Spam and bots have been the bane of anyone that uses the internet for years, but recently this digital scourge has ramped up activity in the crypto sector in a big way.
Crypto intelligence provider LunarCrush has revealed spam in the cryptosphere has increased by an astonishing 3,894%. The firm has been collecting crypto-specific social data since 2019, and says not only is spam at an all-time high, it’s also “the fastest growing metric on social media.”
The findings were published in a May 25 report, stating that “more spam accounts than you would think are actually people.” For this reason, it is often a challenge for software to detect and flag spam.
Spam Volume collected by LunarCrush over the previous 2 years
Twitter is the social media platform of choice for the crypto industry, and it is awash with spam and bots. There has been an estimated 1,374% increase in Twitter spam volume over the past two years, according to LunarCrush.
LunarCrush CEO Joe Vezzani told Quantum Economics founder Matti Greenspan in his crypto newsletter:
“For a Web2 platform like Twitter, there is a direct incentive to turn a blind eye to fake accounts because it increases the value of their platform.”
Tokenized Web3 platforms (such as Aave’s Lens Protocol or Orbis) differ in that they want to have as many genuine users as possible holding the asset rather than trying to extract value from the community, he added.
Billionaire Tesla CEO Elon Musk’s sensational takeover of the platform was put on hold earlier this month pending further details supporting Twitter’s assertion that spam and fake accounts represent less than 5% of the platform’s traffic.
Musk plans to crack down on spam bots that have plagued the platform and suggests that the company’s claim of 95% genuine users is too high.
Twitter claims that >95% of daily active users are real, unique humans. Does anyone have that experience?
Purging the bot accounts would drop the number of followers most genuine accounts have. One estimate from SparkToro suggested that Musk could lose half of his 95 million followers. Earlier this month, the software firm conducted in-depth analysis reporting that almost 20% of all active Twitter accounts are fake or spammers.
Until Musk gets his way and shakes the spammers out of the Twitter tree, users of the platform and other social media sites will have to be extra vigilant regarding the rising tide of crypto scams and spam which none of them appear to have the power to control.
Ahead of the Merge tentatively penciled in for August, Ethereum’s Beacon Chain experienced a seven-block reorganization (reorg) yesterday.
According to data from Beacon Scan, on May 25 seven blocks from number 3,887,075 to 3,887,081 were knocked out of the Beacon Chain between 08:55:23 to 08:56:35 AM UTC.
The term reorg refers to an event in which a block that was part of the canonical chain, such as the Beacon Chain, gets knocked off the chain due to a competing block beating it out.
It can be the result of a malicious attack from a miner with high resources or a bug. Such incidents see the chain unintentionally fork or duplicate.
On this occasion, developers believe that the issue is due to circumstance rather than something serious such as a security issue or fundamental flaw, with a “proposer boost fork” being highlighted in particular. This term refers to a method in which specific proposers are given priority for selecting the next block in the blockchain.
Core Ethereum developer Preston Van Loon suggested the reorg was due to a “non-trivial segmentation” of new and old client node software, and was not necessarily anything malicious. Ethereum co-founder Vitalik Buterin labeling the theory a “good hypothesis.”
Block reorg: Beacon Scan
Martin Köppelmann, the co-founder of EVM compatible Gnosis chain was one of the first to highlight the occurrence via Twitter yesterday morning, noting that it “shows that the current attestation strategy of nodes should be reconsidered to hopefully result in a more stable chain! (proposals already exist).”
In response to Köppelmann, Van Loon tentatively attributed the reorg to the proposer boost fork which hadn’t fully been implemented yet:
“We suspect this is caused by the implementation of Proposer Boost fork choice has not fully rolled out to the network. This reorg is not an indicator of a flawed fork choice, but a non-trivial segmentation of updated vs out of date client software.”
“All of the details will be made public once we have a high degree of confidence regarding the root cause. Expect a post-mortem from the client development community!” he added.
We suspect this is caused by the implementation of Proposer Boost fork choice has not fully rolled out to the network. This reorg is not an indicator of a flawed fork choice, but a non-trivial segmentation of updated vs out of date client software.
