Source: GAMEE

Executive Summary

  • The Skillz-like model doesn’t initially inspire confidence because of its multiple limitations and constraints. However, because of the games Arc8 has already built, the userbase it can amass from its original Prizes App, Animoca Brands’ reach, and the unclear policies around blockchain games on the App Store and the Play Store, Arc8 has a better initial footing from a business model perspective.
  • The 1v1 matches are a very straightforward and sustainable way of managing the economy since it is a negative sum game in which Arc8 earns tokens from every match. However, the Seasonal Leaderboard and the Tournament System is where Arc8 starts losing the plot, because these rewards are inflationary and come from the Game Operations pool (not the same pool in which user spending flows).
  • Fundamentally, the game design is sustainable — more money flows in than out, because Arc8 keeps a 10% cut. However, what’s unsustainable is that buy-ins go into a different pool (Treasury) than the rewards come out of (Game Operations Pool). This should be a simple fix, though, because at some point the team can simply shift capital over from the treasury to the game operations pool or start paying rewards out of the treasury.
  • It’s likely that Animoca Brand’s core strategy with Arc8 is an ecosystem play that will lead more users into its larger metaverse. Only time will tell if this will work or not, and early scalability isn’t the most promising.


Arc8 is a blockchain-based play-and-earn mobile gaming platform which hosts several games that allow players to compete for token prizes (as opposed to real money (fiat) prizes on comparable platforms like Skillz). The platform is one of GAMEE’s four projects: Arc8, the GAMEE token, G-Bots NFTs, and the Prizes App (fiat money-based competitive platform).

Arc8 uses tokens instead of fiat money to run skill-based matches. There are primarily two modes— the 1v1 mode where two players enter a match using tokens and the winner takes all after giving a cut to Arc8, and then there is also a Tournament mode where multiple players pool in tokens and the rewards are distributed based on the ranks that players achieve at the end of the tournament. The games here are typically skill-based hypercasual games that are either familiar or are very easy to learn.

GAMEE was founded in 2015 by Bozena Rezab, Miroslav Chmelka, Jan Castek, and Lukas Stibor and is headquartered in Prague, the Czech Republic. Bozena Rezab is GAMEE's CEO, who previously worked at Google and was responsible for YouTube’s business development across European markets. She has 17 years of experience in developing consumer technology brands and businesses. Jan Castek is GAMEE's Chief of Product, who over the last 12 years as an entrepreneur created several consumer tech products ranging from social networks to finance applications. Miroslav Chmelka is GAMEE's Chief of Technology, with over a decade of experience in technology development for consumer-facing services.

GAMEE was one of the first game developers to launch games in the messaging apps Telegram (in 2016) and Viber (in 2018). In 2016, GAMEE was one of the global game companies selected to pioneer Facebook Instant Games, a group that also included gaming giants Konami, Bandai Namco, King, and Zynga. In 2017, GAMEE was listed in the 100 Disruptive Brands by Marketing Week, was the Czech Republic’s national winner of “Startup of the Year'' in the Central European Startup Awards, and was named one of the Czech Republic’s 10 most promising startups by Forbes. Of course, much has changed over the past few years.

Most notably, in July 2020, Animoca Brands acquired GAMEE for €4 million (approx. $6.53 million) in shares plus earn-out payments of up to €1 million (approx. $1.63 million) in cash or shares. The acquisition aimed to add strategically valuable in-house HTML5 skills, a portfolio of over 80 casual games, and a gaming community of 13 million registered users and 1.3 million monthly active users. This confers to Animoca Brands the capability to offer browser games independently from third party platforms, providing greater freedom, flexibility, and unrestricted search — particularly valuable in light of its larger strategy with blockchain technology.

Yat Siu, co-founder and chairman of Animoca Brands, said: “We see browser gaming as the key to mass adoption for blockchain gaming. The talented team at GAMEE therefore fills a critical gap in the ability of Animoca Brands to execute, on a massive scale, the goal of delivering true digital ownership to gaming audiences. GAMEE’s significant presence on platforms such as Telegram - one of the main communications platforms for the blockchain industry - is particularly important to maximize our reach and influence.”

