Gala Games is one of the more recognizable names in the blockchain gaming industry, and the company has a variety of notable attributes: it was founded by industry veterans, is taking a decentralized approach to Web3 gaming platforms, did not have an ICO (nor does it have a whitepaper), but it does have more than 26 games in development, is collaborating with large brands and influencers, has more than 1.3M monthly active users, is developing a proprietary blockchain, and is extending its focus beyond gaming into other entertainment verticals. That’s a lot!

Since January 2022, when Naavik last covered Gala Games:

• The GALA token has fallen ~50% and the TOWN token has fallen ~80%.
• Two new games were announced, and there remain only two live titles in beta.
• The price of a founders node license has remained roughly flat.
• A proprietary blockchain was announced and is now in testing phases.

Gala Games also prides itself on being player-first and game-focused. And, to be honest, the games that Gala Games has in beta and development appear to be some of the more promising projects in the space.

Gala Games operates a platform, like Steam or the PlayStation Store, that focuses on blockchain games, using a proprietary NFT marketplace. Gala Games also uses nodes, a distributed method of choosing projects to partner with (more on this later). Gala Games’ general strategy is to get node owners to approve a game partnership, then to presell NFTs for that game to fund development costs, and then after the game launches reward players through earning mechanisms.

Before we dive too deep into the details about Gala Games’ future prospects, let’s take a look at where the company has been.

A Look Back

“Something like two-tenths of a percent of the players in mobile are driving half the revenue. It really is relying on them to drive the entire industry. That provides the profits for every developer, every publisher, for the platforms. It’s the only version of trickle-down economics that’s ever worked.”

This is how John Osvald, President at Gala Games, explains part of the genesis of the strategy for Gala Games. If games can cater to whale players, then they don’t necessarily need massive audiences. That’s a thesis that Gala Games co-founders Eric Schiermeyer (the co-founder of Zynga), Wright Thurston (one of the first major miners in the cryptocurrency space and holder of multiple patents on blockchain technology), and Michael McCarthy (the Creative Director behind viral gaming hits such as Farmville 2) all agreed on when looking at the opportunity for blockchain and gaming.

Since its inception in 2019, Gala Games has been focused on creating games or partnering with development teams that can meet whale player expectations in the near-term, with the eventual goal of catering to a more casual audience. This is similar to most blockchain gaming companies, as most players willing to invest in NFTs are whale players.

In December 2020, Gala Games announced a partnership with Brave, a privacy-friendly browser that rewards users with Basic Attention Tokens (BAT) for opting into privacy-friendly ads. The partnership entailed Gala Games accepting BAT in Mirandus, one of its upcoming titles in development. While at face value it seems like an odd couple, Brave had an audience of Web3 native super users, and integrating BAT was a strategy to bring in these early adopters.

In the first couple years, Gala Games made a variety of partnerships to help promote the company and to better integrate within the broader blockchain and gaming industries:

• December 2020: Gala Games Brings GALA to Polyient DEX — Polyient Capital, the asset management arm of Polyient, added GALA to the decentralized Polyient DEX.
• March 2021: Gala Games Sponsors Mazer Gaming, a professional esports and entertainment organization.
• March 2021: Gala Games Partners with PAC Global — The partnership was essentially to help build and scale the Gala Games’ node network.
• March 2021: Gala Games Connects Partners with Wasder — Wasder is building a social media site for gamers, and Gala Games will be integrated in the platform.
• March 2021: Gala Games Partners with Polygon — “Working with Polygon will be an important piece to solving the crucial gas puzzle for Gala Games.”
• April 2021: Gala Games Invests in Concept Art House — Since it was founded in 2007, Concept Art House has provided art for some of the most popular and successful game companies in the world. “With the partnership, CAH and Gala seek to provide End-to-End NFT Solutions for the very best brands, artists, and creators in digital entertainment.” In addition, CAH will dedicate a purpose-built team to support Gala Games.
• April 2021: Gala Games Partners with South Korean Media Protocols — Through this collaboration, it is possible to surface Gala Games content, Town Star playthroughs, and other relevant content in the Korean marketplace.
• August 2021: GALA Comes to Binance Smart Chain — This is part of an effort to make the GALA token more liquid and accessible.
• December 2021: Gala Games Partners with C2 Ventures for $100M Fund — the fund will invest in blockchain gaming projects.