— prestonvanloon.eth (@preston_vanloon) May 25, 2022
Earlier today, another developer Terence Tsao echoed this hypothesis to his 11,900 Twitter followers, noting that the reorg seemed to be caused by “boosted vs. non boosted nodes in the network and the timing of a really late arriving block.”
“Given that the proposer boost is a non-consensus-breaking change. With the asynchronicity of the client release schedule, the roll-out happened gradually. Not all nodes updated the proposer boost simultaneously.”
Van Loon spoke at the Permissionless conference last week and said that the Merge and switch to Proof-of-Stake (PoS) could come in August “if everything goes to plan.”
While the reorg is sure to raise questions of this potential timeline, Van Loon and the other developers have not yet outlined whether it will have any impact at all.
Kazakhstan, one of the global leaders in crypto mining with a recent history of hostile measures against the industry, is taking a step toward a comprehensive fiscal framework for mining operators.
On Thursday, May 25, the lower chamber of Kazakh parliament, Mejlis, passed in the first reading the amendments to the national tax code, regulating the fiscal burden on crypto mining. These amendments suggest graded tax rates tied to the electricity prices consumed by mining entities.
For example, the cheapest grade of electricity prices, 5 to 10 tenges ($0,012–0,024) for Kwh, would come with an additional burden of 10 tenges ($0,024). For 10–15 tenges ($0,024–0,036) per Kwh, the tax would be 7 tenges ($0,017) and for 20–25 tenges ($0,048–0,060) per Kwh — 3 tenges ($0,0072).
Proposed amendments overstride the earlier initiative to raise the price for electricity from $0.0023 per Kwh to $0.01 for crypto miners, voiced by Kazakhstan’s First Vice Minister of Finance Marat Sultangaziyev back in February.
The chamber indicated that the amendments are also aimed at creating a stimulus for using renewable sources of energy. In the case of green energy the tax would be only 1 tenge ($0,0024) without any regard to the electricity cost.
As Kazakh Economic Minister Alibek Kyantyrov stated, the measures are intended to “level the load and de-stimulate the consumption from private sources of energy”.
On April 29, the country’s Minister of Digital Development compelled digital mining businesses to provide information about electricity consumption and “technical specifications” for connection to the power grid 30 days before starting operations. Earlier, in March, 106 illicit crypto mining operations were shut down following raids by the Financial Monitoring Agency, which seized over 67,000 pieces of equipment at the time.
Three years after being ousted as CEO of WeWork, Adam Neumann has jumped on the crypto bandwagon, raising $70 million in the first major funding round for his climate tech venture Flowcarbon.
The project aims to make carbon trading more accessible by putting carbon credits on the blockchain.
Neumann is an Israeli-American businessman and investor famous for his role in founding coworking space provider WeWork in 2010, a company once heralded as the future of work spaces.
However, it all came crashing down in 2019 when the company attempted to go public, which instead lifted the lid on WeWork’s unprofitable business model and questionable leadership antics. The company went from being privately-valued at $47 billion in August 2019 to talk of filing for bankruptcy just six weeks after, with Neumann pressured to step down as CEO.
Adam and his wife, Rebekah Neumann have been listed as co-founders of Flowcarbon, along with CEO Dana Gibber, and COO Caroline Klatt — both of whom are co-founders of Headliner Labs, a company building AI-powered chatbots for major media brands. Ilan Stern, another co-founder of Flowcarbon, heads up Neumann’s own family office.
According to Flowcarbon, the recent funding round includes $32 million in funding from Silicon Valley investors Marc Andreessen and Ben Horowitz through their a16z crypto venture capital firm. Other investors include General Catalyst and Samsung Next.
Another $38 million was raised in a token-sale of Flowcarbon’s first carbon-backed token, the Goddess Nature Token (GNT).
The company describes itself as a pioneering climate technology company working to build market infrastructure in the voluntary carbon market (VCM). Through the tokenization of carbon credits on the Celo blockchain, Flowcarbon wants to make the purchase, selling and trading of carbon credits more accessible and efficient than the current carbon markets.
We highlighted @weareflowcarbon in last week’s State of Crypto report as a prime example of web3 companies making a positive impact.
