Top News
#1: The FTX Fallout Bleeds Over to Games
Much like the earlier collapse of Luna, the sudden implosion of FTX — which officially filed for bankruptcy on Friday (after Binance walked away from a potential acquisitive deal) — is spreading contagion across the crypto landscape, even if only temporarily. We won’t overly discuss FTX at large but rather narrow in on what it means for the games industry.
To start, while FTX was primarily an exchange, the company, FTX Ventures, and Alameda Research (the trading arm) were invested in numerous gaming-related projects. Not only did the combined entity invest in game projects, but it acquired Storybook Brawl developer Good Luck Games whose future may now be uncertain.
One of the bigger effects on the broader crypto market is Alameda Research’s large investment in Solana. In less than 24 hours (from the time of writing), over $1B in Solana SOL tokens will be unstaked and available to sell. It’s always possible that not all tokens will be immediately sold, but considering the need for liquidity, this is very likely. In anticipation of this event, the price of SOL has already dropped 55% to below $14. This puts continued pressure on a network that has already been struggling to acquire game developers amongst multiple outages and unsustainable high profile projects like StepN. Of course, Solana’s ecosystem stems more broadly than FTX, and the good news for players looking to get gaming NFTs on Solana is that the discount on SOL can translate to playing more cheaply. Sellers of existing NFTs may have to reprice their sales or hope SOL goes back up sooner rather than later. Prices of other blockchain tokens like MATIC haven’t seen as big of a big drop, but Avalanche has also been more heavily affected.
Luckily for most of the game projects FTX has invested in — such asFaraway, Soba, and Limit Break — they most likely already received the money and will just look to other investors for future rounds. Some investment deals, however, were meant to be ongoing and will obviously be cut short now. One big example is a $210M deal to sponsor esports organization Team SoloMid (TSM) from 2021 until 2031, and another is a seven-year sponsorship deal for League of Legends Championship Series (LCS). FTX also paid for the naming rights to an arena in Miami, making it the FTX Arena, which clearly won’t stay that way for long.
Fortunately, FTX’s investment and sponsorship money is replaceable, but the entire fiasco is still a major negative for web3 at large. Why? Because it erodes trust at an enormous scale and only adds on to the industry’s increasingly storied history of bad actors. This story isn’t fundamentally about the merits of crypto as a technology but rather about lies, abuse of customer funds, leverage, poor corporate governance, and lackluster regulation. Write-offs from this deal do hurt — Sequoia, for example, has already written off its $210M investment in FTX — and it might spur more contagion (like we saw with Terra/LUNA), but the larger question on our mind is where do we go from here? What regulations are needed to ensure something like this never happens again? How should the industry work to renew trust from users? And what does it mean for talent and capital flows into web3, especially games? Events like this only increase widespread hesitation, deepening and elongating the so-called crypto winter, and we can’t wait enough for the first high quality blockchain games to launch and ideally put our corner of the broader web3 industry back on track.
#2: Microsoft Invests in Web3 Gaming
While Microsoft’s stance on web3 gaming is generally interpreted by the media as negative given Minecraft’s no-NFT policy and Phil Spencer’s noncommittal comments, the company just put its money where its mouth isn’t. After dabbling in web3 investments around infrastructure (such as Consensys and data platform Space and Time), Microsoft made its first step into web3 gaming by participating in a $46M raise for South Korean web3 game developer Wemade. Microsoft’s share of the raise was a decent $14.8M in convertible bonds. Rather than betting on a brand new startup, Microsoft is investing in an established game developer that already has some hit games and is building up significant infrastructure around itself and the Korean web3 community.
Wemade predates web3, as it was found in 2000, and it has a number of games under its belt. The most well known is its successful Legend of Mir MMORPG series, with the current version, MIR4, available on Steam; also, whether Valve knows it or not, the game added support for multiple tokens and NFTs. Interestingly, Wemade’s US HQ is located in Seattle, Washington, putting it in the same area as both Microsoft and Valve, which could factor into its good relations.