Top Games according to Monthly Active Wallets as of July 10, 2022 (Source: Dappradar)

If mass adoption is the goal, then Arc8 is Rank #6 with its MAW’s (monthly active wallets) touching almost 100K (if you trust DappRadar). However, with a monthly transaction volume of less than supposedly $1.5K, there seems to be very little tokenomic activity happening at this point in time. The reason why we are looking at Arc8 despite these low numbers is that it is one of the earlier companies that Animoca Brands had acquired while building its ecosystem of games. Given Animoca’s metaverse ambitions, it makes sense to look under the hood.

The skill-based tournament-styled business model has multiple advantages by using on-chain tokens instead of fiat money used by Skillz among others (which we’ll cover later in the report). The model is basically akin to the audience pooling in money for a skill-based contest where the winner wins disproportionally, the loser loses disproportionally, and the game takes a cut and always makes money. If Animoca wanted to make money on Arc8, it probably could; for example, Solitaire Blitz, which was released just over a month ago, has a similar business model (with just one game), is already competing with Arc8 based on MAWs and with 600x the transaction volume. However, the strategy here seems to get as many players onboard without them needing to be on-chain, then give them a taste of what it is like to play with tokens so as to convert as many on-chain players as possible. These players can then be cross-promoted to other projects.

What makes this interesting is that Arc8 is more of an Animoca ecosystem play rather than just a single product and offers a sneak peak into the larger strategy of Animoca Brands in its quest for greater interoperability and scale across its many projects.

With this in mind, lets take a deep dive into Arc8 to understand:

  • How has Arc8 woven in tokens and NFTs into the multi-game — play and earn — tournament-based model?
  • How has this performed?
  • Can the real money/token tournament-based model succeed with blockchain games at a greater scale?
  • What is the role of Arc8 in the overall strategy of Animoca Brands?

Read on to learn more!

The Assets

Before digging into the game design and deeper economy questions, let’s cover the basis of what the key platform assets are and how they plug in.

GAMEE (Token)

Let’s start by clearing up any confusion that may pop up. The fact that the token is named GAMEE might raise questions about how integrated Arc8 is with the original, real-money game — Prizes App — by the same company. Arc8 is undoubtedly built with the learnings of the Prizes App; however, they are completely separate apps with no connection except for when the team uses the off-chain Prizes app to funnel users to the on-chain Arc8 app.

The GAMEE Token (GMEE) is an ERC-20 utility token designed to be the currency of access, action, and governance in supported play-and-earn games provided on Arc8. GMEE uses Polygon as its L2 scaling solution and a bridge to BNB Smart Chain. The total supply of GMEE has been fixed at 3,180,000,000 tokens. Here is a glimpse at the token allocation:

GAMEE Token Allocation (Source: Medium)

Six months after the token launch, the target was to have 8.56% of the total supply in circulation, but this didn’t happen. The token launch happened in April 2021 and as of today, 15 months after the token launch, only 6.98% of the token is in circulation. One of the possible reasons for it lagging behind the target is the team makes decisions based on the price of the token to avoid inflation and price drop. Here’s the longer-term release schedule for GMEE:

Max Possible Token Release Schedule ((Source: Whitepaper)

The long-term goal of the token release schedule is to release it to players over the next 3+ years, with approximately 60% being released by at least 2025. However, it is expected that the issuance of GMEE will be slower than the unlock schedule unless the team makes outsized changes.

G-Bots (NFT)

G-Bots (Source: Whitepaper)

G-Bots are Polygon-based NFTs (using the ERC-721 standard) that players can stake and use as entrance tickets to exclusive G-Bot-only games on Arc8 to earn GAMEE rewards. The larger ambition is to use them across multiple future games within and outside Arc8.

The first pre-sale of G-Bots Packs was introduced on November 2nd, 2021, followed by a first edition sale on January 6th, 2022. There were only 5,000 Packs within the First Edition, featuring unique designs that won’t be ever sold again. This is true only for the First Edition G-Bots. However, with future plans for breeding mechanisms, the number of G-Bots will technically be infinite.

