In this part two: we will cover dual-token projects, the most popular model for GameFi today
4 min read
Updated: May 14, 2022 at 3:38 pm
Cover art/illustration via CryptoSlate
In a previous article, we introduced three tokenomic models for single-token blockchain games and their respective pros and cons.
In this article, we’ll go over dual-token projects, an innovation that came after single-token games, which is the most popular model today.
The dual-token model emerged in the first half of 2020 when Axie Infinity introduced SLP (Smooth Love Potion) to reduce selling pressure on AXS, the original game token of Axie Infinity.
Since then, almost all major titles have had a dual-token economy.
To understand how dual-token games work and why this model exists, we should look at how Axie rolled out SLP.
Before introducing SLP, Axie was a single-token GameFi, where players input USD and receive the game token, AXS. With tremendous user growth and money from many PE funds supporting the market, Axie successfully ran on just one token for over a year.
However, it was not difficult for Axie to realize how critical new users were for the projects. Once new money stopped coming in, a death spiral would begin.
To alleviate selling pressure on AXS, Axie introduced SLP in 2020. Whereas AXS was used for governance and staking rewards, players would use in-game utility token SLP for breeding new Axies and earning more SLP. The development team increased the ratio of $AXS- $SLP required for breeding and increased the amount of $SLP needed for reproduction.
At first, the new model worked as planned. According to Footprint Analytics, AXS’s price roared right after SLP was brought to the game, while SLP’s token price stood below $0.1 for several months. SLP had seen an uptrend drawn by newcomers since the GameFi summer.
However, this trend did not last long, and SLP soon fell into a death spiral. The Axie team responded by changing the community governance structure to become more decentralized. They also removed SLP as the game’s PVE (Player vs. Environment) yielded earnings on Feb. 9 to reduce SLPs mint and supply. With these changes, SLP’s price increased.
The dual-token model has solidified wherein one token is mainly used for governance—owning more of this allows the holder to have more voting power in community votes about the project—and another is used for in-game functions, i.e., the utility token. In most games today, players earn most of the yield in the usually lesser valued utility coin and a bit in the governance coin as a premium, e.g., if they own valuable NFTs.
Besides Axie, several other popular GameFi projects, such as BinaryX and Starsharks, also use the dual-token model.
Two different categories of dual tokens GameFi
Most of the newly released dual-token GameFi projects adopt the model of the “input game token and output game token” model.
For example, BinaryX players use governance tokens to start the game and yield utility tokens as returns, while Starsharks players start and yield utility tokens in the game.
We know from the previous article that the cost and returns are highly correlated to this model’s token price. It is much easier to adjust the tokenomic models without centralized adjustment with the dual tokens than the USD value-based model. The USD-based model requires an oracle to specify the number of corresponding tokens, which complicates the dual-token model.
In this article, we provide an analytical approach to dividing different categories of dual tokens GameFi: After the sale of Genesis NFT, what approach does the project owner use to increase the number of NFTs in the market to meet the demand for NFTs from new players?
In the beginning, most of the GameFi projects will sell Genesis NFT on the official platform or partner platforms such as Binance NFT or Opensea to accumulate initial players. They then have several mechanisms to mint further NFTs while fuelling token consumption. These include:
- Breeding Model: In this model, the second generation NFTs and subsequent NFTs come from the breeding of Genesis NFTs, with no more blind boxes sold. This mechanism requires burning/spending tokens to mint the new NFTs, which allows the game to influence the selling pressure on the tokens depending on the price of minting.
- Blind Box Model: Compared with the breeding model, the blind box is simple. The team sets the number of NFTs in the game, and when the market is good, or consumption goes up, players sell more. This buoys the price of the tokens because they need them to buy the NFTs.
However, all ambitious, long-view projects will declare that most of the money from blind box sales, whether in USDT or utility tokens, goes straight to the community treasury or burnt. Starsharks is so popular because it announced to burn 90% of the utility tokens from blind box sales.
