The gaming landscape is ripe for blockchain disruption. In traditional computer gaming, in-game assets are stored on centralized servers and are not truly owned by players. In blockchain gaming, assets are not only owned by players, in the form of NFTs, but can be earned. This recent shift, known as “play-to-earn” is leading to an explosion of applications as the worlds of gaming, NFTs and DeFi collide. This month we are going to dive into our latest Fund 4 investment, Perion. Perion is a fascinating project that could be described as one of the world’s first metaverse lending DAOs. It is a “gaming guild” that owns a portfolio of gaming assets and loans them out to the top computer gamers in the world. These gamers earn money by playing with the loaned NFTs and a portion of this revenue goes back to Perion. There is a lot to unpack here, so let’s dive in!
To understand a project like Perion, you first need to understand how blockchain gaming is transforming traditional computer gaming. In our June 2018 investor letter we wrote about NFTs and the potential impact that they could have on gaming. We explained that:
In game assets are a multi-billion USD market today. At the moment, World of Warcraft gamers do not actually own the swords and shields that they buy in the game. There is a database run by the gaming company that keeps track of who owns what. It is envisaged that in the future gamers will hold their own digital goods outside of the control of the gaming company. When a gamer buys a sword, it is held in their digital wallet, where they have total control. They may even be able to transport that sword into a different game.
This vision is playing out. We are seeing weekly releases of new blockchain games that enable gamers to own their own assets. We have even seen NFT collections released that have spawned multiple game developers to build games around these NFTs.
As we predicted, NFT assets can now be ported into different blockchain games. As a consequence, whole new business model unfolded and these blockchain games are now generating revenue for players.
Over the last 6 months, the term “Play-to-earn” has become the most exciting development in gaming. The introduction of players owning in game assets naturally led to gamers trading these NFTs. This then made it profitable to play games to generate sellable NFTs.
The tipping point for the play-to-earn ecosystem came earlier this year, with the incredible growth of a game called Axie Infinity. In Axie, players create characters for a fee that they can then level up through gameplay. Over time, a character can become extremely valuable, allowing the player to sell them and cash in on the time taken to cultivate the character. It has been reported that in the Philippines, people have been making up to three times more money playing Axie than can be made working at minimum-wage jobs. In a country with 40% unemployment, it is no wonder that play-to-earn is gaining traction.
To start playing games like Axie Infinity, players need to first purchase their NFT characters. The popularity of Axie, coupled with high gas fees on Ethereum has led to lower income gamers being priced out of the market. In fact, it can cost upwards of USD500 just to start playing Axie Infinity, which prices out much of the developing world. This is where the concept of “gaming guilds” comes in.
Guilds are metaverse lending organisations. They provide “scholarships” for players that are unable to purchase their own NFT assets to start gaming with. The guilds are effectively seed financing players with the agreement that a portion of revenue generated by the gamer will be paid back to the guild. They have become so popular with gamers, that it is now extremely competitive to be part of the scholarship program for the leading guilds. Some of these guilds hold extremely valuable gaming assets which they only lend out to the top gamers in the world.
Perion is one of the leading groups in this new field of gaming guilds. Structured as a DAO (a decentralized autonomous organization), Perion purchases, leases and manages NFT assets for use in play-to-earn economies. It has quickly established itself as one of the most exciting blockchain gaming communities, where it connects, sponsors, and trains the best gamers in the world.
The Perion team takes an analytical approach to lending, conducting deep data analysis into how best to allocate their NFT gaming resources to the top performing gamers. Perion has a unique advantage resulting from one of the founders, Amos Whitewolf, previously being the number 1 ranked Axie Infinity player in the world. Through Amos’ skillset, coupled with proprietary performance tracking software, the Perion team has been training some of the top ranked gamers in the world to maximise returns from Perion’s assets. In September 2021, Perion achieved 3.84x the benchmark return on assets vs its competitors.
Perion’s hands-on approach has been well received by the gaming community. There are now 77k gamers in the Perion Discord channel, vying for Perion sponsorship. In addition, this community is morphing Perion into an attractive location for new gaming apps to promote themselves. Over time, Perion will become a brand that is synonymous with blockchain gaming and the metaverse. The team is looking to build out its presence across several platforms such as YouTube and Twitch, and the brand is well placed to move into the highly lucrative esports field.
From gaming to the metaverse
The intersection of blockchain and gaming represents a critical leap forward in the adoption of the metaverse. Video games are fertile grounds for experimenting with what this new world might look like, but only present a brief glimpse at what the future will hold. While Perion is currently focused on expanding its influence on Axie Infinity, the team recognizes the potential of this virtual world and is positioning itself to become a key player in the metaverse economy.
Perion’s mid-term outlook is to begin purchasing digital land in an effort to build the DAO into a virtual real estate mogul. They are not alone: In late November, Tokens.com closed the largest metaverse land acquisition in history, spending 618k MANA (~USD2.5m) for a 116 parcel estate within Decentraland. Earlier in September, Snoop Dogg invited fans to a virtual pool party at his mansion in The Sandbox which included access to his NFT and car collection. Adjacent land to his virtual property sold last week for 71k SAND (~USD450k).
At CMCC Global, we are thrilled to be participating in the seed investment round for Perion. The team is exceptional and has proven to be fast moving, insightful and decisive. The community that they have built over a short period of time is impressive and the future roadmap for Perion is hugely exciting. While Perion has proved itself to be an excellent gaming guild for Axie Infinity, we believe the potential for the project far exceeds any single game. Applying a professional, data-driven approach to blockchain gaming, NFT and metaverse markets is a recipe for success. We are excited to see the opportunities that Perion will pursue and look forward to supporting the team as they execute on their long-term vision of being a leading innovator in the metaverse.