G-Bots Market Sales Activity (Source: Opensea)

With a floor price of 0.03 ETH ($35 as of July 11th, 2022) and the highest priced sale happening for 3.1 ETH ($3,641 as of July 11th, 2022) the total sale volume stands at 292 ETH. The all-time average sale price is 0.0882 ETH, with the 4,200 G-Bots owned by approximately 2,000 wallets. In other words, this isn’t a huge buyer base and the price is fairly low — but the team likely aims to increase both over time as G-Bots breed and gain more utility across their games.

G-Bots Rarity Distribution (Source: Website)

G-Bots have seven rarities (Starter, Common, Rare, Epic, Legendary, Mythical, and Ultimate) that vary in quantity. The Starter G-Bots are specially minted, limited-edition G-Bots with a unique branded style, and they are distributed only as exclusive rewards while the others can be bought from the marketplace. Although they have very low stats, there will be an unlimited supply of Starter G-Bots. All other rarities are limited. Each rarity (except for Starters) has a specific rarity percent of the total existing G-Bot supply assigned to it (as seen the image above).

G-Bot Stats (Source: Whitepaper)

There are three classes (Warriors, Fighters, and Rogues). Every G-Bot has stats according to its rarity and class.

Currently there are two main utilities for G-Bots:

  • Play G-Bot Exclusive Games on Arc8
    • The stats of the G-Bots will impact the gameplay.
    • There will be two modes: 1v1 and Tournament (which we will explain in a bit).
    • Currently, there is only one game (Dark Lords - Space Shooter) available, but there are more (Energy Wars - Puzzle Battler) in the pipeline.
G-Bot Staking Rewards as of June 13, 2022 (Source: Website)
  • Staking G-Bots to earn GMEE
    • G-Bots can be sent on missions by staking them in order to earn GMEE. Notably, staked G-Bots cannot be used to play any games.
    • The daily earnings depend on the rarity of the G-Bot and the number of bots staked at any given point of time. This is because the earnings pool for the duration is capped.
    • Players can claim their rewards at any point in time without unstaking their G-Bots. They can, however, choose to unstake their G-Bots at any point in time.
Upcoming G-Bot features (Source: Website)

There are multiple upcoming features planned for G-Bots — like a new token (Energy Token - $ET) that can be earned while playing and can be used for breeding, upgrading, and evolving. The diagram below explains the fully realized tokenomics flow for G-Bots when all the features are live.

G-Bot Tokenomics Flow (Source: Whitepaper)

G-Bots are set for interoperability; this will start within the GAMEE platform while the team builds bridges to other open worlds to have G-Bots featured in them. However, this can happen only after the activation of the breeding functionality which will expand the base of players owning G-Bots.

The team approaches all aspects of the design with the lens of scale in mind. This is a step in the right direction, but the jury is still out on how the economy will perform when everything comes together.

Comparison Between Skillz and Arc8  

There are definitely similarities between the designs of Skillz and Arc8. Fundamentally, both platforms are “play and earn,” with Arc8 using on-chain tokens and Skillz using fiat currency.

Both games also have an in-game “fake” currency (Skillz has “Z” while Arc8 has “Credits”). These are used to give players a taste of the gameplay without spending real money — dollars or GMEE — and players can use them for practice matches.

Both have a “Super App” that houses all the games, but Skillz also has apps of individual games. That is because unlike Arc8, Skillz works with third party developers (and shares 50% of the profits with them). Arc8 will start accepting third party developers in 2023, according to its roadmap, but it still has more than enough games left to port over from its original Prizes App. Both game platforms also have the 1v1 matches where players pay (dollars in the case of Skillz and GMEE for Arc8) to enter a match, and afterwards the winner takes all after giving a cut to the platform. They also both host the same types of games (examples further down), although Arc8 has additional special games that are playable only by players who own NFTs while Skillz has no such features.

Next, let’s look at the limitations of the Skillz model and evaluate if being on-chain resolves any key issues.

Does Web3 Mitigate Some of the Risks of the Web2 Skillz Model?

