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#1: The Cross-chain NFT Marketplace Battle Heats Up

As the NFT fever kicked in a year ago, it sparked a major push for marketplaces to support the trade. With high trade volume multiplied by transaction fees, the market became lucrative and caused a number of competitors to spring up. Some of these, like Coinbase, quickly lost steam and were shut down, but others, like OpenSea and Magic Eden, became dominant. As OpenSea was the leader for Ethereum and general NFTs, others looked to take over a particular niche. Magic Eden focused on Solana, Binance for its own chain, Fractal for game NFTs, and eventually GameStop for game-related collectibles. As NFT volumes slowed down, it only heightened the competition for the remaining business, leading to expansion and battles over royalties. The royalties battle has been an especially hot topic, with Magic Eden making them optional and OpenSea looking to do the same but backpedaling after community backlash. The focus now seems to be on growing out of the niches that provided initial success.

The battle started with OpenSea, the current market leader, expanding to support Solana after having a solid foothold on Ethereum and Polygon. Magic Eden made its own countermove by recently adding support for Ethereum and following up with Polygon this week. OpenSea, however, has remained a step ahead and announced the addition of Binance also this week thanks to recent full ERC-721 support. We can only imagine that Magic Eden will look to take advantage of the NFT support and expand to Binance within the next few months as well, heating up competition for Binance’s own native NFT marketplace. Considering the power position that Binance found itself in after the FTX collapse, most likely it won’t make any overt anti-competitive moves and instead will fully embrace additional trade volume and support on its network. OpenSea also recently started supporting some of the other layer 2 rollups like Arbitrum.

The next one to conquer will be Immutable, desirable for its gas-free trading. Like Binance, Immutable has its own native marketplace with transaction fees, and rather than compete with third parties, it has a strong partnership set up with GameStop and its newer marketplace. Unlike OpenSea and Magic Eden that depend on Metamask and Phantom respectively, GameStop has its own wallet which it released on iOS this week with support for on-ramps, swaps, bridges, and NFT transfers. OpenSea and Magic Eden have marketplace apps on iOS, but due to Apple’s policies of getting a 30% cut of transactions, they don’t allow purchases there. It’s uncertain whether GameStop will also introduce a marketplace app, or even better, integrate it into the wallet app. GameStop’s marketplace currently is at a disadvantage due to only supporting NFTs minted on it or select Immutable collections. Interestingly, OpenSea had announced it would support Immutable X at some point last year, but that never seemed to manifest. The other blockchain to keep an eye on for future marketplace growth will be Flow, with Gaia currently being a market leader.

Where this all starts to heat up is in the growing web3 gaming space. While trades for art projects and other “blue chip” NFTs have slowed way down, besides exceptions like Art Gobblers, there is pent-up demand for a game that drives high market trade. Sorare has demonstrated this demand with its strong foothold in the top 10 on Cryptoslam and even shows a recent uptick in activity thanks to some big pushes both into other sports as well as in soccer. Gods Unchained, another card-based game, also made huge strides and sat comfortably in the top 10 the last couple of months. DigiDaigaku made a huge splash and is likely far from done, with a lot left to be revealed leading up to the pre-announced Super Bowl ad for February 2023.

There is huge growth opportunity here for game NFTs and metaverse worlds as both will make a bigger impact next year with higher-quality releases and stickiness that isn’t just financially driven. Royalties can become a major factor here for games with a business model around transaction-based revenue. If marketplaces continue with the race around fees, then that provides huge incentive for game developers to create game-specific or even off-chain marketplaces, relegating the secondary marketplaces to tertiary ones for games with high transaction volume.

GameStop’s marketplace could see some good traction from Gods Unchained’s current high volume, as well as other upcoming Immutable titles like Guild of Guardians, Immortal Game, Bit Heroes, Deviants’ Factions, and Ember Swords. While both Immutable’s marketplace and GameStop charge transaction fees, the lack of gas fees and congestion can pave the way for huge upward volume swings on popular games, as Gods Unchained has shown recently. An important part of the cross-chain battle is that Immutable is enforcing royalties at a blockchain level. Royalty enforcement in place of gas fees and a strong partner push from Immutable’s business development team are going to make the company a compelling choice for games not looking to run gameplay on-chain, especially those hoping for exposure to GameStop’s audience of core gamers. It does suffer a bit from being a layer 2, making it more dependent on bridges and on-ramps, but outside of Solana, its main competition is Polygon, another layer 2.

