The Crypto Gaming Guild Playbook
A look into how gaming guilds operate and where they stand in the general crypto gaming economy.
Smart contract platforms have two broad sectors. DeFi & NFTs. First DeFi had a major run, then NFTs followed. The potential third major run can come from a sector that harnesses the power of both, GameFi. Through NFTs users can now own & trade their in-game assets/characters, through DeFi elements such as staking, farming, decentralized exchanges & dual-token tokenomics users can now actually earn decent money from gaming. This created the play-to-earn or P2E economy.
This entire movement started with the success of Axie Infinity. It’s an average game at best but it had a meteoric rise driven by massive adoption in the Philippines. People were earning around $50 a day playing Axie which was life-changing money for most. This was followed by a meteoric rise in the AXS token price. As is common in crypto, if one project sees major success you will have tons of copies with small tweaks. There are still some games that took a different route to the Axie model but most of the games are somewhat similar.
The success of crypto gaming as a sector subsequently led to the rise of crypto gaming guilds. Gaming guilds could turn out to be a great investment for those who want exposure to the gaming side of crypto without necessarily wanting to put in the work, whether that is by playing or doing the research. Gaming guilds bring a ton of benefits and have the potential to dominate the P2E sector. So I decided to dive into what a gaming guild looks like, how it operates, and you can decide for yourself if it’s a worthy investment or not.
I looked at 7 different gaming guilds. Yield Guild Games, Merit Circle, Avocado Guild, Good Games guild, Unix Gaming, and Astra Guild ventures. The 7th one I looked at was GuildFi but that follows a very different model to these 6 so I will discuss GuildFi in another article.
General Structure
Each guild has the following elements:
· The DAO
· Strategies
· Treasury
· subDAO
· Token
· Vaults
DAO
The DAO element is fairly straight forward. This is the general organizational structure of how the guild runs. You have the team, scholars, & community members. It operates like any other DAO where there is constant interaction amongst the community for a variety of reasons but in this case it will be gaming specific interactions.
Strategies
Most of the gaming guilds follow this general strategy
· scholarships
· Research
· Trading & farming
· Other
Scholarships-
Every P2E game makes use of NFTs for the in-game characters which means that there is a certain start-up cost to play any of these games. Most people cannot afford these start-up costs. This is where guilds come in. They buy the NFTs and hold them. When a prospective player comes along they either lend out or rent out (depending on the person’s preference) the NFTs for them to use. Lend out would mean that the NFT is given for free and any money made from playing the game will be split between the player and the guild. Rent out would mean that all the money made by playing the game is kept by the player but he/she pays a daily, weekly, or monthly rent to the guild. This interaction between the guild and the players is known as a scholarship program. The players or ‘scholars’ can go on to receive additional money from the guild down the line by becoming mentors for new scholars. They will be responsible for teaching them in-game strategies and sharing any other relevant information to turn them into successful scholars.
Important to note that the best performing scholars will get additional rewards from the guild depending on their performance.
Research-
Research within a guild can take many forms. One aspect that’s common amongst all is having people dedicated to doing research into new strategies for the games that the guild is involved in. They are always trying to find the meta to earn the most money from a specific game. Other research includes keeping a keen eye on the P2E ecosystem in general. This means continuously keeping a check on new games that may have potential and trying to get in early on them. Another aspect is doing research to create educational guides not only for members of the guild/DAO but also for newcomers who aren’t in the DAO. This general provision of content should continue to attract new people into the crypto gaming economy.
Trading & Farming-
By participating in so many different games the guild will own a ton of different assets. Due to how fast-paced and unpredictable crypto is, it will require some level of managing and oversight. Let’s start with the trading, the in-game assets that are used in the scholarship programs are traded for two reasons. The obviouos one is that if the game gains popularity then the NFTs will eventually appreciate in value, but the other reason is that in most games these NFTs can be upgraded through playing the game, so once a scholar fully upgrades a NFT character it can be sold by the guild for some decent profit. Other NFTs are static NFTs such as land NFTs, a guild that owns land NFTs in something like Sandbox can earn money from the economic activity that takes place on it and then eventually sell the land once it appreciates in value.
Trading of the tokens is also very important and usually requires a more active approach in comparison to the NFT trading side of things. Each P2E game has either one token or a dual-token model. To profitably trade these, the members responsible for trading will need to have deep knowledge of the tokenomics and the P2E sector in general. Then you have the farming aspect, any DeFi degen knows the constant attention yield farming requires especially in early stage stuff. It’s slightly similar with P2E but also different due to the dual-token model where one token is an emission token that players get, so the balancing act of selling the emission token or using it for in-game stuff such as upgrades becomes tricky. Some guilds also participate in being LPs on different DEXs with the tokens they own to earn decent passive rewards.
Others-
Other revenue streams include things like merch sales & sponsorships. Some guilds have their own twitch streams and teams to participate in competitive Esports like tournaments. This will bring in more sponsorship revenue. In a way, guilds could be looked at as the modern version of Esports organizations.
Treasury
The treasury is where all the assets are held. The in-game NFTs, the Land NFTs, the P2E tokens, and the farming rewards. Everything runs through the treasury.
subDAO
If a guild participates in multiple games, then coordinating all activities under one DAO can become very chaotic. Hence, guilds are divided into subDAOs. Each subDAO is responsible for a specific game. So a guild can be divided into an Axie subDAO a Crabada subDAO and so on. A subDAO will be linked to the multisig of the main treasury so all the NFTs & tokens that are earned or used by the subDAO will eventually redirect back to the main treasury.
subDAOs allow people who are knowledgeable in a specific game to specialize in that game. They can discuss strategies, become scholars or mentors, participate in farming for that specific token, participate in trading or LPing and so on. It’s a DAO within a larger DAO that makes the entire system more organized. Coordinating so many different games under one DAO will naturally get chaotic, subDAOs are a fix to this problem.