Importantly, Wemade isn’t just a game developer; it also created a blockchain specifically for games called WEMIX. The blockchain‘s design supports side-chains called “service chains” for individual games to better facilitate game-level transactions. The network recently went from its WEMIX 2.0 that MIR4 used (rebranded as WEMIX PLAY) to a heavily revamped WEMIX 3.0. The company has also built infrastructure around the chain, including a wallet, a Wemix.fi DeFi platform, and a DAO-centric platform called “NFT is Life Evolution” (NILE).
It is a bit surprising that Microsoft has chosen its first web3 gaming investment to be a foreign company that can’t really develop web3 games for its own country (for regulatory reasons). However, it does make sense when you consider it as investing in a company that not only has a solid track record but has developed one of the most highly played and engaging web3 games, even if that element was added later. Wemade has proven that it has a solid understanding of blockchain tech, which makes the investment about more than just games. MIR4 has not been without its web3 struggles, however, as it has dealt with bot and inflation problems for its token, and the attempts to evolve its tokenomics into a multi-token economy have achieved mixed success. As we’ve mentioned previously, Japan and South Korea have been building up a significant web3 gaming ecosystem, and we expect more companies like Microsoft to look to the east when dipping their toes into web3 gaming.
Upcoming Game Announcements
- Champions Ascension released a new alpha with another vertical slice. Link
- Exobots: Omens of Steel released a new alpha for desktop and mobile. Link
- Koakuma, an MMORPG, launched a second closed beta. Link
- Nyan Heroes announced a demo for Q1 2023. Link
- Superpower Squad launched its third beta. Link
- Genesis League Sports started its airdropping and staking programs. Link
- Heroes of Mavia revealed new alpha gameplay features. Link
- GensoKishi announced its open beta phase 2 for late November. Link
- Kingdom Hunter announced a launch on WEMIX PLAY for November 15th. Link
- Trailblazer Games announced an alpha for its Eternal Dragons game. Link
- Superior announced it can now be wishlisted on Steam, potentially making it the first official NFT game on Steam if it releases successfully. Link
Live Game Announcements
- Square Enix announced its first NFT game titled Symbiogenesis. Link
- Sunflower Land announced an updated roadmap and land expansion plans. Link
- Metaverse World, a Netmarble subsidiary, launched its Meta Football game on mobile. Link
- Drivetime announced a rebrand as Blockstars with a pivot to a web3 rock band game. Link
- Synergy of Serra announced a crate-unlocking event for November 20th. Link
- Lionel Messi announced a partnership with Sorare as an investor and brand ambassador. Link
- Dark Country announced additional utility for its SDM token. Link
- ASICS announced a partnership with StepN for branded NFT shoes. Link
- Synergy Land released its crafting feature. Link
Funding Announcements
- NCSoft invested $15M in Mysten to help build its Sui blockchain. Link
- RealFevr raised €10M for its NFT fantasy sports app led by global sports investor ADvantage. Link
- Xternity raised $4.5M for its platform, which includes a wallet solution and an NFT Store integrated with top blockchains like Polygon and Solana. Link
- VIKER, a mobile P2E developer, raised $4.1M in a round led by Animoca Brands. Link
- Animoca subsidiary Tiny Tap raised $228K from an initial NFT sale. Link
Ecosystem Updates
- Immutable announced a new system for enforcing royalties on its blockchain. Link
- Kraken released the beta of its NFT marketplace. Link
- Meta announced minting and trading capabilities for NFTs on Instagram. Link
- Fractal expanded its marketplace to Ethereum. Link
- Sky Mavis launched its new Ronin Mobile Wallet. Link
- STEPN developers Find Satoshi Lab launched the subscription-based MOOAR NFT marketplace and launchpad. Link
- Sky Mavis announced plans to help onboard more game developers onto its Ronin blockchain. Link
Notable Market Moves
- Unfortunately, the implosion of FTX sent the majority of the crypto market crashing, much like with the recent LUNA collapse. While we expect this to be a temporary setback, it was felt across all the gaming tokens this week.
