Chapter 5: Okay, so maybe web3 enhanced games and NFTs aren’t dead!
5.2 Gaming Assets are Programmable and Composable
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web3 to games can look across wallets to see which wallets hold assets associated with existing games and launch a “UA attack” on that game’s open social graph.156
This also means that gaming assets become composable and, depending on the type of game and who it’s intended for, can plug into an open, web3 financial system. We have seen numerous examples of gaming, creator, and social economies integrating DeFi. For example, one of the reasons Axie Infinity went viral was because users created liquidity pools on Uniswap for Axie’s in-game fungible asset, SLP, which allowed gamers to off-ramp into ETH, USDC, and eventually fiat.157 In addition to secondary liquidity, composability opens borrow / lend / rental markets for gaming assets. I’ve read a lot of commentary about the dangers of “GameFi” and having speculators within crypto games, but I would encourage people to keep an open mind on GameFi. While the name “GameFi” may be unique to web3, the concept of playing games for financial gain is far from new158 — see discussion on Second Life in Chapter 8: But Isn’t Everything Old, Just New Again and see the comment above regarding the significant market for CS:GO skins on DMarket.
Indeed, one could make the case that Nintendo invented GameFi in 1889 when it started manufacturing special trading cards purpose built for gambling, which led to the Yakuza becoming Nintendo’s biggest customer.159 Keep in mind also that GameFi can present in atypical forms. One of my former interns played Fortnite competitively in high school and his earnings helped cover a portion of his college tuition. He’s also currently captain of his college varsity Valorant eSports team, which further reduces a portion of his tuition expense. My former intern loves games, but I would guess that part of the reason he competes is for a form of financial gain.
Yuga Labs160, a web3 native entertainment company, launched a simple endless runner game called Dookey Dash in early 2023, which, over its three week
156 https://twitter.com/IndiGG_DAO/status/1534550308616957957?s=20
157 We’re seeing similar innovation with semi-fungible NFT AMMs like Sequence Marketplace, created by the Horizon Blockchain Games. Brevan Howard Digital is an investor in Horizon Blockchain Games.
158 In FIFA Ultimate Team, players spend fiat money on FIFA Points, which can be used to buy packs of players, which contain a random selection of players with varying rarity. Players earn FIFA Coins by selling players on the transfer market and by participating in tournaments and challenges.
While there is no official off-ramp from FIFA Points or FIFA Coins to fiat, many would consider FUT a form of “GameFi” due to the speculative nature of the game — poor speculation leads to additional money spent in the game (instead of grinding) in the form of a credit card to virtual in-game
currencies or points.
159 https://www.cbr.com/nintendo-japanese-yakuza-history/?utm_source=pocket_saves
160 Yuga Labs is best known for its collection of 10,000 cartoon ape avatars that unlock membership to the Bored Ape Yacht Club (BAYC). Members who got in early paid less than $250 for their apes in April 2021. The current “floor price” for a bored ape is 30.85 ETH or ~$55,200 as of the date of this essay. Reportedly, Yuga earned $100 million in profits during its first year. Bored Ape holders own the art underlying their ape and Yuga earns 2.5% royalties on all secondary sales of the apes. Yuga has called itself “web3 Disney” and is attempting to create iconic IP and monetize it along with BAYC members across games, books, movies, and shows. Former Activision Blizzard COO, Daniel
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course, was played by 25,000 gamers for 706,000 hours and generated 37,000 ETH in Sewer Pass trading volume (a Sewer Pass was required to play the game).161 Additionally, 1/3 of the game’s players (~9,000 players) used Yuga’s native token, ApeCoin, to purchase boosts to help them achieve a higher score.162 The winner of Dookey Dash was Kyle Jackson, aka Mongraal, an 18 year-old champion Fortnite player who has earned ~$700,000 over nearly five years playing competitive
Fortnite on various pro teams.163 Jackson was awarded an NFT one-of-one Golden Key for earning the highest score in Dookey Dash and promptly sold it for $1.6 million. In my opinion, Dookey Dash is a solid example of GameFi working:
• A player doubles the earnings it took him five years to achieve in Fortnite in three weeks.
• The game developer, Yuga Labs, earns 5% royalties, $80,000164, on the sale of the Golden Key (not to mention all the royalties Yuga earned on secondary trading of Sewer Passes).
• Yuga Labs grows its ecosystem by 40% because of the game.165
While GameFi / P2E has had its challenges, it’s far from dead and will take years of experimentation and iteration to see which business models stick.
Alegre, recently joined Yuga as CEO. Prior to joining Yuga, Alegre oversaw franchises like Call of Duty, World of Warcraft, and Candy Crush.
161 https://nftnow.com/features/exclusive-yuga-labs-executive-talks-dookey-dash-hacks-and-whats- next/
162 Id.
163 https://escharts.com/players/mongraal
164 https://dknetwork.draftkings.com/nft-crypto-marketplace-what-is-it/23617612/nft-news-yuga-labs- golden-key-sells-for-1000-eth-lucky-trader
165 https://nftnow.com/features/exclusive-yuga-labs-executive-talks-dookey-dash-hacks-and-whats- next/
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