Flowcarbon’s marketplace is funding projects that reduce or remove carbon from the atmosphere.https://t.co/yntqLkCUdp
Carbon trading is a market-based system designed to reduce greenhouse gas emissions that contribute to global warming.
Businesses that produce carbon-emissions can buy carbon credits to offset them from projects that remove or reduce greenhouse gases from the atmosphere, such as reforestation projects.
However, Flowcarbon argues that the voluntary carbon market is currently “inefficient, opaque, and inaccessible,” with brokers and consultants charging up to 20 percent in fees, many deals done behind closed doors and inconsistent pricing for carbon credit depending on the buyer.
Enter Flowcarbon, which will enable anyone to tokenize their certified off-chain carbon credits, unlocking a new economic flywheel for sustainability.
— AriannaSimpson.eth (@AriannaSimpson) May 24, 2022
Flowcarbon’s solution to the voluntary carbon market is not unique. Other projects aimed at facilitating the buying and selling of tokenized carbon credits include Toucan Protocol, JustCarbon and Likvidi.
Arianna Simpson, General Partner at a16z said it was an obvious area that could benefit from blockchain tech.
“The carbon market is extremely opaque and we believe demand for offsets is rapidly outpacing the speed at which supply can be increased, especially for nature-based projects. Tokenization is an obvious solution.”
Digital asset investment products saw $141 million in outflows during the week ending on May 20, a move which reduced the total assets under management (AUM) by institutional funds down to $38 billion, the lowest level since July 2021.
According to the latest edition of CoinShare’s weekly Digital Asset Fund Flows report, Bitcoin (BTC) was the primary focus of outflows after experiencing a decline of $154 million for the week. The removal of funds coincided with a choppy week of trading that saw the price of BTC oscillate between $28,600 and $31,430.
BTC/USDT 1-day chart. Source: TradingView
Despite the sizable outflow, the month-to-date BTC flow for May remain positive at $187.1 million, while the year-to-date figure stands at $307 million.
On a more positive note, the multi-asset category of investment products managed to record a total of $9.7 million worth of inflows last week. This brings the yearly total inflow into these products to $185 million, representing 5.3% of the total AUM.
CoinShares pointed to the uptick in volatility as a possible source for the increased inflows into multi-asset investment products, which can be seen as “safer relative to single line investment products during volatile periods.” So far in 2020, these investment products have only experienced two weeks of outflows.
Cardano and Polkadot led the altcoin inflows with increases of $1 million each, followed by $700,000 worth of inflows into XRP and $500,000 into Solana (SOL).
Flows by asset during the week ending May 20, 2022. Source: CoinShares
Out of all the assets covered, Ethereum (ETH) has seen the worst performance so far this year with $44 million worth of outflows in the month of May bringing its year-to-date figure to $239 million.
Strengthening dollar continues to impact crypto market sentiment
The declining interest in digital asset investment products comes amidst the backdrop of a strengthening dollar, which has been “one of the most important macro factors driving asset prices over the last 6 months” according to cryptocurrency market intelligence firm Delphi Digital.
U.S. dollar currency index. 1-week chart. Source: Delphi Digital
As shown on the chart above, the Dollar Index (DXY) has risen from 95 at the start of 2022 to 102 on May 23, a year-to-date gain of 6.8%. This marks the fastest year-over-year change for the DXY in recent history and led to a breakout from the range it had been stuck in for the past 7-years.
Delphi Digital said,
“This DXY strength has been a consistent drag to risk asset performances over this same time period.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
E-commerce giant eBay has officially launched its first NFT drop, with a series of tokenized collectibles featuring National Hockey League (NHL) legend Wayne Gretsky going live on May 23.
The NFT collection depicts animated versions of Gretsky that were inspired by Sports Illustrated magazine covers. They come in four different tiers of rarity including green at 299 editions per token, gold at 199, platinum at 99, and diamond at 15.
The collection is up for sale on eBay’s marketplace now, however, the limited edition diamond, platinum, and gold tiers worth $1,500, $100, and $25 apiece have already sold out.
