Top News

#1: The Collapse of Terra

Last week, an attack began on UST, the third largest stablecoin, which is an important backbone of the Terra blockchain ecosystem. UST (as of the time of writing) has fallen to a low of $0.29 (it’s supposed to trade at a stable $1.00), and LUNA, the governance token for the Terra network, has fallen from $85 to $0.09. There are many, many good Twitter threads and a podcast on how all of this worked, if you’d like to learn the grizzly details. In short, though, the short attackers (who were short on Bitcoin) caused a bank run on UST by selling off meaningful UST during a time of low liquidity (as a liquidity pool transition was occurring), which forced the Luna Foundation Guard (LFG) to start selling Bitcoin reserves to defend the $1.00 peg, which pushed the price of Bitcoin down (benefiting the hackers).

Further selling of UST, which further de-pegged the currency, caused mass fear and led to more mass selling, which completely broke the peg altogether. Algorithmic stablecoins always have risks of unwinding from black swan events (or attacks!), but in this case LUNA could always be exchanged dollar-for-dollar with UST, which meant that as UST fell, people kept on swapping it for LUNA, spurring massive dilution. What was designed as a means to hold the peg ended up accelerating the demise of both currencies.

This story isn’t over yet, but it sure is ugly. Unfortunately, this incident isn’t fully self-contained to its own stablecoin and layer 1 blockchain. It had an effect on Bitcoin, and likely is playing at least some role in accelerating the broader crypto bear market that unfolded this week. If you haven’t lived through a crypto winter before, welcome!

Of course, our purpose isn’t to comment on crypto markets but to help provide a sense of what it means for the games industry. In this case, the unraveling of UST/LUNA will likely have an extremely negative effect on games projects (among others) built on the Terra blockchain. The most notable example, which has been mentioned a few times in Naavik Pro over the past quarter, is Com2Us which raised $525M in financing (from Animoca Brands, FTX, etc.) at a $500M valuation to build a games platform, C2X, on Terra. C2X is host to a number of popular and anticipated titles like Summoners Arena: Lost Centuria and Chromatic Souls: AFK Raid. Other games like Derby Stars and Monsterra that were scheduled to release at least an alpha in Q2 2022 should consider pivoting to another chain if the underlying stability of the Terra chain can’t be secured. It’s hard to imagine anyone choosing to build on Terra after this debacle.

There’s more to learn here — the dangers of hubris, a reminder that these platforms are experimental, that financial markets are complex and not always friendly, etc. — but it’s also not worth over-dwelling on the bear market for those building great games. The platform you choose to build on is critical, and public sentiment around crypto still matters for adoption, but crypto winter provides an opportunity for the best builders to double down on the core fundamentals that will define the rise of the next bull market.

#2: Flow Announces a Massive Ecosystem Fund

Dapper Labs, the company behind CryptoKitties and more recently NBA Top Shot, announced a $725M ecosystem fund for its Flow blockchain, which was built after CryptoKitties essentially overran Ethereum. While the network is still a work in progress (as are most), it has been fairly decently battle tested thanks to NBA Top Shot, UFC Strike, and NFL All Day regularly handling large amounts of transactions. Dapper Labs has done a great job partnering with leading brands, and even though the Flow blockchain is still heavily centralized (with plans to progressively decentralize), it’s done a good job at maintaining extremely low transaction fees.

Flow may not receive the same level of attention as other networks like Polygon and Solana due to it being a home mostly to collectibles and not being a permissionless platform. However, it is worth noting that there is currently one live mobile game on Flow, Olympic Games Jam from nWay (Animoca Brands subsidiary), and a multi-platform monster-catching game called Chainmonsters is in active beta.

Thanks to the large $725M fund — backed by investors like Andreessen Horowitz, AppWorks, Cadenza Ventures, Coatue, Coinfund, Digital Currency Group (DCG), and Fabric Ventures — Dapper Labs hopes to attract more projects this year. Dapper Labs has already invested in over 120 companies, and this new fund will allow it to offer studio funding, developer grants, ecosystem investments, and general fundraising support.

It’s worth mentioning that one catch to developing on Flow is that it is not EVM-compatible and instead uses a custom language called Cadence. Dapper Labs is attempting to design a language that it hopes will be more user-friendly and suited to the chain’s design than Solidity. Flow was also one of three blockchains (Polygon and Solana are the others) selected by Meta to be part of NFT integration into Instagram.

So far, Dapper Labs hasn’t been as aggressive with onboarding developers as other chains, instead choosing to optimize around key partnerships as it attempts to further strengthen its suite of technology. This has caused Flow to lose market share, but it’s not necessarily a bad idea if technological improvements paired with cultural relevance can help it regain share later. This fund, however, is a clear step toward re-accelerating efforts to attract more developers to Flow. $725M, especially with those prominent backers, can do a lot of good, but it’s also one of many funds looking to do the same thing. There’s a lot of money sloshing around, and Dapper Labs will be well-suited by becoming increasingly permissionless while still being able to lock down key partnerships with massive IPs.

