🧘‍♂️ALERT: Cryptos of the Future

Market Meditations | January 20, 2022

Who will survive?

Dear Meditators

Our main feature is an analysis on the future of gaming. Which P2E games will survive and why? To aid our analysis we’ve conducted in-house research and produced our own data. This way, we can identify cryptos of the future.

Today’s Meditations: 

  • Hacks & The Importance of Selecting Exchanges 

  • The Future of NFT Gaming: Cryptos of the Future

  • Olympus DAO Deep Dive

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?️ Crypto Hack

Early this week, Crypto.com was hacked! We’ll take a look at what exactly happened and the security that some of these centralized exchanges offer. 

What happened?

  • 400 accounts were hacked after the security was breached. 

  • The hack was reportedly worth $15 million in ether (according to on-chain data) after user reports of “unauthorized activity.

  • Crypto.com paused withdrawals and was back online within 13-14 hours. 

  • The stolen money was being laundered via Tornado Cash. This is an ETH mixer that obscures the link between the source and the recipient of the crypto. 

There are often people talking about the downsides to moving big money into crypto. One of them is seemingly the consistent hacks that companies face. As a reminder, many large centralized exchanges work to get customers’ money back. In this case, Crypto.com’s CEO said all of the accounts that were affected were reimbursed so there was no loss of customer funds.” 

When choosing an exchange, going with an established one such as crypto.com will often give perks such as working with you to retrieve funds that may have been lost in a breach of security. For a more in-depth look at crypto security and what to do to keep your crypto safe, be sure to check out our crypto security guide

Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

? Who Wants To Be A Gaming Millionaire?

Blockchain Gaming

Blockchain gaming is popular for many reasons. Interoperability potential, true player ownership of in-game assets, decentralized governance… The list is quite lengthy. However, there is an undeniable draw seated in income potential.

Unfortunately, this profit margin may blur the line between a game’s intrinsic appeal and the desire of the economically disadvantaged to better their lives. 

Call of Duty: Warzone and World of Warcraft are two of the biggest titles in gaming. They support huge player bases. 

Warzone has had over 100m players since March 2021

WoW features more than 4.5m players 

  1. Data shows the highest concentration of players resides in first-world countries; places like the United States and United Kingdom with higher standards of living.  

  2. There is a conspicuous absence of earning potential in these games as well. With virtually no opportunity of income, the only incentive to play these games is entertainment. 

  3. If these games have attracted such mass audiences in settings most likely to value intrinsic entertainment potential over all else, when P2E gaming becomes ubiquitous, they will carry with them the biggest earning potential.

Looking at the concentration of players currently engaging in P2E games, we see quite a different mapping.

Axie has more than 8m players 

Splinterlands has over 260k daily users 

  1. Data shows the highest concentration of players resides in underdeveloped places like the Philippines and Thailand with lower standards of living.  

  2. There is a conspicuous absence of wealth in these countries. With virtually no accessible means of superior income, the main incentive to play these games is money.

  3. In 2019 the annual household income was less than $4,000 in Thailand. In 2020 the annual household income was just over $6,000 in the Philippines.

Two different types of games are attracting two different types of audiences. But for how long? The paths of these two different worlds are converging. In a matter of years or months, AAA games will feature earning potential. 

Blockchain games with substantial play-to-earn potential are pulling in players from Southeast Asia and South America, while the most popular games in the world consistently draw their audiences from places with higher economic stability. 

What does it mean?

Here’s where your judgment comes in. Axie Infinity has a higher population than World of Warcraft and Pokémon GO combined. 

Is it a better game than either of those?

Most people would answer “no”. Why, then, does it hold such a captive audience with such high numbers? Evidence suggests that players are flooding P2E games as an avenue of income, to better their lives, not for the enjoyment of a superior gaming experience. 

It’s hard to imagine an elderly couple of store owners jumping into the mobile gaming world for any other reason. 

Why does it matter?

To objectively evaluate a project, we have to consider the location and developmental status of its player base against the backdrop of market caps and populations.

  • If a game’s player base is primarily in underdeveloped countries, its tokenomics must be very carefully examined before deciding to buy in.

  • The roadmap and governance models of these projects are also key indicators to be heavily considered. 

  • Once games like Star Atlas and Illuvium reach the production release stage, we may start to see the true potential of this genre. 

Games with play-to-earn potential appeal to underdeveloped populations. Unfortunately, this aspect alone is not enough to sustain success in the long-term. People must enjoy playing games based on their intrinsic entertainment value. If players have to be paid to play, their motivation to continue has a shelf-life equivalent to the duration of monetary inflow.

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⛰️ Olympus(DAO) has Fallen 

Olympus was launched in May 2021 and in their own words, is a decentralised reserve currency protocol based on the OHM token and controlled at a high level by the decentralised autonomous organisation (DAO)

The protocol promises a high rate of returns (at times upwards of 8000% APY) to encourage OHM holders to stake their tokens. This encourages investors to buy OHM from the market or perform more bondings with the protocol to create more OHM. 

But where did it go wrong?

  • On the 17th January, prominent CT figure shotta_sk tweeted “derisked some of my OHM to ensure my family can weather any economic outcome”.

  • The price fell over 40% within 2 hours as $11 million worth of the token was dumped on the market.

  • A domino effect occurred and to date, the native OHM token has lost over 90% of its value from it’s all-time high.

Olympus delved into uncharted territory by implementing revolutionary economic and game theoretic mechanisms that can be built upon.

When things look too good to be true, they usually are. As a market participant this has taught the importance of DYOR and appropriate risk management.

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??‍♂️✍️ Stories in this newsletter were written by Misael Calleja, Kai.A, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

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