According to the announcement from eBay, the collection was developed in partnership with environmentally focused NFT platform OneOf, which supports multiple “energy-efficient blockchains” to provide sustainable NFT collections.
eBay initially enabled NFT listings around mid-2021 but hasn’t integrated blockchain tech to support the sales on its marketplace. In terms of this official drop, users are sent a redemption link via in platform messaging or email to receive their NFT outside of the platform.
Secondary trade for the NFTs on OneOf has been minimal so far, however, with only three users listing platinum tiered tokens at a floor price of $199, while one user has listed a gold tier NFT for $69.
Commenting on the drop, eBay’s VP of Collectibles, Electronics, and Home Dawn Block stated that NFT tech is “revolutionizing the collectibles space” and emphasized that the firm is looking to bring NFTs to mainstream collectors across the globe.
“Through our partnership with OneOf, eBay is now making coveted NFTs more accessible to a new generation of collectors everywhere. This builds upon our commitment to deliver high passion, high-value items to the eBay community of buyers and sellers.”
OneOf CEO Lin Dai echoed similar sentiments, noting that the duo is looking to make NFTs accessible to people that aren’t well versed in crypto:
“You don’t have to be a crypto expert to buy, sell, and collect NFTs. OneOf and eBay are bringing transformative Web3 technology to the next 100M non-crypto-native mass consumers.”
Digital artist and popular non-fungible token (NFT) creator Mike Winkelmann, more commonly known as Beeple, had his Twitter account hacked on Sunday, May 22 as part of a phishing scam.
Harry Denley, a Security Analyst at MetaMask, alerted users that Beeple’s tweets at the time containing a link to a raffle of a Louis Vuitton NFT collaboration were in fact a phishing scam that would drain the crypto out of users’ wallets if clicked.
⚠️ Beeple’s Twitter account has been compromised (ATO) to post a phishing website to steal funds.
The scammers were likely looking to capitalize on a real recent collaboration between Beeple and Louis Vuitton. Earlier in May, Beeple designed 30 NFTs for the luxury fashion brand’s “Louis The Game” mobile game which were embedded as rewards to players.
The scammer continued to post phishing links from Beeple’s Twitter account leading to fake Beeple collections, luring in unsuspecting users with the promise of a free mint for unique NFTs.
Bad actors continue have access to Beeples Twitter account and they have now tweeted another phishing domain.
This one just prompts the user to send ETH to an EOA (0xcad7fc974F61A08ADEF110D1BA446fa5b5B5Bb27).
The phishing links were up on Beeple’s Twitter for around five hours and on-chain analysis of one of the scammers’ wallets shows the first phishing link scored them 36 Ethereum (ETH) worth roughly $73,000 at the time.
The second link netted the scammers around $365,000 worth of ETH and NFTs from high-value collections such as the Mutant Ape Yacht Club, VeeFriends, and Otherdeeds amongst others bringing the grand total value stolen from the scam to around $438,000.
On-chain data shows the scammer selling the NFTs on OpenSea and putting their stolen ETH into a crypto mixer in an attempt to launder the gains.
Beeple later tweeted that he had regained control of his account and added to remind his followers that “anything too good to be true IS A F*CKING SCAM.”
ugh we’ll that was fun way to wake up.
Twitter was hacked but we have control now. Huge thanks to @garyvee ‘a team for quick help!!!!
Beeple has created three of the top ten most expensive NFTs sold to date including one which sold for $69.3 million, the most expensive ever sold to a sole owner. This attention has made him a target for hacks.
In November 2021, an admin account on Beeple’s Discord was hacked with scammers there also promoting a similarly fake NFT drop which resulted in users losing around 38 ETH.
Earlier this month, cybersecurity firm Malwarebytes released a report which highlighted a rise in phishing attempts as scammers try to cash in on NFT hype. The firm noted the use of fraudulent websites depicted as legitimate platforms is the most common tactic used by scammers.
Bitcoin (BTC) has declined by more than 55% six months after it reached its record high of $69,000 in November 2021.
The massive drop has left investors in a predicament about whether they should buy BTC when it is cheaper, around $30,000, or wait for another market selloff.