Throughout 2021 and 2022, Gala Games onboarded more games and studios onto the platform and currently has more than 26 games in development. In February 2022, Snoop Dogg joined the new Gala music platform, which plans to use the same strategy of nodes and a proprietary blockchain to help musicians monetize their communities (more on this later).

Notably, and as we’ve been hinting at, in February 2022 Project GYRI was announced — Gala Games’ own blockchain. Gala Games has spent a great deal of time and energy creating the exact blockchain needed to power its gaming and music ecosystems, and its proprietary blockchain, which is currently in testing phases, is expected to have the following features:

• Faster transactions
• Reduced impact on the environment
• Lower network fees
• Lower minting costs
• Interoperability throughout the Gala World
• Transferability to/from Ethereum

Most of this isn’t unique compared to other emerging competitors (like Polygon or Immutable), but being part of the Gala ecosystem is a clear differentiator.

Additionally, the GALA token launched in September 2020. Instead of an ICO, the Gala Games team opted to distribute GALA as rewards for early adopters of their Nodes. As of the time of writing, the GALA token has a non-diluted market capitalization of $582 million, which is nearly 90% below its November peak of $5.4 billion. This is far more reasonable (if not still high compared to what all is live), but the fully diluted market cap remains approximately $3 billion.

Nodes

One of the central pillars of the Gala Games ecosystem is the Gala Games Nodes. Part of the Gala Games mission is to increasingly give players control of their content and of development decisions. Nodes are the mechanic by which the community can invest in Gala Games to contribute to development decisions. There are Founders Nodes (50,000 sold for ~$33k each), and there are also game-specific nodes. The node ecosystem has expanded since the launch of the Founders Nodes, but the principle has stayed the same: community members can purchase a node and run it on almost any computer, and in return node owners get voting rights and opportunities to earn rewards ($GALA or NFT rewards).

Gala Games has been clear that nodes should not be viewed as an investment: “The only reason to get a node is to help support the growth of a decentralized ecosystem based around the ethos of giving gamers freedom and ownership of their own assets. As node owners support the network, they receive GALA and NFTs as rewards for their support.” Of course, some early node owners certainly made an initial good investment.

Here are the economics and key stats for Gala Nodes:

• Founders Nodes are currently selling for ~$93k.
• Currently, these node owners get approximately 600 Gala each day ($60 at the time of writing, or a ~23% annual yield).
• Each day, node operators are put into a drawing to win an NFT drop (although generally the value is really small on the NFT draws).
• Each year, on July 22nd, the total GALA pool is halved for node operators. In essence, they will make less per day in GALA but with the idea that price appreciation will still drive returns higher.
• Gala Nodes cannot currently be sold (although there is a plan to turn the licenses into NFTs once they’re fully sold out).
• Referral system: For each node that is purchased under a referral code, the referrer will receive a one-time GALA payment of x10 their daily reward; furthermore, the referrer will receive 10% of the referee's daily reward perpetually.

If you bought a Founder Node today for $93k, the payback period would be 4.2 years, based on the GALA rewards and without considering the time value of money, other potential inflows, or major currency fluctuations.

The referral portion of the node strategy feels very multi-level marketing-esque and does give me some hesitation about the general strategy. While Gala Games is very clear in saying that nodes are not investments, most participants in the node ecosystem do view nodes as investments.

The long-term vision for the Gala Games Node Ecosystem is that multiple game studios, each working on multiple games, will create a plethora of NFTs that get allocated to the node network. Gala Games also notes that “Nodes will also serve a vital role in supporting the ecosystem, with an economic model built out to incentivize the network and keep it stable. In the long-run, this would result in $GALA being distributed to the node network in lieu of centralized systems, as the node network will ideally be supplying the computational power and storage needed to keep the network stable.”

While nodes seem to have a meaningful objective of giving players a more direct lane into development decisions and earning, the node sale could also be seen as a disguised fundraising tactic for the company - Gala Games has said themselves that selling nodes was a way of avoiding regulatory risk.

In addition to nodes, Gala Games does have another source of revenue: Gold member subscriptions. Gold members have “priority access to information, special NFT rewards, first access to game testing opportunities, and more.” The strategy of having both node owners and gold subscriptions makes me nervous, as these products are catered toward the same group with little differentiation.