Blockchains have already demonstrated their willingness to spend a lot to woo games specifically over fad-driven art projects, and now marketplaces will need to do the same. We anticipate some exclusive partnerships next year between bigger games and certain marketplaces either providing better terms or closed door deals. Immutable and Ronin both exist because of the high-volume transactions demanded by Gods Unchained and Axie Infinity respectively, which led to those developers capturing all of the value. We wouldn’t be surprised to see a deal between a marketplace and Sorare, for example, since much of the trading is currently captured in-game on a custom StarkWare rollup, with potential transaction fee money left on the table. Despite web3 being designed with an ethos of decentralization, we anticipate an even stronger monopolistic behavior from marketplaces as future hit games start pushing heavy transaction volumes.

#2: Thirdverse Raises $15M for Web3 and VR Games

Thirdverse is a Japanese game developer that’s no stranger to using cutting edge technology, having released two sword-fighting-focused VR games for multiple platforms. With a proven record behind its back, Thirdverse managed to raise $15M in a round led by MZ Web3 Fund this week not only to bring its new VR games to PSVR2, but also to hire talent for building out its recently announced web3 game, Captain Tsubasa: Rivals. This funding round essentially doubles what Thirdverse has raised so far, totaling $33M, and is important in the current climate given the company wants to aggressively release 10 more web3 games in 2023 alongside more VR titles.

Captain Tsubasa: Rivals will be a noteworthy game to tackle because it’s based on the beloved Captain Tsubasa IP in Japan, dating back to the 80s as a manga and spawning multiple TV shows and movies since. The power of this IP can be seen in the performance of Captain Tsubasa: Dream Team’s performance on mobile, which has amassed ~16M downloads (equally spread across various countries) and ~$260M in net IAP revenue (~50% from Japan) since its 2017 launch.

Not only does the strong IP give it a good chance at finding an audience, but it’s also a genre that’s seen a lot of interest from the web3 community — soccer. While some of the soccer games out there, i.e., Sorare, have focused on fantasy sports, Captain Tsubasa will be competing more directly with the likes of Splinterlands’ upcoming Genesis League Goals (formerly Genesis League Soccer) as a trading-card-based PvP soccer sim.

Unlike either of those games, the cards will be based on the manga characters rather than on real-life soccer players. That’s something that will appeal to a different audience, but it gives the game an advantage over new IP concepts like MonkeyLeague. The game was only recently announced and already has a public beta and PvP mode on its roadmap for December 2022, which may give it a pretty strong start against the aforementioned competition. It also looks to target mobile, although it’s unclear how it will fare with Apple’s recently announced NFT policies. Additionally, earlier this year there was an announcement of another non-web3 mobile game, Captain Tsubasa: Ace, which could work for or against this release, depending on audience overlap. Even with the game using fictional IP, the beta release could be well timed to capture excitement around the World Cup currently happening. The World Cup itself runs until December 18th so if Captain Tsubasa: Rivals can manage to hit a mid-December release it would at least hit a potentially receptive audience just before Christmas distractions.

The actual web3 aspects of the game are a bit of an iteration on some of the current web3 game designs, like player minting (breeding with small twists) and a typical two-token setup. The whitepaper highlights a long list of token uses as well as a few different price control mechanisms, which shows the developers at least understand the fundamental problems of some existing games. The game design around the cards underscores a good amount of depth potential with a myriad of upgradable and potentially unique attributes. While there definitely seems to be plenty of spend depth for the $TSUBASAUT utility token, there is a risk that the game leans significantly more into the pay-to-win realm than its competitors. Some risk is also hidden in the ability to earn tokens in the PvE RIVALS mode, although there are controls such as fatigue that curb earning without spending. We will likely have to wait until the beta release to get an idea of how the full tokenomics work in order to try and predict sustainability.