Summary of dual-tokens GameFi tokenomics
Tokenomics are a crucial part of a GameFi project, along with metrics like the number of new players, the number of active players, and the contrast between output and consumption.
As GameFi evolves, each cycle sees new economic models and innovations, each with its own pros and cons. Serious investors can also learn to spot trends within specific tokenomic models to time bottoms, predict FOMO inflation, generate yield during bottom stabilization, and other strategies.
An article originally by Watermelon Game Guild, edited by Footprint Analytics community.
The Footprint Community is a place where data and crypto enthusiasts worldwide help each other understand and gain insights about Web3, the metaverse, DeFi, GameFi, or any other area of the world of blockchain. Here you’ll find active, diverse voices supporting each other and driving the community forward.
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Footprint Analytics is an all-in-one analysis platform to visualize blockchain data and discover insights. It cleans and integrates on-chain data so users of any experience level can quickly start researching tokens, projects, and protocols. With over a thousand dashboard templates plus a drag-and-drop interface, anyone can build their customized charts in minutes. Uncover blockchain data and invest smarter with Footprint.
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These indicators show how the equities sell-off is influencing crypto prices to fall down
Bitcoin · Ethereum › Analysis
US Equities correlations with cryptocurrencies is at an historic peak while most BTC holders are holding at a loss
3 min read
Updated: May 20, 2022 at 4:05 am
Cover art/illustration via CryptoSlate
Cryptocurrencies experienced on May 10 a large market crash, losing over 10% in a single day of most of the coins. This is the second time in 2022 that most cryptocurrencies have suffered a price loss of over 10%. Over the last month, BTC has accumulated a 23.57% loss while Ethereum has a 26.32%. Meanwhile, US equities suffered slightly more moderated losses: S&P 500 a -11.07% while Nasdaq 100 a -14.93%:
As seen in the chart above, cryptocurrencies continue experiencing worse sell-offs than capital markets. The actual macro context of rising interest rates leads to most investors becoming averse to risky assets, which cryptocurrencies are due to their nature of highly volatile price performance.
The origins of the May 10 price drop came from US equities markets turning back on their short-lived recovery of last week. As has been seen in the previous months, the 30-day correlation between the cryptocurrencies markets and US equities indexes continues to grow, and this week achieved an all-time high for both BTC and ETH, with around 0.9 points both for S&P 500 or Nasdaq 100:
A correlation coefficient close to 1 implies a strong positive correlation between the two prices, meaning that the price of BTC or ETH and these indices have a highly statistically significant relationship, so they will tend to move in the same direction. Understanding how these relationships evolve is essential to understanding how macro markets affect the cryptocurrency market and where to look for leading indicators of crypto price movements.
It is valuable to look internally at how crypto holders are reacting to the recent price moves despite external factors. Bitcoin continues dominating the crypto market, so it is worth looking at what its on-chain data shows us.
As studied before, investors are sensitive to react when their investments turn around and stop being in a profiting position. BTC is recently reaching a critical position, where almost half (47.8%) of the addresses holding BTC would be losing money if they would sell at current prices. This is something not seen since the Covid crash of March 2020:
This indicator that provides the variation of holders’ profits over time also shows the percentage of addresses that would have made money or lost money if they had sold at a particular time. Addresses are classified based on if they are profiting (in the money), breaking even (at the money), or losing money (out of the money).
Addresses are a good approximation to single investors, although there is always a chance that a small minority of users are using several addresses. If we look at how long the BTC investors have been holding, we can see that the vast majority (26.74M addresses) have been holding BTC for more than a year. A metric with no signs of slowing down so far (blue line):
This depicts how the amount of BTC holders with a long-term perspective grows despite the recent market turmoil and crypto’s weak price performance. It is quite the opposite for short-term holders (classified as Traders, orange line in the chart): their number increases when significant price movements occur, and speculation fuels the whole ecosystem.
After the worst start of the year for US equities in 83 years, it remains open to question if the current market situation could be presenting an attractive buying opportunity for those looking to the long term. Crypto’s next price moves will undoubtedly be heavily influenced by what US equities do, although so far, at least the majority of BTC holders remain unfazed.