Let’s first understand the overall limitations and risks of the Skillz model:

High Cost of Player Acquisition

  • Getting players who pay for competitive gaming is an expensive affair, especially in the post-IDFA world.
  • Web3 does not directly solve this problem. One can argue that it makes it worse because there is much more friction in getting players to come on-chain than it is to get them to pay dollars.
  • Arc8 has the advantage of cross-promoting users from its original Prizes App which boasts 30M+ registered users who fit the player type. It also has the advantage of being a part of the Animoca Brands ecosystem where cross-promotion can help it get crypto native users.

High Cost of Player Retention

  • Skillz not only has to worry about acquiring users, but it also has to worry about retaining them. However, unlike traditional games where fiat currency is not involved, Skillz actually has to give fiat currency to players to play with so that they get a taste of fiat money gaming. The players who don’t use the real money churn out faster, because real money gaming is the context in which they downloaded the app.
Rentention Comparison of Bingo Games (Source: Sensortower)
  • A case in point is Blackout Bingo, one of the most popular games on Skillz. Compared to the other bingo games in the market, it has much lower retention.
Arc8 Retention (Source: Sensortower)
  • Web3 is better suited to this model, partially because the act of initially giving on-chain tokens to players to help them build the habit of playing with real money does not cost Arc8 fiat currency. This helps its retention. However, one has to be careful in this strategy as it might lead to an inflationary economy which may ultimately hurt the token price.

High Cost of Game Acquisition

  • Skillz sources its games from third party developers with whom they have a revenue share deal of the profits.
  • The genre of games in which Skillz has found traction is pretty limited (we will explore this in detail later).
  • So, in effect, the limited genres, limited player types, and the high costs of acquisition and retention limit the addressable market, which in turn limits the developers who are interested in making these games. Arc8 might not have a similar problem because it develops its own games for now, but this has nothing to do with it being on-chain.


  • Real-money gaming is not considered legal in all parts of the world, and therefore these games cannot be downloaded by players everywhere. These rules also tend to change with time, making the downloads unpredictable. Keeping an eye on these changes is also an additional burden.
  • The regulation around web3 is still quite nebulous, but it can technically get around some of the rules set for fiat-based apps like Skillz. However, we believe that this is a short-term benefit, and the same region-by-region legislation will eventually impact blockchain games too.

App and Play Store Policies

  • Apple and Google allow gambling-based apps on their platforms, provided they follow the country-specific rules and regulations.
  • However, wagering-based, real-money gaming is one of the rare cases in which Apple’s policies are better compared to Google‘s. Apple is a little vague in its policies regarding real-money gaming; it has clear rules for gambling games but not skill-based games — so we see apps like Skillz on the App Store. Google, however, is clearly strict and outright bans skill-based wagering games. Therefore, one cannot download Skillz on Android through the Play Store, and it has to be side-loaded though an APK download on its website.
  • The App Store and Play Store policies around blockchain games are still being framed, and hence Arc8 can be downloaded in iOS and Android in all countries since players technically do not have to pay real money to play the game. This definitely helps in its distribution… for now.


  • Wherever there is real money involved, there will be cheaters, and a lot of time and effort goes into managing this so as to avoid losses and negative experiences for players.
  • Both Skillz and Arc8 face this issue, though currently the impact of loss will be felt more by Skillz since it involves a direct dollar transaction.

Based on obvious limitations and risks, the Skillz model doesn’t inspire confidence. However, because of the games it has already built, the userbase it can amass from its original Prizes App and the Animoca Brands reach, and the unclear policies around blockchain games on the App Store and the Play Store, Arc8 has a better initial footing from a business model perspective. But to get a better sense of how well it can succeed and operate, we should dig more into the game design, economy design, and early data.

Arc8 Game Design

Arc8 Core Loop (Source: Whitepaper)

As mentioned earlier, there are currently two main modes for gameplay within the Arc8 app — the 1v1 matches and the sponsored tournaments. Each of these modes is applicable for all 10 games available on the platform.


Arc8, as a competitive platform, uses seasons to conduct its competitions. The best players compete for big reward pools sponsored by several partners. During these seasons, players compete in matches and tournaments and get ranked by their skill levels in each of the games. With this, players are matched against other players of similar abilities. Seasonal rewards are given on the basis of the points accumulated by players in each of the individual leader boards.