Two of the hotter areas of web3 gaming — soccer and trading cards — are captured by the game, along with a third key one — a strong IP. It’s difficult to ascertain if this will find a strong audience outside of Japan, but it is definitely a strong contender to help push web3 deeper into Japanese mobile gaming culture and find local success. Surprisingly, the game won’t be taking advantage of the growing Japan-focused blockchain Oasys, but will instead be on the well-tested Polygon network. It’s likely that gameplay itself will be entirely off-chain to avoid unnecessary congestion and gas fees, but the on-chain token and NFT aspects will at least be part of a well-established ecosystem and help grow Polygon’s gaming roster. While this may not necessarily have global potential, it could very well be the case that the combination of an experienced developer, a receptive audience due to the IP, and a genre that does well in Japan (trading card games) will likely be successful enough to give the company a good start on those other 10 games next year.

Upcoming Game Announcements

• Star Atlas announced plans for four upcoming sales partly due to the FTX losses. Link
• MonkeyLeague launched its World Cup Breeding Season. Link
• Moonville Farms launched an updated 1.5 Alpha version. Link
• Human Park announced an upcoming Playground technical test. Link
• Ember Sword released pre-alpha gameplay footage showing off the game updates. Link
• AlterVerse released an alpha preview of its Sky City social hub for NFT holders. Link
• Elysium Forge launched its staking program. Link
• Chainmonsters released its private and public Foundation Land sales. Link
• CryptoSkyland launched its first metaverse game called Party Planet. Link
• ChronoForge released a gameplay sneak peek. Link
• Walken launched its first hypercasual game, Walken Runner. Link
• R-Planet launched its Open Alpha after its Closed Alpha ended. Link
• Gala Games released additional details on its upcoming Last Expedition game. Link

Live Game Announcements

• Alien Worlds announced NFT interoperability with Battledome. Link
• Rockstar announced a no-NFT policy for its GTA Online role-playing servers. Link
• STEPN announced a special Sneaker Enhancement Event for the 2022 World Cup. Link
• The Sandbox announced a new land sale referred to as California Dreamin’. Link
• Sorare announced a free access expansion in response to French gambling regulation concerns. Link
• Vulcan Forged announced the hiring of two C-suite execs and additional updates for VulcanVerse and Berserk.
• Skyweaver announced a special 64-player tournament with a USDC prize pool. Link
• Animoca Brands announced a new Soulbound achievement NFT for its TOWER ecosystem of games. Link
• Blankos Block Party announced details for its next pass season. Link
• Fancy Birds launched a Sky Wars PvP mode to extend its original Flappy Bird gameplay. Link
• Splinterlands announced preventative cutbacks, resulting in a 45% staff reduction. Link
• Deviants’ Faction announced a tournament structure, including daily tournaments for its alpha. Link
• Genopets launched its Legendary Lab pet augmentation crafting system. Link
• CropBytes announced a free-to-play-and-earn model. Link
• MetaSoccer announced its PvP World Cup Qualifiers Tournament. Link

Funding Announcements

• Fenix Games raised $150M to both fund and publish new and future blockchain games. The company includes the recently departed Mythical VPs discussed in a previous week. Link
• Heroic Story raised $6M for its web3 tabletop RPG platform in a round led by Upfront Ventures. Link
• Carv raised $4M at a $40M valuation for its decentralized gamer identity system in a seed round led by Vertex. Link
• PlayEmber raised $2.3M for a web3-focused Unity ad monetization solution in a pre-seed round led by Shima Capital. Link
• Thirdverse raised $15M to expand VR and web3 game development. Link
• t3rn raised $6.5M for cross-chain interoperability technology in a round led by Polychain Capital. Link

Ecosystem Updates

• Mattel announced a new marketplace on Flow for collectibles around its toy IP. Link
• VRJam announced a partnership with Polygon to create a Planet Polygon in its metaverse. Link
• NPIXEL announced a partnership with Aptos Network to develop for its layer 1 blockchain. Link
• Wemade announced 40 Wonders as its latest node council partner for WEMIX 3.0. Link
• Metamask announced an in-app price estimation feature for NFTs powered by NFTbank.ai. Link
• Gate.io launched its AMM and NFT liquidity pools including fractional assets. Link
• Sky Mavis launched a new testnet for its Ronin chain called Saigon in an effort to attract more developers. Link

