secondary title

new business model

I think it may be necessary to face the elephant in the house, that is, the cooperation between game companies and encryption technology still has a lot of obstacles. When they have spent years perfecting the monetization mechanism around user binding, platform krypton gold channels, and PUA player mentality, it will be difficult for them to rewire their thinking. Especially where shareholder interests are involved, outlandish changes to a functional business model may be undone. The topics I've covered will require many new approaches, right down to game design itself, which will need to adapt to new economic realities. Handing over elements of economic control to your user base can fundamentally open up new and potentially larger revenue streams, although the idea is counterintuitive to the shareholders of the big players who are currently comfortably earning.

Speaking of which, Fortnite ("Fortnite") provides an interesting example of companies ceding control, not explicitly economic rights, but their intellectual property. As Matthew Ball points out, it's very unusual for brands to do so when they don't have control over the editorial experience. For Marvel Comics, DC Comics, NFL, Nike, etc., I believe that there will be endless discussions and long-term hesitation before reaching a cooperation. Games might be the only place where Star-Lord can meet Batman, Batman can meet Stormtrooper, Stormtrooper can meet John Wick, and the brand doesn't have a say in their interactions. He mentioned, “This partly reflects Hollywood’s still lack of a clear game strategy and capabilities. Therefore, they have no choice but to embrace the existing opportunities. Therefore, this multi-IP experience may be in the next few years. become more pervasive.” Reflecting again on the concept of increased IP liquidity, what does the future look like as this concept opens up a whole new dimension of monetization?

For example, after Fortnite introduced the character image of God of War protagonist Kratos, I immediately logged into the game and spent my hard-earned V-Bucks in-game currency for him. Cross-play activities can stimulate players of both games at the same time. In the encrypted world, maybe my Kratos image can have an exclusive skin, just because I have the God of War platinum trophy. Just imagine if these skins were limited editions that could be traded for a fee through a secondary market run by Fortnite, the demand would be immeasurable. Maybe in order to qualify for an airdrop, I need to complete certain tasks in other games, or have certain interactions on other types of social media platforms. Or, in order to enter an auction for a Legendary Mandalorian skin, I need to prove that my Disney+ account has tracked all of the series. In fact, we can achieve this without having to sacrifice user data privacy in the Fortnite/Disney+ platform authentication instance. The point is, these exciting ways to stimulate and monetize mutually beneficial engagement without players having to keep stooping over liver boxes, raking in cash, being overwhelmed by a bunch of unscrupulous ads, and investing a lot of money in the game. Time and money, in the end, is just a tool man working for a major game company.

"What I hate are business models that are anti-consumer. Make money by doing things that detract from the consumer experience. A legitimate business model makes money by selling consumers what they want, or by giving users a great experience , and make money from the economic activity around it" - Tim Sweeney

One of the most exciting applications in the NFT space is a new financing model that is still in the exploratory stage. A whole new set of monetization mechanisms have been revealed to developers and creators. Selling "land" or personal items in a virtual world has never been a viable form of financing. With the growing popularity of virtual worlds, projects like Cryptovoxel have been able to launch projects by auctioning off scarce virtual real estate. In this particular example, we even see the gentrification of different virtual neighborhoods, as artists spontaneously congregate in certain parts of that world (virtual art constructed by crypto art collectors in a blockchain-based virtual world galleries, where it is already a trend to exhibit their work). Art platforms like SuperRare allow artists to finance themselves directly by selling tokenized digital art. They are now able to permanently collect royalties on secondary market sales, which is often not possible or very difficult in the traditional world. How long will it be before game asset designers, UGC world builders, and other creative media get similar options? Across the globe, the creator economy is undergoing a broad shift. As automation increases, projected labor requirements decrease, and more recently, COVID hastened our transition to a primarily digital species. We’re really only at the tip of the iceberg, as the disintermediating power of crypto proliferates across many verticals, rapidly breaking down the lines between creators and consumers.

secondary title

Investable range

I want to talk about how the investable universe has exploded, breaking down barriers to entry. I noticed that uniqueness and tradability of content play a big role in the creator economy, but let's consider it in games. Before the crypto world, the options to gain financial exposure to a game you thought would be successful were very limited. Or, if you're lucky, the company behind the game has gone public and is primarily focused on that game. Or, one possible way is that a part of the equity of a private game company is held by a public company such as Tencent (Tencent), through which you can seek proxy exposure. If you want to invest on a more granular level, you may be dabbling in the dark art of trading in gray market accounts or items, with potential risks. In crypto gaming, not only is there direct access to exposure, but you can also see a wide variety of options on one platform. As the financialization of games and other virtual products such as encrypted artwork increases, we are likely to witness the birth of a whole new generation of investors. Developers are able to raise capital from a wider pool of capital, and the various sources of actual access to capital are likely to expand. Perhaps we will finally see an increase in the total amount of capital available to the gaming industry.

