Crypto Games and NFT
Originally written by Blue Fox Notes
(Popularity comparison of different types of NFT, NonFungible data)
Over the past six months, the most popular TYPE of NFT has been the crypto collectibles type, but with the rise of crypto games like Axie, that's changing.
(NFT Weekly trading volume change, NonFungible data)
In terms of weekly NFT sales, the NFT market is still affected by the overall crypto market sentiment.
(NFT Weekly Buyer volume change, NonFungible data)
Overall demand from NFT buyers remains stable, with June and July at the same level compared to May.
(NBA Top Shot sales change, NBA Top Shot data)
Sales of the most popular NBA Top Shot in the past few months have started to decline in April, and of course, this has to do with the change in the NFT's popularity.
(NFT weekly turnover change, from NonFungible)
If you look at Q2's overall deal size, NFT did not drop significantly and exceeded Q1, which totaled $1.24 billion.
(NFT overall market cap, Coingecko data)
To date, according to Coingecko, the NFT's overall market value at the time of writing of the Blue Fox is more than $13 billion, representing 1% of the total crypto market value.
If summer 2020 was a big launch season for DeFi, summer 2021 could be a big launch season for crypto games and NFT. And one of the most important driving forces is the power of Axie's demonstration. Just as Compound and YFI demonstrated last summer.
Axie was a catalyst for the development of NFT
Axie is a crypto game that was introduced in blue Fox notes two years ago.Blockchain games: Where will it Go?"But it was still early days. Back in September 2020, we also mentioned that one organization paid $150,000 for four Axie, which seemed too expensive at the time. But these days, even the most common Axie costs a few hundred dollars, and the scarce Axie is expensive.
(Axie can cost hundreds of dollars each, from Axie)
Axie now has about 170,000 users a day, down from a peak of more than 250,000 users in recent days.
(Number of Users on Axie, from dAppRadar)
This is a large number of daily users, even for traditional games. Of course, we're also seeing a significant percentage of Axie's users coming in because of the revenue that the Play2Earn model can generate.
Axie's daily trading volume was more than $10 million on the day of writing and peaked at around $30 million. This transaction volume is also very good results in traditional games.
(Daily trading volume on Axie, from dAppRadar)
* Agreement fee
(Axie protocol fee Trend, from TokenTerminal)
The Axie protocol fee has been growing mostly in the last month or so, and once it's passed the tipping point, it's growing rapidly, but it's fallen back a little bit recently.
(Agreement cost comparison, from TokenTerminal)
The cost of the Axie protocol stands out compared to other protocols. The magnitude of this fee, regardless of the lifetime of a particular crypto game, will be of great interest to the crypto community and game developers alike.
At its peak, Axie was making more than $8 million a day. If it stayed at that level, it would have been the top game in the world. Recently, it has slipped down a bit, but it can still reach around $2 million to $4 million.
* P/E ratio
(Axie's P/E rate, from TokenTerminal)
It can be seen that THE P/E ratio of Axie is constantly declining. Generally speaking, the lower the P/E ratio (diluted total market value/annualized total revenue, generally speaking, the lower it is, the more undervalued it is. Of course, there are many factors in this, and it is not an absolute indicator) is currently less than 10, ranking first in the whole crypto project, which can also see its revenue scale.
(Axie had the lowest P/E rate of any encryption project in the last seven days, from TokenTerminal)
One of the most important reasons for The rapid growth of Axie's audience is not so much the fun of its games (Axie is pretty good in the crypto space, of course), but the rise of gold farming studios, or "guilds." In places like the Philippines and Venezuela, many people are willing to make hundreds of dollars a month playing games, which is good money for local income levels. The important thing is to not only play the game, but also make money. Like car-sharing drivers and takeout riders, they get paid for their work. Through the organization and training of the game guild, these hired players can pick up the game more quickly. At the same time, for these hired players, it's all work. One early player in the Philippines is said to have bought two rooms by playing Axie. Axie's tokens, AXS and SLP, are also utility tokens, which are used in games. For example, when Axie is breeding, it needs to use tokens, and the more times it breeds, the more SLP it consumes. The diagram below:
(Number of SLPS needed to breed in Axie, from Axie)
Breeding an Axie would cost at least 4 AXS and 300 SLPS (150 SLPS each on first breeding), which would cost at least $200 at the time of writing.