Every season, Arc8 changes the games on its platform based on the participation in games in the previous seasons. This is a very good way to keep things fresh by trying out new games that might work for Arc8 (all from the Prizes App’s repository of 50+ games). As of writing, we’re currently in Season 3, which runs from June 1st, 2022 to August 1st, 2022.

Season Based Rewards on Arc8 (Source: Medium)

Season 1 and 2 were consistent in their approach while Season 3 added additional rewards in terms of Daily Login, Weekly Airdrop Draws, and Vouchers (buy GMEE with tokens of other Animoca Brands games).

1v1 Match

The 1v1 match is a skill-based game competition in which two participants are matched asynchronously by their skill levels. When both scores are submitted, the results get published and the prizes are distributed. The entrance fee to the match is paid by both players in GMEE tokens. Arc8 charges players a platform fee of up to 10% for hosting each match. Prize pools are created from match entrance fees paid by players, with the winner receiving most of the rewards.


Rank based on cumulative LP points earned. Higher Rank unlocks higher value 1v1 matches. Seasonal Leaderboard based on Cumulative seasonal LP earned

Players earn LP points based on Win (+10LP), Loss (-6LP) or Draw (+3LP). As these points accumulate, players are ranked (from Bronze to Legend). Each rank unlocks 1v1 matches requiring higher entry fees for those who want to multiply their earnings. The cumulative LP earned in a season determines the rewards in the Seasonal Leaderboard. Of the 550K GMEE allocated to the Season 3 “Seasonal Leaderboard Rewards,” an equal 50K are distributed among each of the 11 games (10 games with GAMEE as entry cost and 1 game that requires G-Bot to enter along with GAMEE) in Season 3. This system provides short-, medium-, and long-term goals for players to chase after.

The 1v1 matches are a very straightforward and sustainable way of managing the economy since it is a negative sum game in which Arc8 earns tokens back from every match and is very similar to the Skillz model. However, as we’ll break down in the tokenomics section below, the Seasonal Leaderboard System is where Arc8 starts losing the plot because these rewards are inflationary and come from the Game Operations pool (not the same pool in which the 10% cut and royalty from G-Bot NFT sales go to). More on this in a bit.


The other mode is the time-limited Tournament System in which the results scored during the tournament are displayed in the event's leaderboard; only the highest score by each player is uploaded to the leaderboard. The entrance fee for the tournament is paid by players in GMEE. The prize pool is fixed, communicated ahead of the start of the tournament irrespective of the number of players participating.


50 GAMEE Prize Pool Tournament with 350 GAMEE Prize Pool Tournament 400 GAMEE Prize Pool Tournament with GAMEE

Credits (off-chain currency) as an Entry Cost. with GAMEE as an Entry Cost. as an entry cost with a Bronze Rank Requirement.

At any point in time, there are multiple tournaments that are active. These differ based on:

  • Game
  • Reward - This can vary from 50 GMEE to 400 GMEE. In Season 3, 500K GMEE is set aside for the 10 Games with GMEE as entry cost and an additional 500K GMEE is set aside for 1 game that requires G-Bot to enter.
  • Number of players receiving rewards - This can vary from 100 to 250.
  • Time duration - This can be from anywhere between 2 to 6 hours.
  • Entry cost - This can be in GMEE or Credits (the on-chain vs off-chain currencies, respectively).
  • Rank requirement - For example, only players with a Bronze Rank in a particular game are allowed to participate.

The interesting design decision taken for the tournament structure is that players can attempt a single tournament multiple times by paying the entry cost for every attempt. This has the potential to be a major token sink for the more competitive players who believe that “just one more try” will help them hit the top the leaderboard. Let’s take an example of a 50 GMEE reward tournament with a 1 GMEE entry criteria. All it will take for the tournament to be net positive (from Arc8’s perspective) is for there to be 50 participants, with just 1 participant attempting it twice. However, it is difficult for this design to guarantee profitability.

Just like the 1v1 Seasonal Leaderboard System, the rewards for the Tournament System are also inflationary in nature. Although the decision to let players try multiple times by paying the entry cost is interesting, it is very difficult to ensure that the Tournament will be a net-sink of GMEE. There are multiple easy suggestions here to achieve profitability:

  • Avoid Tournaments with Credits (off-chain currency) as entry cost while giving GAMEE (on-chain currency) out as the rewards.
  • Don’t start a tournament until the Entry Fees Collected > Prize Pool.
  • Don’t have a fixed prize pool; instead, determine the size of the pool based on the number of participants (just like the 1v1 match).