Zcash [ZEC]: Breaking down the potential effects of the current bearish structure
As the basis line (green) of the Bollinger Bands (BB) constricted the revival attempts for nearly seven weeks, Zcash [ZEC] bears pulled the altcoin down to yearly lows last week. The basis line has crippled the buyers’ ability to sustain a close near the upper band of the BB.
With the current rising wedge setup being solid, a recovery toward the $113-level could see a slowdown. At press time, ZEC traded at $103.9, down by 2.63% in the last 24 hours.
ZEC Daily Chart
Since its multi-month April highs, ZEC bears have persistently steered the price south after propelling an up-channel breakdown. On its way down, the price action underwent strong liquidations whilst the basis line of the BB constricted the bullish comebacks.
Consequently, the alt was down by nearly 67.42% (from 28 Mar) and dropped to hit its 16-month low on 12 May. After the $83-baseline posed some hurdles for the sellers, the bulls quickly provoked a short-term string of green candles. After forming a morning star candlestick pattern, the altcoin continued its oscillation in a bearish rising wedge.
A continued trajectory in the current pattern could face strong barriers in the $113-zone. This area represented a host of barriers that includes the upper fence of the Pitchfork, the 38.2% Fiboancci resistance. Any reversal from this zone could result in a breakout from the wedge and find testing grounds in the $96-zone. In an unlikely event of invalidating the strong bearish tendencies, any close above the $113-level could test the $126-level.
The Relative Strength Index depicted a gradual uptrend from its oversold lows. As far as the 41-support stood strong, the buyers still had conceivable means to stall the near-term liquidations. But with the -DI line looking north, keeping a check on the selling pressure could be a menacing task for the bulls.
In light of the confluence of multiple hurdles in the $113-zone, ZEC could see a short-term pullback. Any close below the wedge could result in a pathway to its $96-zone lows. To alter the existing narrative, the bulls have to find a spot beyond its Pitchfork and the 38.2% level.
Finally, keeping an eye on Bitcoin’s movement and the broader sentiment would be important to complement the aforementioned analysis.
Polkadot: Why DOT can be expected to lead the upcoming bull run
Polkadot’s native cryptocurrency DOT has so far managed to remain on the list of top 20 cryptocurrencies by market cap. The latest market events have forced investors to re-evaluate their portfolios in favor of digital currencies that have strong fundamentals, but does DOT fit these criteria?
Polkadot’s multi-chain approach can provide better insights into whether investors consider DOT to be worth having in their portfolio. It announced that interoperability and multi-chain as the future of blockchains are among the key areas of focus during the WEF22 conference on 16 May.
Polkadot’s ecosystem has been growing rapidly as it continues to onboard more projects through para-chain auctions. While this approach bolsters the interoperability agenda, it also boosts organic demand for DOT from projects running as parachains. The para-chain approach allows the community to support projects that align with Polkado’s values and can provide value to the ecosystem.
DOT’s price action and on-chain metrics
Although DOT is slated to leverage organic growth as the Polkadot ecosystem continues growing, it is also heavily correlated with Bitcoin. It struggled to maintain a healthy recovery after last week’s market crash in which it bottomed out at $7.30. However, it bounced back to $10.07 at the time of writing.
It seems DOT’s recovery is currently limited by low buying volumes. It is currently trading at a 58% discount from its April 2022 top. DOT’s price is also at an 82% discount from its current ATH of $55.09 which it achieved in November 2021.
DOT’s supply held by whales metric registered an uptick between 16 May and 17 May, courtesy of slight accumulation. However, the same metric recorded outflows which have so far pushed back to monthly lows. The metric shows that whales are selling and it reflects the lack of adequate buying volumes and failure to register a significant rally.
DOT’s developer metric achieved a significant uptick and is currently in its highest monthly range. The uptick is due to the recently announced Polkadot which also highlights the network’s commitment to security.
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