Focusing on the Axie Infinity example again, there are various options in the market for users to invest and obtain investment income. Remember, these exist in a liquid global market where anyone can buy and sell. Importantly, users get most of the following rights:

• Buy individual Axies (can be traded, fought or bred for profit)

• Purchase in-game land (can be developed to provide services for profit)

• Purchase items (deployed on estates, usually with some utility function, such as increasing attributes)

• Buy ERC-20 tokens in the Small Love Potions (SLP, Small Love Potions) game to breed Axie.

• Purchase Axie Infinity Shards (AXS) governance tokens (can be staked for additional yield or used to vote on the allocation of financial resources to the community)

Opening up all of these opportunities to users also provides equal opportunity for a fair monetization process to maintain and develop the game. Here are corresponding examples of their monetization models that earn some of their value through the game economy:

• Bonding Curve Auction for High Rarity Axies

• Fees charged on Axies transactions

• Breeding fees charged during breeding Axies

• Auction of high rarity virtual real estate

• Auction of scarce game assets.

• Token sale to early strategic investors, and subsequent public token sale.

• In-game payments such as upgrading characters, developing land, or crafting items.

• Fees for in-game battles and matches.

From Q1 2021, all fees and auction fees within the Axie universe will go into a community treasury managed by AXS token holders. Currently, the transaction fee is 4.25%, and the fee for breeding an Axie is 0.005ETH. In November 2020 alone, $250,000 flowed into vaults. This economic model is not only applicable to Axie, but provides a paradigm for investing in online virtual world assets. Another point worth noting is that this new economic model not only provides players with new ways to participate, but also provides players with the ability to exercise the power to withdraw funds interactively to restrict developers from doing evil. This creates a wonderful incentive covenant that the player actually has the ability to "fight back" if the game starts to go in a less-than-ideal direction. The user base can simply sell their assets, get out of the game, drive down prices, and affect the operator's main source of income. This new constraint is likely to keep game creators on their toes, rather than the blatant duds and complacency we've seen from many AAA studios in recent years. In fact, a "fork" of an entire game is theoretically possible -- a third-party developer could build a parallel version of the game around a set of NFTs. Users are free to transfer their assets to this new game version and keep playing. How long it will take us to develop a game that incorporates these dynamics, generated by a constantly rotating pool of developers, remains to be seen. Third-party developers will submit their plans for the next year or season, and players can vote on who will be the next official developer store.

investor

main points

investor

As an investor, there are many moving parts to keep an eye on, and opportunities arise amid larger changes. Within the industry, we see traditional equity investments in developer institutions, investments in project tokens (including NFTs), and investments in protocols that support projects on top of them. Traditional investment measures, such as team strength, utility, and product-market fit, still apply, but they are often just the beginning. In crypto, assessing long-term value capture is critical. As investors, we usually look for projects with multiple, composite moats, and when these moats are combined, the bigger the moat, the harder it is to beat. In traditional markets, investors generally don't need to stress test this angle because proprietary technology can get you far. What makes the crypto industry different is its open-source nature, which means projects tend to be forked if protocol rent fees are too high. Therefore, the only way to achieve defense is through strong network effects. Assuming traditional market evaluation and its underlying network effects are considered robust, token economics and value accumulation present a very unique question: will the value created by the project accumulate to the token? If there are no tokens, where and by whom is the value captured?

