During 2021, Play to Earn was coined as a term to describe gaming projects that aim to provide players income while participating in games. Decentral Games in a unique project which chose to follow up on the original play to earn game - Poker. This article is an analysis on Decentral Games ecosystem & their unique Play&Earn model.
Overview of Decentral Games
What is Decentral Games?
Decentral Games is a Play&Earn ecosystem built on Decentraland, one of the most popular metaverse platforms. Their games are hosted at venues in Decentraland. Some notable venues include Stronghold, DeXT Lounge, Chateau Satoshi, Osiris and Tominoya Casino.
This is one of the key selling points for Decentral Games - allowing metaverse users to participate in gaming experience in a universal virtual world.
Decentral Games venues
Tominoya Casino used to be similar to a typical real-life casino where players can buy in with crypto and get rewarded with crypto. However, due to legal constraints, Tominoya has been turned into a free-play casino. Here, you can play your favorite casino games such as Poker, Blackjack, Roulette, etc. but there is no reward whatsoever.
In other venues - Stronghold, DeXT Lounge, Chateau Satoshi, Osiris - players are required to either own an NFT or have one delegated to them to be able to participate and earn rewards. The game hosted at these venues is ICE Poker, in which players finish daily challenges and compete for a leaderboard to earn rewards in ICE token.
Why the need to open multiple venues? That’s because similar to real life, a metaverse venue can only host a certain number of individuals. As DAU (Daily Active Users) increased, Decentral Games had to open up new venues to accommodate such growth.
Overview of ICE Poker
What is ICE Poker?
ICE Poker is currently the main product of Decentral Games, based on real life Poker. There are 3 key assets in the game: ICE Wearables, Chips & ICE token.
What are ICE Wearables?
ICE wearables are NFTs which act as subscription tickets required to participate in ICE Poker.
Supply of NFT Wearables is controlled by Decentral Games, new NFTs are only available through periodical drops. These NFTs don't follow the ‘breeding’ model as often seen in other P2E (Play to Earn) games, which in the long run may lead to uncontrollable inflation due to unlimited supply cap. Without drops, players have only 2 ways to acquire their ticket to the game:
- Buy ICE Wearables from secondary NFT marketplaces such as OpenSea.
- Get delegation from an ICE Wearable owner. Delegates only need to submit their wallet address in order to get delegated through DG’s trustless native delegation (scholar management) system.
How delegation system works (based on rank 1 NFT - for higher ranks the split ratio is slightly different in favor of owners)
NFT owners can use a Player Look-up tool to evaluate a players’ prior game statistics to filter and select players who can earn the most. Daily earnings in ICE are split according to a set ratio (see image above).
Owners are also rewarded with XP points which are used to upgrade wearables. The higher rank the NFTs, the higher the reward rates. In order to upgrade wearables to higher rank, owners are required to spend XP + ICE + DG (Decentral Games’ governance token).
Highest rank wearables earn up to 45% more ICE than a rank 1, costing 25000 ICE + 400 DG + 250 XP to upgrade. See table below.
Activities in ICE Poker
According to the amount of wearables one owns/is delegated, players are supplied with a certain amount of Chips everyday.
Chips are free-to-play in-game items which have no monetary value and are non-transferable. The amount of chips won/lost will determine players’ place on the daily leaderboard, based on which players are given an earning multiplier. The more chips one has at the end of the day, the more ICE tokens one earns.
The table below shows the amount of starting chips daily in relation to wearables count.
These are some activities within ICE Poker:
(1) Each day, the amount of starting chips is reset based on wearables count. Players participate in the game for free and earn rewards in ICE & XP.
(2) Players can use ICE, XP, DG to upgrade wearables.
(3) Players can purchase NFT wearables on the Marketplace in wETH and burn 500 DG (equals to 2500 ICE as of recently) to activate such NFTs.
(4) Spend ICE in in-game sinks & on marketplace to receive items & services.
How ICE Poker provides value for ICE token
At the time of writing this article, there are few use cases for ICE tokens other than “Earn” in Play&Earn. A plan is in the work to provide ICE utility of purchasing buy-in ‘points’ for wearables NFTs to participate in Sit&Go tournaments.
Therefore, the main route that ICE Poker utilized is to increase deflationary pressure to maintain ICE’s value. Utilities for the ICE token for now and in the future include:
- Upgrading ICE Wearables.
- Sinks introduced:
- Cosmetic items.
- NFT activation fee.
- Royalty fees from secondary market for ICE NFTs.
- Revenue from DG’s Polygon validator node (6th biggest node).
- In-game & metaverse venues advertisements/sponsorships.
- Sinks in the work:
- Native Marketplace fee (Q2).
- Tournament subscription NFTs sold in ICE.
- In-game utility items (boosts, power-ups, etc.).
- In-game & metaverse venues advertisements/sponsorships.
- Buy-in points for Sit&Go tournament mode (to be released soon)
Despite reducing circulating supply, upgrading wearables indirectly increases future ICE emissions due to higher ranked wearables producing more ICE.
In addition, other than mint drops in wETH which go to DG’s Treasury, drops in ICE also removes ICE spent from circulation.
Decentral Games’ shift in model
In the beginning, Decentral Games had a rather simple & straight forward economic model.
Players could buy in with crypto coins/tokens to participate in their casino. House revenue would be sent to the Treasury, which could be used to add liquidity to ICE - USDC to maintain ICE value.