Notable Market Moves

• Most of the tokens this week followed the general crypto market, although a few saw bigger upswings around the 22nd.
• Despite still being down over the 90D, ApeCoin had a great upswing this week thanks to the ApeCoin DAO launching a community-driven white label marketplace. Interestingly, in the vote on who would build the marketplace, small startup Snag Solutions won over Magic Eden and Rarible.
• Bora also had a fantastic pump on the 22nd. There were no specific news for the token, but a solid mention by Magic Eden as a partner for its Polygon Launchpad may have given it a boost.
• WAX also performed well this week despite seeing Mattel move to Flow for its Hot Wheels NFTs. Part of the boost was likely due to a sneak peek of its Music Mogul game.
• WEMIX managed to sneak into the top 10 this week, overtaking Render Token and PlayDapp due to a growth in market cap, but as of time of writing, its price has fallen sharply just within an hour, going from around $1.50 to $0.49. The sharp drop was likely caused by problems Wemade is running into when migrating WEMIX Classic to WEMIX Coin.
• As always, we recommend looking long-term at all financial and gaming markets. The holidays are an interesting time for both, especially in the current macro environment that may see weaker than usual holiday sales and uncertainty around web3 gaming. The aftermath of FTX’s collapse is still likely to continue for a short period as new revelations of contagion come to light. For a related example, this week we learned that Solchicks covered up a $20M loss from the previous Terra collapse.

Content Worth Consuming

• Animoca Brands’ CEO, Yat Siu, speaks out post-FTX collapse (Blockchain Gamer) - “Yat Siu is determined to back Web3 and notes that the actions of the few should not dominate the goodwill that other industry figures are trying to build within the space. Siu states that while the events of recent weeks have been “an attack on our reputation as an industry,” conversations should instead be focused on talking about protecting creator royalties, ensuring teachers can make fair pay, and how many Web3 projects — including over 380 companies under Animoca Brands investments — are “using Web3 to try to make the world a better place.”” Link
• Permissionless Ownership (Kazm Blog) - “Because Web3 companies built their infrastructure on a blockchain, all their transactions are freely accessible. In Web3, you have access to data you would've never had access to. No companies freely share their lists of clients online on the centralized web. But in Web3, this data is automatically on the blockchain. Anyone owns them and is even encouraged to leverage them. Permissionless ownership is a fundamental change in how we think.” Link
• Sports Report – FIFA World Cup introduces Web3 to 5 billion people (Dappradar) - “For the next six weeks, the world’s eyes will be on one place: Qatar 2022. The World Cup is one of the few global phenomena where all nationalities, races, ideologies, or religions can come together. It is the world’s most-watched sports event, drawing 3.5 billion viewers worldwide during the 2018 edition. That figure is expected to surpass 5 billion over the next six weeks. However, this year, in Qatar, Web3 will connect with more than half the world’s population through sponsorships, advertisements, and interactive experiences.” Link
• The future of Digital Gaming Assets (FogDAO Deep Dive) - “Welcome to the Future of Gaming! In our newly introduced Deep Dive segment, we go deep into projects building on the edge. In this episode, your host Philip Collins is joined by Bored Elon (Co-Founder of Bored Box) to discuss the FTX crash, reigniting the market for NFTs + gaming assets, and the next generation of web3 game distribution.” Link
• Building the web3 marketing stack (The Metacast by Naavik) - “In web2, the marketing stack is rich in every area that matters - when a marketer wants to spend on a game, they have many places to do it, they can scale budget up and down as needed, they have the tools to measure how effective the spend is by channel, they can measure revenue events and many other different kinds of downstream activity for days, weeks, months, and even years down the line. They have the analytics tools to segment and understand their player personas, and can effectively target these users across a wide variety of channels that serve particular niches. Incredibly accurate LTV models can be built from the data available, and ROAS can be calculated even on a long-time horizon. And none of this is true in web3! The anonymity and pseudonymity of web3 makes segmentation and understanding of personas hard if not impossible, and while everything on-chain is by default completely transparent and open, having the wallet and the tokens it contains be the primary identifier is severely limiting.” Link