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The State of GameFi 101
GameFi was one of the biggest narratives last cycles. I remember reading that some people in the Philippines were quitting their jobs to farm Axies Infinity full time.
And I was caught up in the DeFi Kingdoms craze myself.
Why are people so excited?
According to Gilpress, there are over 3.22 billion gamers in 2023. And the global video game market size was estimated to be $217.06 billion in 2022.
Axie Infinity, the market leader, had over 2.8 million daily active users (DAU) and a fully diluted valuation of over $44 billion at its peak between November 2021 and January 2022.
But all of it crashed. And people started calling GameFi vaporware.
Crypto promised ownership of in-game assets to gamers. But our games were really bad. So nobody wanted them. Plus, crypto had a horrible onboarding experience. Gamers don't want the hassle of clicking buttons on MetaMask.
So, what has happened in the past several years?
GameFi is gearing up for a comeback. We're starting to see actual fun games. Initiatives like embedded wallets are improving the onboarding experience.
Let's look at some numbers:
- According to Coingecko, GameFi market cap has crossed an outstanding $21.6 billion valuation.
- It attracts heavy funding. $7.6 billion in 2022. And ~$2.3 billion in 2023. These investments are starting to pay off.
- According to DappRadar, Gamefi attracted the highest number of unique active wallets in 2023. In 2023 Q4, they averaged 1.1 million active wallets (UAW) daily.
How to get exposure?
GameFi projects can be classified into two: actual games and infrastructure projects.
Infrastructure projects cater to the needs of actual games. These include gaming-focused chains with specialized features like Immutable Passport. Gaming projects can use Immutable Passport to improve user onboarding for games through passwordless sign-on and automated wallet creation.
Here are the top GameFi projects on my radar. I'll also provide links that you can use to find good games on your own.
(Note: None are endorsements to buy)
#1 Immutable X
It is an Ethereum Zk-L2 focused on gaming.
It offers developer-friendly tools like APIs and a Software Development Kit (SDK) for gaming projects. This makes creating and transferring crypto assets & identities easy.
The metrics on Immutable are all green. The monthly fees have grown ~43% to $732.34k. The chart below is the daily active users. They have 1.78 month million active users.
It already has 300+ games and 20+ marketplaces. You can check them out here.
Ronin Network ($RON) is another chain with a developed ecosystem. It's EVM-compatible L1 built for gaming.
Now, let's checkout some actual games.
#2 Nyan Heroes on Solana
It is a cat-themed mech shooter game from the creators of Halo and Destiny.
The whitelisted people can play the pre-alpha versions of the game. You can try and join the next season of the pre-alpha. The full release is expected in 2025 only.
The $NYAN token went live on May 21st. The market cap is around $25 million. And the token is already listed in some exchanges. It is among the top 5 most wishlisted games on the Epic Games Store.
Solana has many other games building on it. Examples include RPG games such as Solentasy and combat games like BitBrawl.
If you want to checkout other dope games on Solana, read this GameFi ecosystem overview.
#3 Shrapnal on Avalanche.
SHRAPNEL is an AAA extraction shooter game. You can try for early access now. But it'll fully launch on PC in 2025 only.
They also have play-to-earn elements. You don't have to worry about this blowing up like the previous cohort of P2E games. This game seems to be something people would play for actual entertainment.
Avalanche ecosystem is home many more games. Here's the GameFi ecosystem overview.
#4 Cambria on Blast
This game doesn't have the graphics level of Nyan or Shrapnal. It combines old school pixelated graphics with Crypto.
In the Dual Arena, you can challenge anyone to a 1v1 duel to the death in a public arena. Players can wager any amount of Arena Tokens or ETH on these duels. The winner takes all of the waged amount. You can read more about the mechanics of the duals here.
In Pit Fights, you can bet on a roster of NPC champions that battle to the death in the Arena Pits. You can read more about it here.
They also have Essence Points that'll lead to the Cambria airdrop. You can earn these points by staking Blast ETH on duals. Click here to try the game.