#3: New Whitepaper: Champions Ascension

After a problematic Dutch auction for its Prime Eternal champion NFTs at the end of February, Jam City has finally released the whitepaper for its first blockchain game, Champions Ascension. The game is worth watching primarily because it may be one of the first releases in 2022 from a high profile AAA developer behind multiple mobile hits (1.3B in lifetime mobile game installs and $2.5B in lifetime bookings) like Cookie Jam, Disney Emoji Blitz, Panda Pop, and many more. While Netmarble’s Golden Bros will also be released this year, it’s not designed to integrate the blockchain aspects as deeply as Champions Ascension is. There is no set release date except for “Early 2022,” but some previews show the game to be fairly far along. Expectations run high as blockchain games released so far have generally not had the production value and quality level a company like Jam City provides.

While the whitepaper is a bit vague at times, it does finally shed light on many of the game’s blockchain aspects, including multiple tokens (ESSENCE, MASSINA, BONE, DIAMOND) and NFT types (Champions and Gear). The game elements described in the whitepaper include PvP, PvE, crafting, building, land ownership and staking alongside the usual marketplace.

There isn’t a full enough picture of the economy to evaluate its sustainability. That isn’t super reassuring, but that may be intentional, as blockchain games often need to pivot quickly from the documented designs and adjust to the market. According to the roadmap, the next steps are airdrops for the Prime Eternals NFT owners, then tokens, staking functionality, and finally gameplay. Some of the gameplay is slated for “early 2022” and some for “mid-to-late 2022.” Interestingly, the blockchain choice right now is specified as a private Evmos chain (part of the Cosmos system) bridged to Ethereum mainnet.

High-quality game releases from successful game developers will be key to bridging the gap to traditional gamers, so we will continue providing updates as this game moves toward release.

Game Announcements

Blankos Block Party announced an upcoming NFT drop on OpenSea. Link
Yuga Labs issued a refund for gas fees incurred on failed Otherdeed transactions. Link
Yuga Labs shared a sneak peek of the Otherside from a tech demo. Link
Animoca Brands entered into an exclusive licensing deal to bring the Hockenheimring race circuit into the REVV Motorsport ecosystem. Link
Farsite, a space-themed MMO, announced its Alpha release date of June 21st. Link
Heroes of Arcan, a newly announced WAX fantasy game, provided more project details and launched an ICO. Link
Spider Tanks, a Gala Games mech PvP game, started a multi-week free-to-play period. Link
Sipher is now allowing its Spaceship loot boxes to be opened and parts to be minted. Link
CyBall provided an update on its Community NFT Pool and $CBT buyback burn. Link
Nyan Heroes revealed details on four new guardian classes and shared a shorter than planned gameplay clip.
Cryowar and AlterVerse announced a partnership that would see Cryowar content integrated. Link
Crabada announced the launch of its cross-platform Battle Game on May 15th. Link
Arcade Galaxy, an arcade-themed Avalanche game, announced an NFT minting on May 20th. Link
Snail Trail officially launched on May 11th. Link
SkateX released its litepaper while the whitepaper is in progress. Link
StepN announced a giveaway of $1.5M worth of sneaker NFTs. Link
Puzzle Royale announced its genesis NFT sale for May 31st.

Funding Announcements

Irreverent Labs raised $40M led by Andreessen Horowitz for its robot cockfighting game. Link
KuCoin raised $150M in pre-Series B funding at a valuation of $10B led by Jump Crypto, with the potential for some of that to trickle into game projects for its KuCoin Chain. Link
Freeverse raised $10.5M led by Earlybird Venture Capital and Target Global for its evolving NFT tech. Link
Untamed Planet raised $24.3M led by Animoca Brands for its NFT-based nature game. Link
LootRush raised $12M in a seed round led by Paradigm for a low-cost NFT lending platform. Link
Jumbo, an Africa-based web3 user acquisition platform, raised $30M in Series A funding led by Paradigm. Link
The Football Club raised €2.5M in a funding round led by Dreamcraft. Link
Ready Games raised $3M in a token sale led by BITKRAFT and Hashed for its web3 API/SDK. Link
Branch raised $12.5M in a seed round for its “Animal Crossing meets Minecraft” web3 game. Link
X World Games started listing its XWG token on ByBit on May 9th. Link
Time Shuffle, a TRPG, raised $2.1M in a private seed round. Link

Ecosystem Updates

Avalanche announced a $290M incentive program for an Avalanche Multiverse using its subnets. Link
Tilting Point announced a partnership with Polygon to help develop web3 integrations using the Polygon network. Link
Ancient8 is partnering with Delysium to help boost its pre-alpha game test. Link
Binance Labs launched season 4 of its Incubation Program on May 5th with 4 game startups: AlterVerse, ChapterX, CoralApp, and Gamic Guild. Link
Avocado DAO released its 2022 Treasury Report. Link
Move Digital announced plans to expand into P2E and metaverse. Link
Undead Blocks announced a partnership with IndiGG. Link
Merit Circle announced a partnership with Shrapnel. Link

Notable Market Moves

There’s not a lot of individual token analysis to be done in an accelerating bear market when all assets tend to correlate. The one interesting note is that Illuivium finally made it back into the top 10; it fell less than other tokens perhaps because of its recent land sale announcements and the ongoing private beta.

