When Bitcoin was first created, the pseudonym Satoshi Nakamoto said that it would be used with its peer-to-peer technology to operate transactions without any middlemen. However, after more blockchains were developed, news technologies emerged in the industry and the hottest one so far was blockchain gaming.
Before the NFTs play-to-earn model was first introduced by Axie Infinity and the likes, people used to play video games mainly for fun. But, that’s not the case anymore.
The innovation didn’t actually stop there and as more play-to-earn games were made; companies were whooping into the industry with innovative approaches that could stabilize and advance the blockchain gaming space.
In a report shared by the information technology company “Accenture”, the firm estimated that the gaming industry has blasted above 300 billion dollars. These players spent a total of 100 billion dollars on in-game items such as character skins, and other perks.
Yield Guild Games or YGG for short is a play-to-earn gaming guild. A blockchain-based guild is basically a community of NFT enthusiasts who collect NFTs from several games to create their own marketplace of some sort. These players could rent out their NFTs from different blockchain games to other players. YGG is structured as a Decentralized Autonomous Organisation (DAO) and the platform also lends out NFTs to players who want to earn.
The developers of YGG believe that digital economies can be worth a lot more than physical ones in the upcoming years. The platform was co-founded by Gabby Dizon, Beryl Li, and Owl of Moistness in late 2020 and according to the Lite Paper of the Yield Guild Games, the goal is to research and invest in profitable yield-bearing NFTs, as well as build a global decentralized economy of Play to Earn gamers — while providing them with a new income stream by allowing them to rent out their NFTs.
Two years after the creation of the platform, YGG has secured a spot as the largest guild in the blockchain gaming space, and the platform has amassed around 250,000 members on its social platforms.
The guild’s investment portfolio includes digital assets, in-game NFTs, and virtual plots of land. Members of the community can rent out their NFTs to other players and earn income from them without having to play the NFT’s game. They can also buy NFTs from the Guild and use them in their game of choice.
The idea was inspired by Axie Infinity’s Scholars. The scholars are owners of Axie NFTs who lend out their creatures to other players and share the profit. However, the only difference is that YGG also takes profit for its part as a middleman, or when it rents out an NFT to you. Yield Guild Games assets under management include League Of Kingdoms, F1 Delta Time, The Sandbox, Illuvium, Monkey Ball, Star Atlas, and more.
The business model that YGG implemented is an innovative one, and it focuses on supporting digital economies through buying and renting out NFTs to other players. The primary source of income for the DAO in YGG is tied to the ownership of YGG-owned NFT assets. Both the guild and players will benefit from the ecosystem. Guild members will be able to use NFTs that they own or those that they rented.
Note that it is possible to enable players to rent NFT assets. But, the current ERC-721 token standard doesn’t technically allow such functionalities. Fortunately, YGG was able to design an in-house smart contract architecture that allows for farming and renting digital assets without any gas fees, and this definitely gives the platform a huge advantage over its competitors.
The project’s native cryptocurrency YGG has a circulating supply of 69 million tokens and YGG is the native ERC-20 governance and utility token of the ecosystem and Yield Guild Games will soon release 1 billion SEA tokens which are going to be the governance tokens for the YGG SEA. Meanwhile, 7.5% of the tokens will be sold in the open market and 25% will be distributed to the community as rewards. Another 10% of YGG SEA will be allocated to support yield farming during the first five years.
As of this moment, YGG has a market value of $375 million. The cryptocurrency is trading around the $4 mark which is down 56% from the all-time high price of $10.50.
Now there is a downside to Yield Guild Games, however. According to the platform’s white paper, the value of YGG crypto is severely dependent on Yields generated from YGG treasury’s assets, and this includes the NFTs that the treasury owns. This means that this dependence is a double-edged sword. For instance, if NFT games surge in popularity, YGG will do and if it’s the contrary, the Yield Guild Games will definitely plummet.
What’s exciting about YGG is also the fundings that it went through. The platform held its initial DEX Offering (IDO) on July 27th, 2021. The platform raised around 12.5 million dollars and sold 25 million tokens via a Dutch auction at a price of around $0.50 per token.
Unfortunately, 32 wallets took the allocation in less than 31 seconds, despite YGG’s discord exceeding 47,000 members. What’s worse is that a whale was able to get 4.5 million YGG tokens, which represents 18% of the tokens available in the offering and it is unclear on whether the address is for a whale or a liquidity pool.
Other fundings included 1.3 million dollars raised during the Seed funding round in March 2021 and another 4 million dollars was raised during YGG’s Series A round, and finally, in August 2021, Yield Guild Games raised another $4.6 million in another funding round.
Interestingly, Yield Guild Games was also able to secure a partnership with Coinbase. The partnership between the two companies will provide more assets for scholarships.
Now the play-to-earn industry has offered the gaming community massive opportunities to monetize their gaming skills. Before blockchain games appeared in 2018 people used to play mainly for fun. But now, with the emergence of NFT games, people are earning passive income while enjoying their time. Still, the entry price for most of the games is exorbitant and many people can’t afford it.
When we take into account that people who play these games come from third-world countries and low-wage economies things might become more complicated. This is when Yield Guild Games come to fill the gap. With their scholarships, people who can’t afford costly NFTs are now able to rent them out and share profits with the platform.
Nonetheless, there is a huge problem that we should talk about that is the economy of scholarships. Let’s take Axie Infinity as an example.
The play-to-earn game is the largest NFT game to date. To keep the economy of the game stable, Axie Infinity relies on bringing new players who pour money into the ecosystem. However, the platform can’t survive with this economic model, so they decided to transition into a player-driven economy, where the economy stabilizes thanks to Axie Infinity players.
The developers of the project said that when more players re-invest their earnings in the game through breeding Axies and buying new creatures, the economy of the game becomes more stable. But, there is one thing that could break that cycle which is scholarships. Yes, as you might already know, most of the scholars who lend out their Axies or NFTs want to cash out and they consider the game an investment rather than a game. This means that whenever they earn money, they’ll cash it out instantly instead of reinvesting it in the game.
Sky Mavis which is the studio behind Axie Infinity is aware of this problem, and in fact, this economic dilemma isn’t the problem of Axie Infinity alone, many game economies that rely on this kind of model are having a hard time keeping the ecosystem stable.
Yield Guild Games could contribute to the worsening of the situation by lending out NFTs since people will rent NFTs to earn income, while the lenders will just cash out their money instead of reinvesting it. In conclusion, Yield Guild Games and blockchain gaming companies that rely on the scholarships model should take into account what we mentioned or else, inflation could hit the gaming economy so hard that it will destroy several blockchain games.