[FREE] the Distributed: Issue #1
Talking about Stepn problems, and the Illuvium land sale.
This is a newsletter about NFT gaming, highlighting interesting developments across the market, directly to your inbox ☕️
Letter From The Editor 📕
Hi all 👋 who have followed my newsletter for the past 6+ months, I am back after a busy few months launching Emergent Gaming and investing in early stage web3 games at Pylon Capital.
Today, I am confident that web3 gaming will be the #1 revenue generating software vertical that we will see this generation.
You need to be exposed to this area.
Every week, I will synthesize the weeks top news and give you my insights on takeaways as you go on the web3 gaming adventure.
I have spent the last 12 months in this space, investing and building, and I want to share my insight with you.
That’s why I am re-launching the Distributed focused on my thoughts on web3 gaming, which you can access for US$7 a month to support my writing 🧘♂
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🕛 About the author: Jack Leung (@haitzu) is a VC at Pylon Capital and co-founder at EmergentDAO.
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Headline: Stepn banned in China, and Illuvium raises $72mm in bear market.
Stepn has seen a sharp decrease in their GST token as China bans the app for tracking their GPS functionality. Stepn has announced the ban for Chinese players will start on July 15th.
To get a gauge of user breakdown, this is what it looks like on community language preferences in the Stepn Discord:
Many of their player will not longer have access to the game.
Previously, I have been quite positive on Stepn as they signed ex-Multicoin Partner, Mable Jiang, as Chief Revenue Officer:
Launched in Dec-21, Stepn has experienced incredible growth due to their move-to-earn product. However, the sustainability of their economy has been questioned alongside other games such as Pegaxy and Axie Infinity.
Bonus: Stepn Mint Farm in action in China (maybe this is why they were banned in China?)
Overall, I am bullish “forming positive habits”-to-earn products, where alignment incentives are net-positive for society and citizens. However, this is not possible without real value exchange.
The Problem with Stepn
Today, games are pseudo-ponzis, where users are able to make a return only based on net new users into the ecosystem. This is inadequately designed to falter when the net marginal new user runs out… when it does, who holds your bag?
Ultimately, games will need to link the value creation i.e. positive health habits, to an ultimate beneficiary i.e. the govt, thus closing the value loop, which allows a sustainable ecosystem to be built.
I also came across this thread, talking about how prices have affected players from around the world:
Remember, these games affect real players and real capital.
Something you should listen to 🔊
This week, I was listening to Vance Spenser, from Framework Ventures, on the Bankless podcast and was particularly fascinated by his take on gaming today.
Here are my top three highlights 👇
True F2P is finally possible 🤯 instead of F2P as a freemium model i.e. first three levels are free, then you have to pay, studios can provide NFTs for free and only take % on the transaction fee (as revenue), which can then be added to a communal treasury. In actuality, studios will be able to not only to earn scalable revenue, the user themselves gets charged less. Win-win!
Game Studios have MANY MORE monetization methods 🤑 beyond the value unlock via NFTs, the ability to launch tokens, L2s etc will mean games studios will increasingly diverge away from the traditional advertising model, again, resulting in a much better experience for the consumer
Games need to be fun 🙄 the issue today is that games like Axie leveraged a flawed re-packaging of defi, and just aren’t engaging for the player. This is not a particularly contrarian view, but games need to be fun, full-stop, and they aren’t today. Look for the fun games.
Listen from 1:32:00 when he talks about gaming.
On the other side, Iluvium, one of the highly touted P2E games, just raised $72mm in their initial Land Sale.
Despite the general macro conditions, Iluvium’s Dutch Auction outperformed my expectations, with the following land clearing at the following prices:
Tier 1 = 0.33 E
Tier 2 = 1 E
Tier 3 = 3.6 E
When you contrast Pegaxy, Axie, Stepn etc which has seen general dumping of tokens and NFTs, the fans of Illuvium appear to have very high conviction in the project and are willing to bid during these prices, which makes me very bullish.
This is also very bullish for Immutable X (the ETH Layer 2 that Iluvium is built on, which is also built on Starkware), which has received wide-spread praise for a seamless purchase and gas experience from users to particapated in the land sale.
Take that BAYC 👎
Curated News - The news you should be across 📰
Animoca Brands, the web3 gaming king maker, acquires Notre Games, a Czech Game Studio. ☁️ This is part of a broader arbitrage strategy for Animoca, acquiring web2 studios, leveraging their own NFT competency and unlocking upside off via web3 monetization strategies.
YGG (seed investor of Merit Circle) responds to a governance proposal in Merit Circle’s governance forum of “lack of value-add”. ☁️ Essentially, YGG was an original investor in Merit Circle, now that Merit Circle has gotten big, the community wants to pull the seed investment from YGG as they have not provided value in their eyes. This is a tough one - on one side, VCs should always be value additive… on the other, this is a legally binding document… and you chose to have YGG on your cap table when you signed your seed round… to go back against your word is not good on your own reputation. IMO Merit Circle need to deal with it - they signed the docs for their cap table, they need to own for their decisions.
The Red Village raises $6.5mm led by Animoca and Gamefi Ventures to create a web3 Runescape. ☁️ Awesome founding team, no game-building experience, but very web3-native builders - (i) always in the discord answering questions 24/7, (ii) refunded community members when gas issues occurred during initial mints, (iii) met them in Dec ‘21, and have seen some crazy improvements from founding team. One to watch out for (NOTE: Pylon Capital is a participant in the seed round of The Red Village)
Immutable and Avalanche bid to be the blockchain of choice for the BAYC Metaverse Game [Link to Proposals: IMX and AVAX] ☁️ Supporting the development of the #1 NFT collection would be a big win for any L1/L2, especially in a market looking for positive catalysts. From my read, in all-likelihood, the BAYC game will remain on ETH main-net until they have the opportunity to build their own L1/L2. You would cap your upside if you committed to building on another L1/L2.
Thanks for reading Edition #1
How is everyone? anyone buy the Goblintown NFT? I may have aped in 🦧
Any spotting interesting games in crypto? anyone playing Diablo: Immortal? It’s fun…. but so fucking pay-to-win, it is disgusting… some new lows from Activision/Blizzard that is a rabbit hole to go down another time.
See you next week 👋
I loved the information shared here. I found it very informative, helpful, and easy to digest since I'm always on a rush to go do the next thing.