The Games Pipeline

“When blockchain developers make games, they have a tendency to make games from the perspective of a blockchain developer, which means they typically make crappy games. What we do, coming from the perspective of game developers who interface with the blockchain, is we’re able to provide users the functionality while minimizing the pain and suffering and onboarding process that they would typically encounter.” - Eric Schiermeyer, co-founder of Gala Games

Gala Games has 10 official games on its website. This number should actually be 11, as node owners recently decided to add a Western battle royale game, GRIT, to the platform. While there are 11 announced games on the platform, the executives at Gala Games have mentioned more than 26 titles in the works, although few details have been shared about other projects.

Right now, two games are in beta: 1) Town Star, a farming and town simulation game, and 2) Spider Tanks, a multiplayer battle arena game with mechanical spider-like tanks. In Spider Tanks, players can build their own tanks from various parts. It’s also worth noting that the NFT ownership stats are low given the lack of transparency into Gala Chain.

Gala Games is also working on an ambitious fantasy role-playing online game, Mirandus, which has been delayed until either late this year or next year. It also has a multiplayer survival game coming for The Walking Dead franchise, with the launch date still to be announced. It has other titles coming, including Echoes of Empire, Legends Reborn, Last Expedition (coming from former Halo and Call of Duty developer Certain Affinity), Fortified, and Legacy (from Molyneux).

Town Star

Town Star is the flagship title for Gala Games, and it’s the furthest along in the portfolio. It was also the first title worked on by the team, and the genre is right in-line with the experience from former Zynga devs. In October 2021, Town Star added a NFT and a P2E feature that allows players to earn money by participating in weekly tournaments, completing daily challenges, and earning special rewards. At various places, NFTs can be used in the game to provide bonuses but are not required to play, have fun, or compete.

Town Star has its own token, TownCoin (TOWN), which is used as the game’s primary currency (the dev team also introduced gems recently, which will function as a secondary currency).

TownCoin has two supply sources:

• Players earn TownCoin by playing with NFTs.
• Node operators receive TownCoin in a daily distribution as a reward for operating their Founders Nodes.

The uses for TownCoin include:

• Exclusive NFT items that can only be purchased with TownCoin.
• In-game upgrades and benefits that are purchasable only with TownCoin.
• Holding TownCoin provides additional benefits to Gala Power (more on this below).

There are two ways to earn TownCoin in Town Star:

1. Players own NFTs and use them in their farms. Rewards are distributed primarily through daily and weekly challenges (i.e. collect 10,000 stars to earn 10,000 TownCoin).
2. Place in top 400 of weekly or monthly leaderboards (which also requires NFT ownership).

An additional layer of earnings is limited or enhanced by “Gala Power,” which is determined by the amount of GALA and TOWN that players have in their wallet:

Gala Power = GALA + (TOWN * 2) — Gala Games is planning to remove TownCoin from this equation over the next several months.

Gala Power enables additional earnings because it allows for additional NFTs to be placed on a farm. For example, a player with 5 Gala Power can place 5 NFTs on their farm, while a player with 20 Gala Power can place 20 NFTs on their farm. Currently, there are ~150 different NFT items that players can buy and place on their farms to earn rewards. Daily rewards per NFT (as of April 2022) range from $0.09 to $279, with an average reward of ~$18.

So let’s say a player buys 5 NFTs for an average price of ~$2k, the average town points per $2k NFT is ~60, and the maximum TownCoin a player could earn is 424 per day (roughly $17, based on the current TownCoin price of $0.04). This also assumes the player owns the requisite amount of TownCoin/Gala in their wallet to place those 5 NFTs. If we assume the player holds Gala only, they would need 20,000 or ~$2,000. So for an upfront NFT investment of $10k and an additional $2k investment in Gala, players can earn ~$17 per day, which implies a 1.9 year payback period. In addition to these rewards, ultra whales can earn additional income through weekly/monthly competitions; these earnings are not captured in the above analysis.

Ultimately, to earn in Town Star, a player needs to invest significant capital into NFTs and GALA/TOWN. While the rewards could be worth it, there is ongoing re-balancing of the Town Star economy, and very recently Gala Games has shrunk the daily TownCoin distributions to help balance the tokenomics. As the game grows, I imagine less and less economic value will be shared with players.

