystem incentive program to fund development on its EVM-compatible multi-chain network. Link
- Age of Gods launched its initial NFT offering. Link
- Yield Guild Games announced its Guild Advancement Program as a new way to reward guild participation. Link
- Atari cut ties with its token business partner and will relaunch the tokens on another chain. Link
- Rainmaker Games launched a platform for P2E game discovery. Link
- Merit Circle announced an NFT Marketplace. Link
- DeRace is partnering with Multichain for a custom Layer 2 solution. Link
- Staking of IndiGG’s INDI token is live on KuCoin with a 60 day 60% APR. Link
Notable Market Moves
- As with other weeks, we saw prices influenced by a crypto-wide dip on the 17th, followed by varying levels of recovery. Bitcoin and Ethereum recovered a slight bit better than the gaming tokens, which were mostly down.
- APE jumped up 15.40% this week into first place thanks to rumors that the token could be the method of payment for an upcoming land sale for the Yuga Labs Otherside project. If this turns out to be false and no other near-term utility emerges, it’s likely that the token will heavily correct.
- StepN also saw its GMT token continue a heavy upward trend, jumping over Gala and Enjin, with a 47.77% increase thanks to a large buyback and burn program combined with an announced partnership with ASICS for branded NFTs. Overall, the GMT governance token is being managed a bit better than the GST utility token and some continued upward movement is expected. Alongside the hype for the earnings also comes skepticism of the sustainability of STEPN’s economics due to the emphasis on ponzinomics earning.
Content Worth Consuming
- A Case Study on Monitoring the Health of a Play & Earn Economy (Flying Falcon) - “What follows in this paper is an overview of the key quantitative health metrics we actively monitor which aids in bootstrapping a sustainable play and earn economy. Quantitative data points we touch on throughout the paper include DAU growth, new supply side asset released relative to new DAU, mint-to-burn, active supply, upgradability totals, % of supply side asset for sale, scholarship percentage, treasury growth, game token price, floor price, annual yield, break even days, and monthly income. In most cases, we believe these are the key metrics to monitor the quantitative health of play and earn economies and look forward to refining our approach as the industry adapts and grows.” Link
- Constructing the Ideal P2E Economy (Lumikai) - “As the world propels headfirst into the Web 3 wormhole and millions of dollars are invested in P2E gaming start-ups, it is imperative to start talking about the economic realities of these businesses. If this is the democratic, decentralised future we have all been waiting for, then we wanted to ride the economic gravy train. In order to really understand the inner workings and sustainability of P2E games, in this blog we draw the analogy of these economies to real-life macroeconomics to demystify topics like deflation, currency sinks, money supply, and more.” Link
- Will STEPN Bring Crypto to the Masses? (Nat Eliason) - “After playing for about two weeks now, I’m regularly earning $300-400 a day. That’s a six-figure salary just for going outside and spending time with my wife, kid, and dogs. That’s completely insane, totally unsustainable, and a giant Ponzi waiting to collapse. Right?
- This one’s weird. There’s something here. Something that I honestly haven’t seen with any other Web3 game. STEPN might be the best-designed Play and Earn game to hit the market, and the more I dig in, the more excited I get about what they could be in the future.” Link
- The End of NFT Rug Pulls? (CoinDesk) - “As far as sellers are concerned, the main advantage of using ERC-721R would be the increased credibility, allowing them to build confidence in the market. Also, since the new standard guarantees that the creators take more responsibility, we might see potential buyers leaning towards ERC-721R projects more in the future. The refund mechanism also creates a new dynamic while still active because the floor price of the collection is unlikely to fall below the minting price. Until the refund period ends, or a large number of the original holders sell their NFTs, no minter will choose to sell the token below mint price if the refund price is equal and guaranteed.” Link