While Blast isn't an L2 focused on gaming, we're seeing interesting games being developed there. Click here to learn more about them.
#5 Fantasy Top on Blast
It's a trading card game. Think of Pokeman'ish cards based on your favorite Crypto Influencers. We've talked about it before.
The above chart shows the trading volume on the platform. it had a lot of activity last month. While the activity has dipped this month, this game has serious potential. Read our previous article to know more.
The quality of games is a lot better compared to the last cycle. And so, we are getting ready for an actual GameFi narrative.
So might of you guys might be wondering, "Does Edgy invest in GameFi?"
I'm not too interested in GameFi this cycle.
First, it's hard to valuate. I remember years ago I was so excited for Cyberpunk 2077 to launch. The developer was behind the massively successful Witcher series. Freaking Keanu Reeves was an actor in it.
And the game flopped initially because it was full of bugs. Developing games is tough. Now you gotta add in other elements like Tokenomics and timing the cycle?
Second, I haven't seen a single game I'd consider fun. People play games to have fun.
Anyways, I'm a gamer at heart and I hope I'm proven wrong. When I invest, I like to take as much risk off the table as I can. GameFi's super risky at this stage for me.
Sponsored By Anzen
Maximize Your Yield and Farm Multiple Airdrops with Anzen
High gas fees doom airdrop farming on ETH.
It's impossible to keep doing transactions over and over and not die by gas (unless you're a whale). The natural solution is to ignore what's happening in ETH, which leads to leaving a lot of money on the table.
But Anzen Finance has a solution.
Introducing USDz, the first RWA-backed stablecoin, launching on Base. With USDz, you can farm z-points with virtually $0 gas fees while enjoying a 10-15% yield. (Atm the yield is around 84%)
Here's how:
- Swap USDC for USDz: Earn 5x z-points/day by holding USDz
- Lend on Extra.fi: Gain yield + 5x z-points/day
- Deposit in LP Pool on Aerodrome: Earn weekly $AERO emissions + 20x z-points/day. Lock for 7 days to earn additional 20x z-points.
- Leverage on Extra.fi: Earn yield and 20x z-points/day with a 5x leverage. (ExtraFi will also auto-compound the $AERO rewards into the user position. Win-win situation)
Anzen is backed by major investors like Circle, FRAX, and Mechanism Capital, with underwriter partnerships with BlackRock, JP Morgan, and Goldman Sachs.
Strong investors, strategic partnerships, and a bullish narrative make Anzen a promising opportunity.
They've shared an exclusive invite code for The DeFi Edge readers to skip the line: OHKG9R
The airdrop is close, so don't sleep on it.
Advanced DeFi Strategy
Earn More Yield and Increase Your Pts Exposure with Leveraged Looping
It might be the case that you are borrowing assets against your ETH but not utilizing the full potential of the market maker.
Market Makers such as AAVE or Spark (MakerDAO) are among the biggest in the space as measured by TVL ($13B in TVL for AAVE alone).
And lending and borrowing are the main pillars of a healthy DeFi ecosystem.
For this reason, such protocols (and equivalent forks) are where liquidity thrives and expands for dApps to be built on top.
I'd refer to them as the "containers of liquidity."
The current DeFi TVL is about $105B and market makers account for more than 25%.
Do you get why I call them containers of liquidity?
What is a Lending and Borrowing Protocol?
Lending and borrowing protocols are decentralized apps (dApps) that allow users to either lend their crypto assets to others or borrow assets by putting up collateral.
Imagine a bank without the bank – everything runs on blockchain technology using smart contracts.
What if I told you that you can supercharge this?
Looping is where you supercharge your assets and basically lend and borrow multiple times until you hit the point of Diminishing Return.
DR = The point when it no longer makes sense to continue looping your assets.
Example:
In Aave, a user can utilize a looping strategy to maximize their Ethereum (ETH) exposure by repeatedly borrowing against their deposited ETH.