The more you look at prior $BTC price history the more one can think it’s not the bottom
After 190 days from the all-time high, Bitcoin still had another 150 to 200 days until it hit bottom last couple of cycles (red box)
This is primarily because interest rates are lower despite Federal Reserve’s recent 0.5% rate hike. Meanwhile, cash holdings among the global fund managers have surged by 6.1% to $83 billion, the highest since the 9/11 attacks. This suggests risk aversion among the biggest pension, insurance, asset, and hedge funds managers, the latest Bank of America data shows.
Many crypto analysts, including Carl B. Menger, see greater buying opportunities in the Bitcoin market as its price searches for a bottom.
But instead of suggesting a lump-sum investment (LSI), wherein investors throw down a huge sum to enter a market, there’s a seemingly safer alternative for the lay investor, called the “dollar cost averaging,” or DCA.
Bitcoin DCA strategy can beat 99.9% of all asset managers
The DCA strategy is when investors divide their cash holdings into twelve equal parts and buy Bitcoin with each part every month. In other words, investors purchase more BTC when its prices decline and less of the same asset when its prices rise.
The strategy has so far provided incredible results.
For instance, a dollar invested into Bitcoin every month after it topped out in December 2017—near $20,000—has given investors a cumulative return of $163, according to CryptoHead’s DCA calculator. That means a circa 200% profit from consistent investments.
Bitcoin DCA calculator. Source: CryptoHead
The Bitcoin DCA strategy also originates from an opinion that BTC’s long-term trend would always remain skewed to the upside. Menger claims that buying Bitcoin regularly for a certain dollar amount could have investors “beat 99.99% of all investment managers and firms on planet Earth.”
Historical returns in traditional markets, however, do not support DCA as the best investment strategy. Instead, the LSI strategy proves to be better.
For instance, a study of 60/40 portfolios by Vanguard, which looked at every 12-month timeframe from 1926 until 2015, showed that all-at-once investments outperformed the DCA two-thirds of the time, averaging 2.4% on a calendar year basis.
This somewhat raises the possibility that Bitcoin, whose daily positive correlation with the benchmark S&P 500 index surged to 0.96 in May, would show similar results between its DCA and LSI strategies in the future.
Thus, investing regularly in Bitcoin with a fixed cash amount might not always give better profits than the all-in method.
BTC/USD daily price chart. Source: TradingView
But what about combining both?
Larry Swedroe, chief research officer for Buckingham Wealth Partner, believes investors should invest with a “glass is half full” perspective, meaning a mix of LSI and DCA.
“Invest one-third of the investment immediately and invest the remainder one-third at a time during the next two months or next two quarters,” the analyst wrote on SeekingAlpha, adding:
“Invest one-quarter today and invest the remainder spread equally over the next three quarters. Invest one-sixth each month for six months or every other month.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Blockchains have relied on proof-of-work (PoW) validation since their inception. Yet the PoW consensus proved to be unsustainable with its high energy usage and its need for fast, powerful hardware creating high barriers to entry. That’s why blockchains are adopting proof-of-stake consensus algorithms (PoS), where those wanting to earn rewards don’t have to compete against other miners, but can simply stake part of their crypto for a chance to be chosen to be a validator — and reap the returns.
Everyone who owns crypto on PoS blockchains must want to take advantage of the opportunities staking provides, right? Actually, according to our report, while 56% of those surveyed had staked before, many who hadn’t staked or wouldn’t stake again pointed toward the same hesitation: They don’t want their assets locked up in staking, not when those assets could be put to use elsewhere. This is why liquid staking provides the best of both worlds. It allows investors to stake their assets while also allowing them to use those assets in other projects during lock-up.
Despite the fact that this innovation is able to lower barriers to staking, there’s still confusion about what liquid staking is and what it can offer to the crypto community. What follows are some of the misconceptions about liquid staking and what the truth is about this new opportunity.
Staking is changing the way blockchains function. It brings better energy efficiency to blockchain validation, more flexibility to the hardware needed and quicker transaction frequency. But despite its benefits, one of its biggest challenges — and what’s holding many back from staking — is the lock-up period. Assets are inaccessible to the holder while being staked, and those owners can’t do anything with them — like invest in decentralized finance (DeFi) — while they’re being staked. It’s because of this sacrifice that many are hesitant to stake.