These do not seem to be difficult changes, yet the team is continuing with the original design even after data of the past two seasons. This indicates that the team wants to give players a predictable stream of tournaments that have defined prize pools but lack a minimum required player count to begin. The platform also currently boasts very low barriers to entry, which helps drive maximum participation even if it comes at the cost of a potentially unsustainable economy.

Games on Arc8

Games on Arc8 in Season 3 (Source: Whitepaper)

Finally, let’s talk about some games! The games that Arc8 offers are hypercasual in nature and change with every season. In order to best work with the 1v1 and/or Tournament structures, these games usually have the characteristics of being:

  • Primarily skill-based
  • Repeatable without getting boring
  • Easy to learn but hard to master
  • Use familiar mechanics
  • Have enough scoring variation so as to avoid ties on a leaderboard with multiple players
  • Should be able to be played asynchronously
  • Technically lightweight
Source: Naavik

This is typical of the games seen on platforms like Skillz, GAMEE Prizes App, World Winner, etc. Even though the data above is from 2020, it still holds true if one looks at the games on Arc8. This model clearly seems to work only for a limited set of games. These games have a very low Retention (The D1 benchmark for a game to be accepted on Skillz is just 20%), and they lack monetization depth.

Top 10 Countries by Download for Arc8 (Source: Sensortower)

However, these games are downloaded quite a lot, especially in Tier 2/3 countries. These are also the countries that are observing good traction for blockchain games since the rewards offered are meaningful to them, even if they appear low for players from Tier 1 countries. This is also in line with Animoca Brand’s strategy to focus on scale.

Token Price and Economy

GMEE is a limited supply ERC-20 utility token designed to be the currency of access, action, and governance in supported play-and-earn games provided on Arc8. GMEE flows between the Game Operations Pool, the Players, and the Treasury.

For this to be a circular and sustainable economy, all that Arc8 needs to do is to ensure that the GMEE flowing into the treasury is greater than or equal to the GMEE given as rewards. Currently, however, that is not the case, with the rewards outweighing the player spends, putting Arc8 down a path of unsustainability. However, the fix is simple (lower rewards below player spend), but it remains to be seen if/when Arc8 will adapt.

Now, let’s understand how value flows through the economy in more detail.

Arc8 Token (GAMEE) Flow

Based on the game design, players sink GMEE through 1v1 entry fees, tournament fees, and G-Bot purchases — all of this goes into Arc8’s Treasury. Specifically, 90% of the fees collected from the 1v1 matches are given to the winner of that match, and the rest goes into the Treasury. However, the rewards for the Tournaments and the Global 1v1 Leaderboards don’t come from the Treasury. Instead, they come from the Game Operations Pool which allocates fixed rewards every season.

Currently there seems to be no connection between the Treasury and the Game Operations Pool. If the inflows are greater than the outflows, it is sustainable as long as they’re eventually willing to shift money around between the pools. Let’s see if that’s the case.

Source: Coinmarketcap

GAMEE’s token, GMEE, launched on April 8th, 2021 and soon reached a peak price of $0.67. However, by the time the Arc8 app launched in October, GMEE traded at $0.34, but it wasn’t possible to use it in the app yet. Its true utility — being used to pay the entry fees for 1v1 Duels and Tournaments — didn’t start until Season 1 commenced (February of 2022), by which time its price fell to $0.15. Currently (as of mid-July) it stands at a much, much lower $0.013. The market cap touched a maximum of $60.7M (in November of 2021) and is now only $3M.

GMEE can be viewed in two distinct parts: before the launch of Season 1 and after. Let’s look at both.

The public presale of GMEE (0.16% of the total supply) was interesting since it was done via vouchers sold through sister projects of Animoca Brands. These vouchers could be brought with REVV, TOWER, SAND, and LYM, which are the tokens of other Animoca Brands projects.