1. Starting with 1 ETH, the user borrows 750 DAI (using the maximum loan-to-value ratio of 75%), swaps this for 0.75 ETH, and deposits it back into Aave.
2. This process is repeated: in the second loop, the user borrows 562.5 DAI against their new total ETH deposit, swaps this for another 0.5625 ETH, and redeposits it.
Each subsequent loop results in a smaller and smaller increase in ETH exposure.
On the 15th loop, the total net ETH exposure (which is already around 3.9 ETH) doesn't increase by much anymore (just 0.0083 ETH, representing not even 1%).
And gas fees might make the next loop not even worth it.
Money markets normally require you to be overcollateralized, meaning that you can only borrow less than what you deposit.
For instance, ETH on Aave has a maximum loan-to-value (LTV) ratio of 82.5%, meaning that you can only borrow up to 82.5% of the $ value of the ETH you have deposited.
Note: Looping makes sense when the interest you earn on the asset you lend is greater than the interest you earn on the asset you pay to borrow.
In some cases, there might be active incentives from the protocol that will turn your overall APY positive.
Let's get a bit more practical
Protocols such as Summer.fi are created so that you can avoid having to do the looping manually.
Doing 10+ loops manually also means a waste of time and gas fees.
What Summer.fi does is use a single transaction to loop your desired asset and help you to increase your exposure.
I have been using it for two main reasons:
1. Increase my ETH exposure (pool link).
This pool has been yielding 40% on my WSTETH over the last 90 days, not bad, right?
On the right side, you can adjust your leverage based on your desired risk.
2. Increase my sUSDE exposure to farm more Sats on Ethena (pool link).
Not only I am leveraging the yield received on sUSDE, but I am boosting my Sats multiplier for Ethena Season 2.
Note: I'm not recommending this strategy. Quite a few people have asked us to share advanced DeFi strategies so we wanted to share an example of what's possible.
As always, when following such strategies, please be aware of the risks involved.
🚀 DeFi Catalysts
Instadapp is discussing deploying Fluid on Arbitrum. It'll take Fluid multichain and enjoy 400k $ARB incentives.
IndexCoop introduced Leverage Suit. Users can trade 2x, 3x, or inverse leverage on ETH or BTC with automated liquidation protection and low fees.
PoolTogether DAO is discussing updating the $POOL tokenomics. They'll cap the supply at 10 million tokens. And will use POOL in treasury for an incentive program.
LayerZero is now live on Solana. Projects can now support Solana alongside 70+ chains LayerZero already supports.
Rabby has started season 2 of their points program. You'll get points if you were active in 2024 and hold more than $1 in your address.
📰 Industry News
Cosmos stopped producing blocks for ~5 hours on June 5th. It happened after the scheduled v17 upgrade.
Paxos International launched the Lift Dollar ($USDL). It'll be a yield-bearing stablecoin backed by cash & cash-equivalent assets.
Telegram launched Telegram Stars. It allows users to pay for digital services via in-app purchases on iOS and Android.
🚀 New Launches
Spectra Finance went live. It is a DeFi Yield Derivatives protocol.
Myso Finance launched Whale Match. It is a Convertible Loan Marketplace. It'll allow DAOs/projects to raise stables using treasury tokens as collateral.
Iota launched the IOTA EVM mainnet. It is an EVM-compatible Layer 2 for the Iota network.
Illuvium will launch its Open Beta Mainnet on July 25th. They've added 10,000 $ILV to the testnet rewards to make the total 20k $ILV.
🐦⬛ X Hits
- US Macro does not get any better.
- Stephen has an amazing APR on ETH.
- Additional thoughts on ETH ETF.
- Pentoshi on BTC as the long-term bet.
- ETF now holds 1M of $BTC.
😂 Meme
Until next time,
Edgy "does not have a single Iggy song in his Spotify playlists"
Today's email was written by Edgy, Yayya, and Lorenzo.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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