However, liquid staking solves this issue. Liquid staking protocols allow holders of staked assets to get liquidity in the form of a derivative token that they can then use in DeFi — all while the staked assets continue to earn rewards. It’s a way to maximize earning potential while having the best of both worlds.
PoS is also swiftly rising in popularity. PoS protocols account for over half of crypto’s total market cap, a total of $594 billion. The opportunities will only increase as Ethereum moves fully to PoS in the coming months. However, only 24% of the total market capitalization of staking platforms is locked in staking — meaning there are many who can stake but aren’t doing so.
Despite the benefits of liquid staking, there’s still confusion about how it functions. Here are four common misconceptions, and how you should be thinking about liquid staking instead.
Misconception 1: Only one player or protocol will exist. One of the misconceptions about liquid staking is that only one player will exist through which investors can gain liquidity. It may seem that way since it’s still so early in the liquid staking space, but in the future, multiple liquid staking protocols will coexist. There may also be no capping to the number of liquid staking protocols that can coexist, either. In fact, the more the number of protocols, the better it is for the network, as it can reduce instances of stake centralization and fears of a single point of failure.
Misconception 2: It’s only limited to liquidity. Liquid staking isn’t just a way to get liquidity. While liquid staking does help PoS networks acquire staked capital that secures the network, it is not just limited to that. It’s also a way to get composability because you can use your derivative in multiple places, which you can’t do with an exchange. The synthetic derivatives that are issued as part of liquid staking and used in supported DeFi protocols for generating more yield actually help in constructing monetary building blocks across the ecosystem.
Misconception 3: Liquid staking is solved at the protocol level. People think liquid staking will be solved at the protocol level itself. But liquid staking isn’t just about enabling functionality at a protocol level. It’s about coordinating with other protocols, bringing more use cases, more features and more usability. A liquid staking protocol is solely focused on developing the architecture that will facilitate the creation of synthetic derivatives and ensuring that there are DeFi protocols with which those derivatives can be integrated.
Misconception 4: Liquid staking defeats the purpose of staking overall. Some say liquid staking defeats the purpose of staking or locking up assets, but we’ve seen that’s not true. Liquid staking not only increases network security but also helps achieve a crucial objective of the PoS network, which is staking. If there is a solution that issues derivatives for staked capital within the network, then not only is the staked capital ensuring that the PoS network is secure, but it is also creating an enhanced experience for the user by enabling capital efficiency.
The future of PoS
Liquid staking not only solves a problem for crypto enthusiasts who want to stake by issuing tokens they can use in DeFi while their assets are staked. An increase in those staking their assets — which is made easier by making liquid staking available — actually makes the blockchain more secure. By learning the truth about common misconceptions, investors will enable staking to truly become an innovative new way for blockchains to achieve consensus.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Mohak Agarwal is the CEO of ClayStack. He is a serial entrepreneur and investor on a mission to unlock the liquidity of staked assets.
You’ve seen it before. An amazingly talented gaming founder teams up with a top-tier studio, promising to create a wondrous game experience built on the industry’s most powerful engines. But then, it happens: It’s paired with a dubious shitcoin that launches well before even a morsel of game content drops.
In the not-so-distant past, mainstream media may have referred to the hype-fueled crypto bull market — but, with Bored Ape floor prices still in the clouds, we’ll respectfully call it what it is: the monkey run. Market volatility aside, Metaverse evangelists still claim that Web3 finance will revolutionize the way that games monetize. I call BS.
The focus right now is not on new monetization models. The only thing these token raises are challenging is the idea of capital formation — not monetization. However tempting, the monkey run has quickly deluded some of our brightest founders into believing that they should raise a nonsensically large amount of capital from tokens printed out of thin air, as a faulty substitute for a real monetization strategy.
We’re ready for a change of mindset. The critical question is this: how can we make the hyper-capitalized, hyper-hyped Web3 Metaverse project work — for gamers, for founders, and for investors?