Things to pay attention to:

• Encrypted media, games, sandboxes, collectibles and artwork

• The creator economy will create synergies as content creation is monetized in new ways

• Virtual asset trading platform

• Virtual asset trading platform

• Critical infrastructure such as layer 2 solutions

• Major brands and IP holders adopting these technologies

• big companies and big brands

While gaming companies may have the most intuitive understanding of this evolving landscape, large IP holders, as well as businesses with any content creation component, can start using the technology. We've already seen the likes of Atari and Square Enix get in on the action. Taking Atari as an example, they purchased a large amount of land in The Sandbox Game (a blockchain-based virtual world), and developed 3D versions of classic games such as Asteroids, Pong, and Rolercoaster Tycoon on it. Beyond encryption, we’ve seen some companies adapt to new distribution mechanisms. For example, Gucci sells clothing on Roblox, Fortnite has partnerships with IPs such as Odaily Wars, Snapchat Bitmojis has partnerships with Ralph Lauren, and more. Matthew Ball points out that gaming as an entertainment industry is unique in that every new format is almost additive. Typical interruption patterns don't always apply to games, and its outlook can vary dramatically. The interesting thing about blockchain applications is its ability to penetrate all devices, platforms and content types. As concepts like direct virtual commerce emerge, companies must stay on the lookout and familiarize themselves with new encryption tools that may intersect with these trends.

Importantly, these encryption-enabled content types don't necessarily have to compete with other content to succeed. While we have noted that it tends to have a positive impact, for the first time the new content type itself actually expands the investable universe, thus increasing the pool of capital available for that content area. What's more, the content itself has uniqueness that may make it more desirable, such as genuine ownership, apparent scarcity and provenance, as I've noted. Muhammad Ali's gloves at the Battle of Fraser, for example, are priceless due to their historical significance. Virtual goods do not currently have this personality. What will fans say about the skin Buga won the World Championship with? Or the avatar costume he wore to a live concert over the weekend? These are new value drivers and therefore likely to attract new types of demand.

Unlimited scalability

• Unlimited scalability

• zero marginal production cost

• not bound by the laws of physics

• Very low cost and quick to produce prototypes

• Community Consensus Strengthens Loyalty and Promotes Evangelism

• Ability to generate ongoing revenue fees from resale fees on virtual goods

• Ability to collaborate and mobilize users at an unprecedented scale (maximized through interoperability!)

If you are a business considering a digital content strategy and would like to adopt these new technologies, please contact our Consulting Department and we would love to talk with you.

entrepreneur

The new tools available mean that now is a once-in-a-century moment for entrepreneurs who want to build digital products and experiences. Due to composability, participants in the ecosystem are able to pick and choose critical infrastructure as they build their systems on the work of their predecessors. Encryption technology provides extremely fertile ground for experimentation. The beauty of these technologies is that they have very short iteration cycles, allowing permissionless innovations to be compounded much more quickly. Small-scale experiments allow developers to take advantage of real market conditions and "test in product" with real-time user feedback. Those interested should familiarize themselves with:

• Bitcoin and Ethereum; Cryptoeconomics

• DAOs, DeFi, NFT, Social Tokens, Crypto Media

• Decentralized network opens up new business models

• Decentralized network opens a new governance model

• The intersection of encryption and new trends, such as direct-to-avatar

in conclusion

in conclusion

Old entrenched consumer behaviors are on the cusp of change as truly capable alternatives emerge. The virtual world is increasingly financialized as technology develops to connect thousands of isolated virtual economies. Followers will benefit from a continued focus on transformations such as brand building within the Metaverse, and the strategies existing brands are adopting to tap into this potential area. Businesses, brands and creatives cannot ignore the call of the digital future. Knowing how to build and participate in digital communities, and the tokens and networks tied to them will give you an advantage. Virtual commodities are becoming an asset class in their own right, but most people still don't notice it. While I've touched on some emerging business models, it must be emphasized that we are still in the very beginning stages of an explosion of innovation and experimentation. Whatever visions we have for the future, they don't necessarily materialize. The underlying advice is that we have a good understanding of new tools that exist, a willingness and imagination to really explore them. Don't be afraid to improvise creatively when the need arises. Those who act quickly will be rewarded accordingly. As long as you can deal with the consequences of making mistakes, you don't have to worry about being the first to get caught. With every hard problem we solve, we get closer to standardized, scalable processes that drive the entire ecosystem into the mainstream. With trillions of dollars flowing in the encrypted economy, supported by distributed web3 technology, the metaverse will prioritize users; allowing each of us to enter a new land of opportunity. A modern, digital renaissance is happening on the grandest stage we've ever seen, spanning billions of connected minds. In the coming decades, a new era of virtual presence will dawn, marking our next great milestone as a networked species. Look closely, and our direction is clear: into the void.