However, after realizing there were legal constraints, Decentral Games passed a proposal to shift entirely to the Play&Earn model to avoid these obstacles. Instead of buying in using tokens with monetary value, players now use NFTs as subscription tickets to participate.
Players can now either play for free and earn no rewards in DG’s free-play casino or obtain a Wearable (own or be delegated) to play ICE Poker. Rewards in ICE tokens can either be sold to cash-out or used in activities listed in the section above.
With NFT wearables, players can play the game for free without buy-ins. This allows DG to operate despite legal barriers. However, Decentral Games now lacks direct revenue from the gameplay itself.
The reason for this is players only need NFT assets to play for free, which can only be bought through secondary purchases. Excluding royalty & activation fee, most of the value made from these purchases only flow from owners to owners instead of providing revenue to DG.
ICE Poker is the first P2E project with stable external revenue streams backing their reward token. Owning an ICE Wearable NFT is akin to owning a sort of gamified stock paying dividend accruing through conventional & enduring business activities such as operating 6th biggest Polygon validator node & providing venue advertisement services. This put DG in a completely different territory compared to other P2E projects whose model is purely ‘Ponzi’ where rewards come from reinvestment activities.
Decentral Games’ Treasury
Decentral Games’ Treasury comprises of:
- ICE Wearables drops.
- Wearables activation fee.
- Royalty fee from wearables secondary purchases.
- Fees from upgrading ICE Wearables.
- Native Marketplace fees (Q2).
- Liquidity positions.
- Operating Polygon Node.
- Decentraland Land assets.
Decisions regarding how Treasury money is used, how the project moves forwards, etc. are based on DAO governance (eg. Snapshot votes on proposals).
Most of Treasury’s value accrued comes from NFT drops & early investment in Decentraland assets. Major revenue from NFT drops in wETH were sent to the Treasury and part of it was used to provide liquidity positions, buy back DG, convert to fiat reserve, etc.
At the time of writing, a DAO proposal passed which entails pausing NFT drops. Thus, despite 4.9% royalties and high volume NFT assets secondary sales, Decentral Games is missing out on a significant revenue stream from their main product, which is ICE Poker.
An interesting note is that almost a third of Treasury’s value is in metaverse land assets, which have great potential space related revenues in the future.
How does Decentral Games brings value to DG token
In spite of the fact that DG is the project’s governance token, it hasn’t received much attention lately. The main use case for DG has been Staking to receive xDG & governance rights, as well as staking rewards in DG. DG used for rewards allocation is 2% of the total supply.
Another use case for DG which was recently introduced is holding 1000 xDG per NFT for Premium Guild Dashboard, which provides ease of managing for owners of multiple NFT Wearables delegating to scholar & entry into Guild Leagues. In addition, to mint Wearables, one had to hold at least 1000 xDG at the time of drops.
Generally, only minting NFT Wearables & Premium Guild brings significant value to DG, which means DG’s value is tied to ICE Poker’s success. When ICE Poker grows, demands for NFT Wearables increases, aspiring owners would want to mint at discount rather than from secondary marketplace, and owners of multiple NFTs delegating out would need to use Premium Guild Dashboard to manage their player pool.
Upgrading NFT Wearables also costs 100 DG for each rank upgraded. This fee is sent to the Treasury and reduces the amount of DG in circulation.
Additionally, the Treasury uses funds from mints to buy back DG as well.
Future Prospects & Potentials
Regarding the DG token, its current use cases are not playing a significant role within the ecosystem. Therefore, it’s hard to say how DG can accrue value for the time being. In the future the project may introduce new utilities for their governance token and somehow ties DG to Treasury’s cashflow.
For now, most of the major activities & revenue within Decentral Games comes from ICE Poker. ICE Poker is the main product that may dictate the success of DG as a whole.
Commonly, an ecosystem which relies on only one single factor may meet a lot of obstacles in the long run without a “back-up” plan. With a healthy treasury allowing runway for several years, Decentral Games has an unique position that minimizes such risk.
Poker is a tried-and-true, addictive & popular game in real life. Unlike other niche, fictional games, Decentral Games don’t really need to come up with ideas or strive to keep the game attractive and engaging to players. Decentral Games has only one problem to solve - balancing ICE’s supply & demand.
In the next few months, Decentral Games is releasing a Progressive Web App (PWA) version of ICE Poker which can be played on any mobile device or browser platform, similar to web-based poker games many are already familiar with.
According to Wikipedia, in 2014, Zynga Poker’s revenue accounted for a whopping 61% of the total social poker game market, reeling in 9~13 millions USD each month. Zynga Poker netted massive revenue from in-app purchases of game items (skins, extra chips, boosts, power-ups etc.) - while their rewards have no market for players to trade and cannot be redeemed for any monetary value.
Currently, ICE Poker’s DAU (daily active user) rests at 10 thousands upwards, while Zynga has 4-6 millions. What if millions of existing mobile poker players would rather earn $ICE with their free time & money?
Decentral Games started with a rather simple premise: using revenue from an established business model to balance a Play&Earn ecosystem. Despite legal hardships, the project has successfully controlled ICE token’s supply by introducing stable sinks - and planned for multiple major future sinks which will potentially capture substantial value for ICE.
Although DG is the project’s governance token, it seems nowadays that their near-term success is more tied to the ICE token. This certainly is not in accordance with investors interests who invest in DG token. However, Decentral Games has a good position and enough runway to come up with big changes in the future.
We’ll have to wait and see how Decentral Games’ creative team can turn things around.