Grit 

Grit is the latest game to join the Gala Games ecosystem. The owners of founders nodes had 24 hours to vote for Grit on May 11th, and it was revealed this week that the project passed the node vote with flying colors. In the official Gala Games Discord server, it was shared that there were 9,407 voters; 99% were in favor of having the game accepted, while 1% were against (less than 0.5% abstained from the vote).

The game is something like Red Dead Redemption meets PUBG, a western-themed battle royale title. Based on early gameplay footage, I’m a little underwhelmed with the look and feel of the game. Despite being built in Unreal Engine, the visual fidelity isn’t very good. Further, the game doesn’t have any standout mechanics from other battle royale titles outside of the western theme and blockchain integration.

The game will use “generative Hero NFTs that allow you to play as an entirely unique character in GRIT’s Wild West.” And Active Founders Node operators will be given 4-8% of all NFTs when minting takes place, except for the generative Hero NFTs, which won’t be included in the drop.

Beyond Games

Gala Games may be a bit of a misnomer by now, as the company has expanded horizontally into other entertainment verticals. The other side of the Gala-branded business includes Gala Music and Gala Labs.

Gala Music is a decentralized music platform that uses the same node strategy as Gala Games. Music collectors buy nodes to get access to NFT music, which empowers artists and connects them to their fans and communities. Node owners earn NFTs and share in the economics of that music. On February 11, Snoop Dogg released his twentieth studio album, B.O.D.R. (Bacc On Death Row). In addition to the typical streaming platforms, Snoop partnered with Gala Music to release the album in “Stash Box” NFTs. By Tuesday Feb 14th, less than 4 days after the release, about half the NFT Stash Boxes had been sold for more than $44M.

Gala Labs is a group exploring new ways to use technology like smart contracts to engage the fans and partners of Gala Games. The inaugural project launched by Gala Labs is known as VOX, which are collectible NFT avatars (from 2D pixelated images to 3D voxelated animatable characters). Gala Labs also helps incubate and launch NFT projects, including the Curry Brand.

The original VOX collectibles were based on Town Star, and subsequently additional VOX drops have happened for other Gala Games IP. The company has “2 or 3” more VOX drops planned for this year. It’s also worth mentioning that depending on how rare the VOX collectibles are, they have more utility. According to the President of Gala Games, John Osvald: “We’re building a metaverse with that. We’re building VoxVerse.”

Risks and Outlook

The biggest risk Gala Games faces is that their early projects don’t get traction, which spooks potential studio partners, creating an environment in which no strong dev teams want to work with Gala Games, essentially destroying the planned ecosystem. The next biggest risk is general security; while this is a common risk, Gala Games has faced more than average scrutiny for poor security. Here are a few reasons why:

• Lack of mandatory 2FA
• Lack of IP-based login confirmation
• Lack of time-lock for unauthorized changes to account details
• Captcha anti-bot protection integrated very late in project lifecycle (late December)
• Lack of safeguards against the use of the same login password and transfer code allowing the download of private keys from the Gala website
• At least four reports stating that 2FA did not guard against hack
• Gala Gold members banned for discussing hacks on Discord

For me, if a developer chooses not to address security issues head-on and very transparently, it’s a big red flag. There’s also the risk that the company is spreading itself too thin — branching out before it’s even able to prove itself in a single vertical. Diverting attention and resources across verticals can lower the odds of success in any given vertical unless the team has a very deep bench of talent, phenomenal execution, and no resourcing concerns.

That said, it’s nice to see a large vision, and many elements are intriguing. The early games have decent polish and earning mechanics, there’s plenty of interest in some of the upcoming games (like Mirandus), and they’re taking plenty of swings at bat so the odds of finding a hit are decent. Even though we have some early concerns about security and traction, we’re eager to see what the broader Gala ecosystem will morph into and how it’ll all function across the incoming Gala blockchain and the various tokenomics at play. The bear market might not be over — so the 90% price decline of GALA might have more room to fall, especially if Gala’s games are delayed or slow to see traction — but from a long-term view, we’ll primarily stay focused on one element above all: Can Gala Games produce a hit that takes its userbase and brand to the next level? Time will tell.