On a side note, I had a thought of creating an index of subDAOs. Suppose I’m bullish on game ABC and believe that participating in the game in any way will be incredibly profitable but I don’t have the time or patience to figure it out and play it myself. I can invest in basket ABC which is an index that contains the tokens of all the subDAOs that are participating in that specific game. If the subDAOs don’t have their own token, then create a way to track the performance of subDAOs playing game ABC and then create and index out of it so people can get exposure. If you are bullish on a specific game, then you can get exposure to multiple different approaches to one game through one index. Let me know what yall think.
Token
Each guild has its own native token. The general use cases for most of these tokens is staking & governance. Some guilds require people to use their native token on their website or app for things like exclusive content or any other type of use case within their respective websites/apps. Some guilds also offer the performance bonuses in their native tokens.
The governance is fairly self-explanatory. Token holders get to vote on different proposals for the guild. Staking on the other hand comes in many forms. Tokens can be directly staked to earn a portion of the revenues earned by the guilds treasury. Other purposes of staking comes from vault-specific staking which I will further discuss below.
Vaults
Since guilds are involved in many different activities they have specialized vaults and each vault represents a specific activity. So users can stake their native token in any one of these specialized vaults to earn a portion of the reward/revenues. So there can be a vault for Axie, a vault of Crabada, a vault for Sandbox, a vault of DeFi Kingdoms, and so on. Some guilds also have vaults to represent money made from activities such as merch and sponsorships. So users can choose to stake their tokens in a specific vault which they believe will perform the best and that way they earn more rewards from revenue share, or people who aren’t deeply involved or well-researched can stake in the general vault which earns them a portion of the overall revenue generated by the guild.
Differentiators
I’ve outlined the general structure of guilds for you, but every guild has to have some element that differentiates themselves from the rest.
Merit circle host its own meta-games on top of existing games for its community members. It works by them establishing partnerships with gaming projects and then creating an integration with merit circle. An example is their partnership with Azuro to bring betting features for the Merit Circle community.
Good Games Guild has its own app. This app allows members to track their detailed performance across the different games they play. It maps out their achievements and rewards earned. It also provides an easy off-ramp into fiat for users who want to sell their rewards directly from the app. Additionally, it offers some exclusive features which can be unlocked by the reward tokens or $GGG.
Astra Guild Ventures uses its research team to launch new games. They created the concept of Initial Game Offering (IGO) wherein they work with devs to launch new games through the guild. This makes them a guild + game production house. Players of the games & creators of the games.
Yield Guild Games came up with the sponsor-a-scholar program. Think of traditional gaming. When sponsors see an up & coming talent they’ll probably back them by sponsoring them early on in their career. An existing high level talent will also be given much higher level sponsors. Similarly, sponsors can now directly sponsor scholars by covering the cost of the NFTs, they can also make additional arrangements on the side if the scholar has a popular stream or something of the nature. Yield Guild Games also introduced the concept of regional subDAOs. IndiGG is the Indian regional subDAO which has recently launched.
As an investment
Now that you know the playbook, let’s look at what guilds are like in terms of investing in them. Before we get into this, these are just my personal thoughts that I want to share. I’m not rich nor am I a genius so please don’t consider this financial advice.
In its current state, most of crypto gaming usage is likely to be dominated by gaming guilds because they have the capital to cover the start-up costs which every casual person doesn’t have. So most new users will most likely start their crypto gaming journey through a guild. Additionally, having teams working on researching strategies and dedicated scholars for each game will mean that it will be tough to compete against guilds in the P2E economy. This means that guilds will own major portions of the token supply of the P2E games. This makes guild a sort of leveraged bet on the crypto gaming economy because you get exposure to upside of playing the games and the upside of the tokens themselves doing well.
Let’s run some numbers. These 6 guilds have combined figure of around 50,850 scholars. Let’s do a comparison with Axie since it’s the most popular P2E game. Let’s assume that around 60% of these scholars are focused on Axie (idk actual number, could be higher or lower). That’s 30,510 scholars focused on Axie. Over the last 30 days, Axie had a total of 128k users. So around 23.8% of that activity would be coming from guilds. This is just Axie, think about what it will be like with the newer games. As newer games come along it is more likely that they will be dominated by guilds because these guilds are attracting new gamers at a very high rate, in-between 100%-400% monthly increase in scholars.
Risks
The main risk is not so much from an investors stand point, but a sector standpoint. Gaming guilds dominating in every game means that the entire sector will essentially be controlled by a few players, making it centralized to some extent. This defeats the entire purpose of gaming per se, because it’s meant to be a fun thing you do when you’re chilling with the homies. But guilds make it a somewhat mercenary environment where you can’t really play for fun. This may dissuade many people from playing these games, resulting in the entire P2E sector usage coming solely from guilds.
From an investors standpoint I guess the main risk would be that the success of guilds is entirely dependent on the games. In the current state of how P2E games are designed, the guilds have an edge because of the start-up cost element and the fact that they have dedicated research teams to figure out strategies. There is a possibility of a new wave of games to come out that follow different mechanics and have completely different concepts which make it more friendly to play as a recreational player. This can chop away at the guilds dominance.
This is pretty much it for the article, I hope it helped you.
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