The more demand for Axie in the market, the higher the price, the stronger the impetus to propagate Axie, and at the same time, more AXS and SLP need to be consumed, which will lead to the increase of AXS and SLP prices. At present, the price of ordinary Axie is around $200-500 in the market, so according to the cost of its first breeding, it is still profitable. Of course, the more times you breed, the more SLP you need to consume, the higher the cost, and the more people are discouraged from breeding more Axie. It is also a balance of the internal economy.
In addition, the demand for Axie comes from the ability to earn SLP in the game, which can range from 150-600SLP depending on the user's strength, which is around $40-160 per day at current prices. The cost to the player is at least 3 Axie (playing with 3 Axie), and assuming the average price is $300 each, the upfront investment is at least $900. Assuming that the user earns a low revenue per day, around $50, the player will recoup their costs in about 18 days. Of course, this is just for illustration and simple calculation. Since the prices of Axie and SLP fluctuate all the time, the above figures will not be accurate, but just a simple logical explanation.
As mentioned above, the guild model was born of Play2earn. There are people who invest money to buy Axie, cultivate good Axie, make those Axie strong in combat, and then lease those Axie to other players for a percentage of the profit. In this way, the entire economy of Play2earn players is established. There are now more than a few thousand Axie game guild members. At current SLP prices, some game guilds are making millions of dollars a month.
So, this also raises the question of whether crypto games like Axie, using Play To Earn, will be the dominant model for crypto games in the future, and whether guilds will prosper in the future. Will there be a larger crypto game economy in less developed regions?
Of course, there are two sides to everything. The crypto game, which is driven by gold farming studios and guilds, may not be able to continue or even decline at a certain point in its revenue, because eventually someone will have to pay to support the entire economic system.
In the beginning, the SLP price goes up and more people are motivated to play because they can make more money. To play this game, each player needs at least three Axie players, so the increase of players will increase the demand for Axie, and also increase the price of Axie. The increase in the price of Axie will make it profitable to breed Axie (relative to the cost of breeding), which will encourage more Axie to be produced. On the other hand, breeding Axie requires AXS and SLP, which in turn increases the demand for AXS and SLP, which is conducive to the price increase of both.
From the perspective of Axie's economic mechanics, its AXS and SLP are deeply integrated with its inherent game mechanics, which results in a short burst of activity once the cold start is completed.
However, as new SLPS are released as more players enter, the price of SLPS will fall, assuming that demand for SLPS cannot keep pace with inflation. So, the loop that we're talking about is reversed. As the price of SLP goes down, people have less incentive to play, which leads to less demand for Axie, and less demand for Axie to breed, which leads to less demand for AXS and SLP. So there's going to be a supply-demand equilibrium, there's going to be an inherent constraint. Nothing will go up forever unless new demand continues to absorb the supply ahead.
Ultimately, the sustainability of cryptographic games requires a combination of gameplay and good economic design. Only one aspect, can not make it last, need to have a real user to last.
Crypto games have become one of the engines of the NFT market
Encryption games have been explored for years, and with The rise of Axie, it could have a profound impact on the entire NFT market, just as it did last year with the help of Forever and Forever, with The help of Forever.
So far, Axie's breakthrough will have several effects:
* More and more game developers will really start taking cryptographic games seriously, and more and more well-made chain games will enter the crypto market. When Axie's daily revenue was in the millions of dollars, and at its peak reached the daily revenue level of Honor of Kings, it was impossible for game developers not to be indifferent, not to focus on its potential. Even if it has a big bubble.
* Because of the hot market, there will be money to drive the crypto market at least in the short term. There will be more institutions willing to try and invest in crypto games, which will lead to more game developers.
*Axie's cold launch will be followed by more and more communities, and Axie won't be the last cryptography game to break through. Game guilds and so on will play an increasingly important role in the future encryption game cold start process.
* If the crypto game market as a whole is sustainable (and by sustainability, I don't mean short-term hype, but long-term fundamentals -- growth in users, growth in protocol fees, etc.) It has a chance, then, to support the crypto market as it warms up. If, for example, it fails to do so, it will only accelerate the cooling of the market.
*Axie's breakthrough will expand the NFT market from the crypto collectibles market to the crypto games market, which has a broader user base and will help drive adoption of NFT among a larger population.
Crypto games have the opportunity to bring new revenue streams to people in economically disadvantaged areas. In the Philippines, for example, Axie was used to provide a new source of income during the outbreak lockdown, helping some people to make a living.
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