GAMEE Voucher Availability (Source: Medium)

There were 800 vouchers available for this sale, representing a total 5,000,000 GMEE tokens; 600 were 5,000 GMEE Token Vouchers (sold for approximately $194), and 200 are 10,000 GMEE Token Vouchers (sold for approximately $389), available evenly across the 4 payment options (REVV, TOWER, SAND, LYM). Players could buy a maximum of three vouchers of the same denomination in a single transaction. Vouchers were redeemable for GMEE tokens three months after the token listing but could be tradable in OpenSea.

GAMEE held a public presale of the GMEE Vouchers on April 2nd, 2021, that sold out within 7 minutes, raising approximately $194K. These could be claimed on July 8th, 2021, resulting in a 2x-5x gain for the folks who got them in April.

This was followed up by a $2.2M private presale of GMEE tokens, with key investors including Metakovan (from Metapurse), OKEx’s Block Dream Fund, Mind Fund, Genesis Block, Smile Tech, Summit 33, Longling Capital, AKG Ventures, Everest Ventures, and other prominent angel investors.

It looks like this was more of an Animoca ecosystem play rather than just for Arc8, with utility being provided for the tokens of its other projects. This offers a sneak peak into the larger strategy of Animoca Brands in its quest for interoperability within the ecosystem of its projects.

With the token being launched more than ten months before it could be used in the Arc8 app, the team had to deploy several strategies to give it utility in order to maintain or increase its price. Now, let’s look at the performance of the token after the launch of Season 1 as that is when it had real in-game utility.

Source: Dune Analytics

Since the start of Season 1, Arc8’s MAUs doubled from 50K to 100K. Each of these players has an on-chain, in-game wallet and has played at least one match. However, during this time, the price of GMEE has continuously dropped.

Source: Dune Analytics

In order to understand the correlation between the token price and players, it’s important to understand how the players can influence the price. The price can be said to be impacted by the players when their activity in the market translates to token-based economic action in the game.

One indicator of this is the number of players who move tokens into Arc8 from outside the app. We call these Transactors. An important point to note here is that a player does not have to be a Transactor in order to spend GMEE. This is because the player continuously receives GMEE while in the game. The player can spend the same GMEE to take part in the tournament and might not have to depend on getting it from other players through a DEX. In addition to that, there are some tournaments that reward GMEE but do not require GMEE to enter and can be participated in through the off-chain Credits. However, a wallet is counted as a player when it plays a match and not when it spends GMEE. Based on the chart above, even though the number of players is increasing, the number of transactors is around 650, which was 0.62% of the players in June.

This is too low a number to affect the price, and hence we don’t see the usual correlation between the price and the number of players. One would expect that as the distinct monthly players is increasing, the transactors would also increase. That is not the case and points to a very small group of enthusiasts actively engaging with GMEE outside the game.

In Season 1, compared to the total GMEE rewards given, only 5% additional GMEE was moved into Arc8 from outside the game. This number was 11% for Season 2. Mind you, this is not an indicator of the revenue made by Arc8. This just means that after using up the GMEE rewards given to them, players put in 5% to 11% more GMEE into Arc8. The ideal number here needs to be greater than 100% for the economy to be stable. Basically, this means that the rewards Arc8 gives need to come from the tokens sunk by the players.

Source: Dune Analytics

The GMEE loaded per player by the transactors or the GMEE transferred to Arc8 from outside the app is low but increasing.

Source: Dune Analytics

However, due to the dramatically falling price of GMEE, the total dollars moving into Arc8 show a clear decreasing trend.

Fundamentally, the game design is sustainable — more money flows in than out, because Arc8 keeps a 10% cut. However, what’s unsustainable is that buy-ins go into a different pool (Treasury) than the rewards come out of (Game Operations Pool). This should be a simple fix, though, because at some point the team can simply shift capital over from the Treasury to the Game Operations Pool or start paying rewards out of the Treasury.

All that said, whether the economic model is technically sustainable or not doesn’t matter if a tiny percent of the userbase (which is small to begin with) interacts with the token economy outside the app. The Skillz-based model clearly can work in Web3; it just needs superior execution.

