Overview: How Gaming Guilds Work
In the current state of P2E gaming, the cost of joining and reaping the benefits of a game has become exorbitantly high to the point where potential new players are quickly deterred due to the upfront cost to participate in the P2E experience. Evidently, this upfront cost is unattainable to those who would benefit from and play the game the most.
Capitalizing on these barriers of entry, gaming guilds have become the primary path for people of lower socioeconomic status to participate in these thriving ecosystems. By facilitating the necessary asset to reap the benefits of the game, guilds like YGG have quickly amassed millions of dollars worth of NFTs under management across multiple games.n exchange, these gamers share their earnings with Guilds
Currently, individuals who are able to participate in these lucrative ecosystems with the help of Gaming Guilds are subject to some form of profit-sharing and in exchange, they are able to be quickly onboarded to begin receiving the native token they desire. This process is effectively being described as becoming a “Scholar” industry-wide. In addition to profit-sharing with gamers, gaming guilds are growing their treasury by holding various assets (ie., Game NFTs) and early-stage investments in P2E games.
The emergence of P2E alongside intuitive levers of economic empowerment has created many successful guilds thus far. In addition to profit-sharing with gamers, gaming guilds grow their treasury by holding various assets (i.e., game NFTs) and early-stage investments in P2E games.
The majority of the Guilds are associated with P2E games, and their ultimate success depends on that.
Internal underpinnings and Future Growth
If the associated P2E games asset demand reduces or token value goes down, the Guild also suffers. To answer whether Gaming Guilds are practical, one must answer whether P2E games are sustainable. The answer is partial – P2E games still require more fine-tuning to become sustainable.
The reason why I argue the trend of the P2E game will continue for the foreseeable future is due to the resounding success of Axie Infinity. We have seen broadly that gamer retention in Axie has been significantly higher than traditional mobile games. We also saw Axie generating 1.3 billion cumulative revenue, achieving scale with nearly 3 million DAU at its peak, and the player retention has generally been consistent over time. On the contrary, this success can be attributed to token incentives which haven’t been sustainable, and we saw more than 85% collapse in the prices of SLP. Consequently, it doesn’t come as a surprise since the peak DAUs on Axie have fallen more than 50% to 1.48 million.
I believe the entire field of P2E and its relating tokenomics is still in infancy, with best practices unknown. Over time, these models will be increasingly tested and scrutinized. We will develop sustainable P2E models that effectively engage users yet incentivize the long-term sustainability of the P2E economies. We already see interesting experiments; for instance, Crabada, instead of having a typical dual tokens model (standard in P2E games), has three tokens. Its equivalent token version of SLP has four distinct sinks (breeding fee, marketplace fee, hiring fee, network gas fee) compared to Axies SLP’s single sink (breeding fee). Even if P2E games are not sustainable long-term, one advantage Guilds have is that they can also shift their resources and scholars towards the game that optimizes their returns. One trend recently has been that many Gaming Guilds are moving gamers away from Axie infinity towards other promising P2E games. For reference, YGG is now invested in 21 different P2E games.
Comparison of different Guilds on the market
Not all Gaming Guilds are equal, all of them have similar but unique business models.
Yield Guild Games (YGG) franchises its brand and creates an organizational structure known as the “Guild of Guilds.” YGG is the main DAO and has a second layer called subDAO. YGG main DAO focuses on the decision-making process on the DAO’s assets (i.e., tokens, NFTs, virtual land parcels), and token holders determine the direction. SubDAO, on the other hand, represents either a specific game division or region. For example, YGGLOK (League of Kingdoms game), YGGSPL (Splinterlands), YGG Pilipinas (Philippine focused), YGGSEA (Southeast Asia focused), and IndiGG (India focused)
YGG has a take-rate of 10% from each subDAO that leverages its brand. Two potential risks of this model are cannibalization and revenue dependency. As subDAO grows more significant, it may cannibalize YGG’s revenue source from its scholarship program. Additionally, if the subDAO gets big enough, it may leave the main DAO, impacting revenue. In contrast, this model does allow them to grow fast
The main strength of YGG has been its first-mover advantage; they actively invested in in-game assets (NFTs), early-stage gaming tokens, and other Guilds (i.e., Merit Circle) before competition emerged. This helped them acquire many scholars, forged essential partnerships, and gave access to promising early-stage gaming projects; who flocked to them for capital, player liquidity, and operational support.
Merit Circle’s core business is similar to YGG. However, instead of franchising, Merit Circle develops its players by creating an end-to-end system. This system covers everything from recruitment to gaming education to tournament participation, akin to eSports company operations. The strength of this model is that there is less dependency on external forces. Merit Circle’s activities also go beyond just providing scholarships to gamers. Merit Circle also has a game incubation and development arm(Merit Circle Studios) that houses upcoming games, similar to how they created their first creative project, Edenhorde. Merit Circle is also developing a native NFT marketplace for in-game assets.
BlackPool is a unique guild. Even though it offers scholarships to gamers and makes seed investments in P2E games, its main focus is quantitative NFT trading. Their strategy revolves around arbitraging NFT trades between primary and secondary markets and day trading of NFT assets based on a news event.
Trends in the Guild Market
New guilds are trying to distinguish themselves by focusing on a particular niche. UniX and Good Game Guild (GGG), for example, have been focusing on the infrastructure of the P2E ecosystem. UniX is soon launching its gaming studio called 1MHZ to incubate quality P2E games and working on a launchpad. On the other hand, GGG already has a launchpad called MetaversePad and has an incubation arm called Good Games Labs that has helped around 100 projects. Some Guilds like Ancient8 are carving a niche by focusing on the regional market. In the case of Ancient8 they are focusing on Vietnam and tailoring their educational training and scholarship application just for the Vietnamese community.
Another tailwind for Guilds is that projects like BreederDAO are emerging. They act as a factory/supply chain for Guilds to acquire NFTs. This enables a large volume of gaming NFTs to be outsourced, allowing the Guilds to scale. Exposure to these factories (BreederDAO) could be an interesting opportunity for Investors as they can bet on the growth of the overall Guild market without taking a concentrated bet on an individual Guild.
One headwind for Guilds is that P2E games are now implementing Gaming Guild operations in-game, primarily via NFT renting mechanism. Games such as Basketballverse, Ascenders, and Rumble Kong are some of the culprits. This could potentially reduce Guild’s market share in the longer term.
For the potential Investor who yearns for exposure to P2E games – Gaming Guilds provides an excellent index level exposure to this space. The actively-managed nature of these Guilds also means emerging trends within these sectors are captured dynamically. Better yet, if one wants super index exposure to multiple Guilds themselves – YGG and BreederDAO warrant your attention.