The current market environment is somewhat reminiscent of the beginning of the 2018 “crypto winter” but backed by a different global economic situation. It’s important to note that these cycles are normal and healthy, even if they don’t feel great at the moment. Bear markets wash out speculation and grifters, leaving the true builders who go on to define the next era of progress.
Despite the downbeat note of a bear market, the overall outlook for NFT games is more positive. Yes, many ponzinomic games are getting whacked and likely won’t make a comeback (people are finally learning that ultra-high yields are unsustainable for a reason), but there are a number of solid-looking projects releasing this year and next that are well-funded enough to make it through a downturn.
This downturn should temporarily cause a decrease in active wallets and transaction volumes within blockchain games, but as we said before, it’ll only take 1-2 new breakout hits (which could occur in a few months) to push engagement to new highs.
Many funds also still have abundant capital yet to deploy that is earmarked for blockchain games. This funding will probably be more disciplined than over the past year, but that just means higher quality projects backed by higher quality builders will get more attention. As with previous crypto winters, builders should look at times like this as an opportunity to put their heads down and really focus on shipping quality.
Games are still big business in recessionary environments, and the best games, teams, and companies will continue to chug along. In fact, given the “earn” nature of blockchain games, there may be unique opportunities for teams to find ways for players to benefit during tough times (ideally, in less ponzinomic ways than what we’ve seen so far).

Content Worth Consuming

The DeanBeat: The NFT debate at GamesBeat Summit 2022 (GamesBeat) - ‘“If you own an item in a game, and you want to sell it to somebody else, you really can’t do it except through a centralized system,” Kim said. “But if I own something in the real world, if I own a car, I can sell the car to somebody else in a myriad of different ways because the whole economy is essentially decentralized. So the point of blockchain is to allow similar decentralized activity. [In this economy], people can sell things in a decentralized way, which gives them choice.” Ismail questioned what choice people have. “The choice of who they’re going to sell it, what they’re going to sell it for, and where they’re going to sell it,” Kim said. Ismail responded, “But there’s nothing technologically stopping us from doing that.”’ Link
Treasure DAO - Building a Decentralized Nintendo (Metacast by Naavik) - “Big Brain Time! In this episode, we take a deep dive into Treasure - a DAO that’s building On-Chain bridges between Metaverses. Treasure Co-founder and Core team member John and Karel join you host Nico Vereecke to discuss #1 Treasure and $Magic, #2 On-Chain Economic Primitives, #3 Incentivizing Game Builders, #4 Managing a Gaming DAO” Link
Designing a Sustainable Game Economy (Lyceum) - “Splinterlands defaults to an available pool of 1 million tokens daily but inflates or deflates the size of the pool based on how far the token price is from a soft peg of $0.001 - doing this allows the available supply to try and scale dynamically. Despite the inability of this system to directly address inflation in the sense of burning tokens, the price has remained above the soft peg consistently for over 6 months! In addition, there are a number of other variables that determine how much you can earn from that pool including how many battles have occurred over the last 24 hours, diminishing individual returns (that recharge over time), and spending-based bonuses.” Link
WIPs and Chains: Which Blockchain to Build Your Game Upon (David Fox) - “Whatever you opt for, make sure to take the time to have your team code up a prototype dApp on your target chain to get the hang of it and ensure they feel comfortable. Plan to write your code in a manner where you can eventually help your players transfer tokens across chains, so those who already have some crypto on one chain easily get into your game. Also, abstracting your blockchain code can help you more quickly make the switch if the chain you choose eventually suffers a major overload, catastrophic hack, or ultimately becomes the Betamax to the winning chain’s VHS.” Link
Guilds #17: Dark Forest DAO, STEPN and Web 3 Gaming Guilds (DeFi Vader Podcast) - “Will Robinson is a core member of web3 accelerator DeFi Alliance, founder of web3 gaming guild Dark Forest DAO and a primary advisor at move-to-earn game STEPN. Will joins the pod to discuss the future of web3 gaming guilds & games, the sustainability of STEPN, and the story behind how he hired & retained Dark Forest DAO guild members.” Link
Tokenomics #8 Premium Utility NFTs and How to Build a Tokenized Community (Deconstructor of Fun podcast) - “The recent launch of Moonbirds is shaping up to be the best NFT drop of 2022 yielding up to $280M. In this episode, we dive into why it worked so well, as well as the lessons learned and actionable takeaways for gaming. The premium of Utility NFTs is growing rapidly, and we’re witnessing the growth in real-time with innovative projects like Moonbirds that build upon previous successful projects. Aligning communities, creators, tokens, and value is how you onboard people to crypto and build tokenized communities.” Link