Which gaming guild positioned itself best for the bull market?

Gaming guilds amassed huge treasuries during last cycle’s Axie Infinity-inspired blockchain gaming bull run. But how did they survive the grinding bear market  and pivot their treasuries to set themselves up for the bull market?

And more importantly, which one is in pole position to take advantage of the big opportunties expected this year?

Gaming guilds — organized groups of sponsored gamers — were the hot Web3 business model of 2021. They emerged because popular blockchain games, most notably Axie Infinity, required expensive NFTs to play, and “scholarships” enabled gamers to access resources to learn and to play through the gaming guild.

Valued as cash cows in 2021, gaming guilds were a customer acquisition masterstroke, on-boarding players from developing countries reeling from unemployment due to  Covid lockdowns.

The guilds became very lucrative. Including micro guilds they were believed to number over 20,000. There were 800 guilds in the Phillipnes alone. The Merit Circle guild raised $100 million and Avocado guild raised $45 million in 2021. Merit Circle raised over $100 million in November 2021 and YGG was valued over $10 billion dollars for a concept that suggested the revenue would keep coming in indefinitely.

Then Axie Infinity, the game most of the guilds had built their economies upon, collapsed.

Mitch Penman-Allen, the co-founder of the Perion gaming guild told Magazine:

By the end of 2022, we were certain that the Axie Ecosystem would not be sustainable. We had scaled down our exposure to Axie and had diversified our business model. We had also started to strategize and plan a roadmap for the future, however the collapse came faster than we thought – accelerated by a $620 million hack of the Axie Ecosystem.”

And so the guilds were left with huge treasuries and a need to pivot. But to what?

As the bear market ravaged user bases, revenue and interest, some guilds pivoted to making and investing in new games in search of a new hit. Others, like the guilds in this story, Perion, CGU and YGG have embarked on a variety of endeavors focused on building gaming community infrastructure with their massive raises. Some died.

With a new Bitcoin ETF-fuelled bull market on the horizon, have the battered and bruised gaming guilds developed a clear and discernible strategy to take advantage of it?

There is at least a clear theme, the gaming guilds have all pivoted to online reputational building in various forms.

But first, how did we get here in three short years?

The original and the copycats: how the gaming guilds began

Gabby Dizon founded YGG, the original Web3 gaming guild in 2020. He tells Magazine “the key lesson of that period was that though some guilds focused on making as much money as possible. My end goal was to grow my user base.”

Long before crypto, Dizon was a pioneer in the Philippine game industry as part of the team that released the first Filipino-made game in 2003 called Anito: Defend a Land Enraged and since 2014 ran his own Manila-based gaming studio, Altitude Games. 

Sustainable tokenomics 

He learned about blockchain and liked the fact that “smart contracts can transfer value around and Ethereum could program value inside virtual economies.” But financial applications of blockchain left him cold. It was when he saw CryptoKitties popularize the idea of NFTs for gaming applications, he began to get excited. He discovered Axie in 2018, an online blockchain based game from Vietnamese studio Sky Mavis. As Covid got a grip on the globe, in “2020 things started moving from a hobbyist community to the idea of earning tokens from gameplay.”

While playing Axie Infinity and breeding Axies, he discovered it was possible to lend Axie NFTs without giving away your private keys. This was the foundational idea for  YGG,  the first guild concept to scale. It quickly raised $1.25 million in seed funding, led by Delphi Digital. 

The guilds became a way to profit from renting assets but relied on community managers, especially in the Philippines, where Axie first took off and had the biggest user base.  

Axie Infinity became the most successful game of 2021, thanks in part to a big Filipino community of players borrowing Axies from the guilds to play the game and earn additional income during Covid.

Dizon capped his token sales at just $12 million. He tells Magazine the copycat guilds were inevitable – and the height of the market and the insane figures raised scared him.

While some people raised $100 million for their guilds, the reality is that there are now huge expectations of that money.”

 

 

Now everyone is scrambling to prove they are building something of value for web3 gaming and their scholarship communities.

The guilds pivot to user reputation building?

Dizon initially used YGG’s treasury to re-invest in breeding Axies (creating new NFTs), and bought other NFTs to invest in other up-and-coming games. Today, he is still focused on the same mission since day one: improving gaming for gamers.

In late 2021, he started building a Questing and Achievements platform using YGG’s treasury funds. It allows gamers to earn achievements in different games and to build up their on-chain reputations. Reputation will be one of the most valuable things to build in Web3, he tells Magazine.

YGG’s Guild Advancement Program, or GAP for short, is an exercise where gamers can complete tasks in-game and community-based quests in order to provably demonstrate their capabilities, as well as their contributions to the broader community. 

“So for example, if an individual is able to pass certain quests, it can be proven on-chain with a non-transferable NFT, which is called a Soulbound Token, or SBTs. These are proof of their achievements in web3. A combination of all of these SBTs tell a story about the individual. And based on that, the holders are able to access, for example, other games or communities,” explains Dizon.

The non-transferrable nature of an SBT is very important as this means that the minted record of achievement cannot be bought or traded, it can only ever be earned through the wallet holder’s demonstrated effort.

Another core part of YGG’s questing program is Superquests which launched earlier this year in a partnership between YGG and Axie Infinity. It allows gamers to develop new skills in a learning program delivered through short form video content created by top community influencers and YGG esports champions. And while it’s for members of the guild community, it’s not a closed shop and new members are welcome. 

10-15 years from now I want people to match their skills with virtual economies. In crypto, reward for effort is a crucial currency.”

Dizon suggests that the ERC-6551 token standard or Token Bound Accounts (TBAs)will be influential to blockchain gaming, and developers are already starting to use it to thread AI into games. 

TBAs are a byproduct of the standard which allows NFTs to own other NFTs. So you could have a TBA that is also a Soulbound Token (SBT) that cannot be transferred. 

In future metaverses, Dizon says, virtual economies will one day rival small countries in terms of GDP. The emergence of AI will send us there sooner than you think and reputational tools will be even more important. 

On-chain reputation for quests in virtual worlds can be checked via wallet history, proof of contribution along with SBT achievements and associated metadata. These Web3 tools display what someone actually did and who they are. 

“This is really important because I think the next phase of crypto will be all about people’s web3 reputation. In things like yield farming, we didn’t really segregate between useful people or people who were just there to extract money. I think reputation will go a long way towards separating who is most useful in guilds and in other communities,” noted Dizon.