Everyone does well in a monkey run, financially speaking. From major smart contract platforms to experimental DeFi protocols to the next Axie Infinity copycat, the monkey market beautifully substantiates the notion that there actually are no shitcoins — only shit prices.
For a clearer picture, journey with me through the deal pipeline into the heart of crypto venture capital, where shiny new metaverse and gaming projects relentlessly flood inboxes. Links to cinematic trailers, Unreal Engine mockups, and convoluted “token economics diagrams” abound, parroting their demands to raise millions on simple agreements for future tokens to adequately prepare their token launch(es) and initial decentralized exchange offering.
The game’s launch date, you ask? Maybe it’s a “mini-game” planned for Q3, or a massive triple-A launch in mid-2023. What about the kind of utilities the token will have on day one? Well, you can stake them for more tokens, and they might even give you access to the game’s first NFT sale. Sometimes they even advertise a utility-less utility token and a governance-less governance token — justifying their existences because the big daddy exchanges agreed to list them in just a few months.
This might read like an exaggeration, and I wish it were. However, these are the most troubling realities facing the current landscape of token launches in the middle of a bull — excuse me, a monkey market. They capture short-term enthusiasm without a sustainable plan for future-building. These pitches capture a moment — but not the right perspective and business model required for the future of gaming.
The GameFi token landscape is incredibly fragmented. While early liquidity is tempting, a premature token launch has serious risks. The balancing act of creating sticky tokenomics and successful game design actually offers a narrower focus for project tokens: user engagement and retention, not pure monetization.
The final optimization problem? Maximize additional user retention and engagement per project token emitted, subject to some level of existing Web3 revenues and user community.
You do not immediately need your own project token to monetize your application. Tokens are simply forms of exchange for the assets that your virtual world generates and sells. If your Web3 game can’t operate on an already liquid, volatile token or, worse, a well-pegged stable, then your game is in trouble. Try again!
Instead, raise enough private capital to comfortably get through beta launch. In beta, work with your smart contract platform of choice to integrate its native token and your stablecoin of choice into your game. Begin to observe your core game loops and key revenue streams.
Think of yourself as a data scientist! Is there user behavior you know is defensibly fun but still underperforms? Is it such a valuable loop that perhaps a subsidy can kickstart things? Is currency volatility something your users avoid? Where are your most engaged users coming from? How many are underpaid laborers in developing countries? How many are prosumers looking for the next hip social hangout? How many are whales driving auctions through the roof?
Ultimately, you must design your token to incentivize users to stay in your world. For instance, just like with foreign currencies, you could offer a discount to consumption when paid for in your own project token — but you price your digital goods in USD. You could also utilize the layered-risk treasury strategy, whereby you accept USD (and equivalents), the L1 or L2 of your choice, and your project token. This ensures that you have a large, existing audience immediately equipped to engage with your world. It also helps safeguard you during crypto and macro downturns, and the excess can be used to reward investors and users without exerting sell pressure on your token — among other massive benefits.
The most important thing you can do as a gaming founder in Web3 is to stay focused on improving your game. Tokens cannot make your game — but they can break it.
The right priorities for a sustainable GameFi future
The unique value of gaming and metaverse applications is not the token they circulate. Project value is created by revenues which, in the long run, spawn from unique, in-game digital assets. When these NFT-based assets are owned, experienced and understood by a community, value builds and builds — otherwise stated, the community’s unwillingness to sell increases.
I’m excited for the day when this model becomes the status quo — because it means we’ll be closer to the best Web3 games we’ve ever seen. Instead of the market rewarding short-term bag grabs, we’ll see superior gameplay and tokenomics wrapped into one gaming ecosystem built for the long term.
Engagement, retention, then monetization. Optimize for those things, in that order. Choose the right path.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Alex Ye leads Republic Crypto’s early-stage research, investments, and token economics strategy — helping secure and advance cutting-edge projects for Republic Crypto’s advisory portfolio. Before Republic Crypto, Alex drove fintech and blockchain investments at ZZ Capital, crypto fund research at $7 billion venture fund Top Tier Capital Partners, and at the endowment of the University of Chicago, his alma mater.