- The big surprise this week is a newcomer on the list (bumping Render Token off) — VIDT DAO. VIDT is an open-source technology for certifying digital assets like certificates, NFTs, and more. The big reason for the jump in market cap that brought it on the charts is a series of changes completed successfully on Binance, including a rebrand and token swap.
- As always, we recommend looking long-term, especially during these moments of difficult news and major volatility. It’s important to remember that the market is much bigger than any one company, even if these setbacks do erode broader trust. As we’ve said for the past few months, the number one determinant of success for blockchain games will be the quality of the games themselves — truly being a great source of entertainment more so than yet another vehicle for speculation. Therefore, even though major fallouts do have an impact on various teams and trust from players, it’s important to keep focus on which teams are most likely to generate hit games and how the tooling/ecosystems around them will grow over time.
Content Worth Consuming
- OpenSea Sparks Stiff Debate with Muddled Stance on Creator Royalties (NFT Plazas) - “Now, as the NFT community continues to ponder this latest conundrum, OpenSea has taken its tentative first steps regarding the matter by developing a tool that will essentially give any new projects the power to blacklist platforms that offer to waive the creator fee while additionally leaving the door open to a future where OpenSea could move to an optional royalties model themselves.” Link
- Royalty-Free NFT Trades: What’s to Happen With Marketplaces & Creator Fees? (DappRadar) - “Creator fees are an important innovation of web3 that helps creators monetize their work in a more effective way. But marketplaces should not enforce business models for creators, creators should have independent control. We hope that this is a first step in that direction.” Link
- How money fundamentally impacts player motivations in web 3 games (Evolution of Web3 & NFT Gaming) - “Alignment between intrinsic and extrinsic rewards: Games with in-game economies (i.e., MMOs, RPGs) have always had a conflict between incentivising players to pursue intrinsic and extrinsic rewards. This is because in order to progress in these games, there is usually some way to ‘min-max’ or ‘optimize’ your play. However, the most “optimal” way to progress isn’t also always the most fun. For example, imagine if killing chickens was extremely optimal (i.e., high extrinsic reward), but also extremely boring (low intrinsic reward). Players would kill a million chickens and enjoy the extrinsic reward afterwards, but it would be a terrible experience. Money in web3 games takes this a step further, as the extrinsic reward of money can completely overwhelm the intrinsic desires of accomplishment, completion, etc.” Link
- Investing in Web3 Gaming with Magic Eden (The Metacast by Naavik) - “In just a single year since launching, NFT marketplace Magic Eden has grown to dominate on Solana, with over 85% of the trading market share, and increasingly taking share from OpenSea on Ethereum as well. They started with digital collectibles but very early on made a bet on gaming NFTs as their second major vertical. Now, they sport a $1.6B valuation in their latest funding round and have recently announced that they will be making direct minority equity investments in gaming companies. In this episode, your host Niko Vuori talks to Zhuoxun Yin, Co-founder & COO of Magic Eden, and Tony Zhao, who leads gaming investments at Magic Eden, about why Magic Eden is pushing so hard on gaming, where they see web3 gaming trends going, and what the role of an NFT marketplace is as it relates to promoting and elevating games.” Link
- AI Arena Deep Dive (FOGDAO) - “Welcome to the Future of Gaming! In our new Deep Dive segment, we go deep into projects building on the edge. In this maiden episode, your host Nico Vereecke is joined by AI Arena team members Brandon, Wei, and Michael. AI Arena is a Web3 gaming platform designed to empower AI talent around the world. AI researchers and gamers compete to design, train, and battle AI-powered NFTs in a PvP fighting game.” Link