Due to the large number of rewards given to players and the fact that there is no relationship between the tournament rewards and the entry fees players are paying to play the game, the economy is unsustainable. The fact that the game is choosing not to do it again points to the strategy that Arc8 is a way for Animoca Brands to get in more users. Only time will tell if this strategy will work or not.

GMEE can also be staked in liquidity pools in timed staking events to earn GMEE. If the team wants to do sustainable staking, they can use part of the 10% that they keep from the 1v1 matches to give out as staking rewards. We believe that staking tokens to get tokens can be inflationary if not done right, and a better approach would be to give other in-game rewards for staking — promoting retention-driving behavior rather than profit-maximizing behavior.

The team has decided that GMEE will not be burned through use, but instead will be reintroduced back into the economy after it is used by players to pay for gameplay fees, NFT purchases, and upgrades. It also means that the team will need to prioritize player expansion or else dilution will continue to wreck existing holders. We believe that in the volatile world of blockchain gaming, decisions like these should not be made at the start since it is very difficult to predict what strategies may work for future problems.

Overall, the decision to launch GMEE well before the launch of the game might have helped the team to raise initial funds, but the strategy will not work as well in today’s market. Arc8 had the full might of the Animoca Brands ecosystem and the manpower to execute multiple strategies to keep the token holders engaged for 10 months before the Season 1 launch. Paradoxically, the token price was on an increasing trend before the launch of the game and started falling after the launch. There is a growing consensus that it’s wise to release a token after the launch of a game, because the team would want to look at data from players rather than speculators to decide on strategies that may affect the price of a token.

Future Roadmap and Conclusion

The best thing going for Arc8 is that the model is sustainable with easy tweaks, and that’s a win compared to the typical blockchain game. The worst thing — which is an enormous red flag — is that there are barely any transactors bringing GMEE into the game from outside, meaning players aren’t spending more to participate. The ball is in the team’s court to get more economically engaged players into Arc8. There are multiple ways to do this:

More Games

We have established the parameters for the types games that can be added to such a platform, and the constraints make it difficult for most types of games to be used here. For any player operating in this space, coming up with new games will always be part of the content treadmill. Arc8 is planning to tackle this through either using games from its original Prizes App or using third party developers in the future. We believe that this strategy has a diminishing utility over time. Perhaps third party developers can help bring a new breadth of ideas while the in-house team builds depth in the ideas that work — although building a business model for third party developers will mean splitting the pie even more. We’ll see how the team approaches this if/when the time comes.

More G-Bot Features

The G-Bots can be viewed as a part of the strategy to add more depth, especially with the planned features of leveling and breeding. However, there is a paradox in letting players level up their G-Bots to increase their stats in a platform advertised as a skill-based gaming hub. What would work better in skill-based games is to monetize them via ample customization options. The leveling and breeding of G-Bots would work in games that are built to handle those systems.

In Summary

Execution aside, Arc8 has a slight edge over Skillz when it comes to operating in the skill-based, real-money gaming space. However, this can change as crypto regulations tighten and the Arc8 economy matures. One of the main issues with the games on the platform is that they have low retention due to a lack of depth. G-Bots are a good way to solve these problems and expand the universe, but they might not work well with skill-based games and need games where leveling up and breeding make more sense.

When it comes to tokens, there is a growing consensus that it’s wise to release the token after the launch of the game, because the team would want to look at data from players rather than speculators to decide on strategies to affect the price of a token. The current Arc8 economy is inflationary since it is not circular, driven by the sources outweigh the sinks, which pushes down the price of the token. However, there are some very easy solutions to fix that.

As we’ve stated, it seems like Arc8 was more of an Animoca Brands ecosystem play with the goals of getting more players on-chain and providing utility to the tokens of other projects in its network. This offers a sneak peak into the larger strategy of Animoca Brands in its quest for interoperability within the connected universe of its projects. Based on what we’ve seen so far, if Animoca Brands is trying to get scale from this game, it isn’t working yet. The team needs to invest in hits that will pull people into the economy at a greater scale. So far the scale and spending aren’t cutting it, but we hope that Animoca Brands has more plans and tricks up its sleeve to help.

A big thanks to Karan Gaikwad for writing this deconstruction. If Naavik can be of help as you build or fund games, please reach out.

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