NFT Worlds - Tokenomics Catalyst?
Introduction
NFT Worlds launched a new concept into the GameFi market. Minecraft, with play to earn mechanics. By using a Minecraft open source seed generator, and allowing for gasless transactions, they have created an easy way for 130 million existing Minecraft players to build and potentially earn $WRLD token, within their games. This thread is the best summary of the bull case for the game. I will focus primarily on the catalyst in this note.
Tokenomics
Unfortunately the tokenomics were not very well thought through. Currently owners of NFT Worlds land, can stake and earn $WRLD from their land without having to build anything innovative. As we have seen with many other P2E projects, this leads to tokens being farmed and dumped.
Catalyst
Recently one of the core devs has hinted that this mechanic will be changing. “Lots and lots of pressure on $WRLD through staking + new mechanics will be released this month”..We are working with some of the top tokenomic experts in the space rn” (Source: ArkDev, NFT Worlds Discord - 13/3/22) The $WRLD token is up 40% since this announcement.
I suspect that the team may copy some of what TreasureDAO has done well. Allowing yield for those who are willing to lock up their tokens for up to 12 months. There may also be some game elements that require lockup. Maybe to reach a certain levels you need to lock up $WRLD for x amount of time.
The exact mechanics may not matter as much as growth in NFT Worlds users, combined with a change in narrative. The launch of $APE Coin has brought renewed optimism to the NFT/Metaverse space. The ideal scenario is 1. Well thought through tokenomics change to $WRLD .2 $APE coin optimism is sustained. 3. NFT worlds keeps attracting new users.
CHALLENGES
Liquidity/ Trade Execution
Unlike TreasureDAO, who set up their game to ensure liquidity was the actual focus of the game, NFT Worlds is still very illiquid. As part of the new tokenomics I suspect increased liquidity provision rewards will be included. Another option is to buy land but it is no longer undervalued at 9 ETH.
New Tokenomics could be worse
We are arguably in the first inning of GameFi Tokenomics. Axie and Defi Kingdoms have struggled with high inflation and I hope that NFTworlds doesn’t offer a very high yield to stakers. Unless gamers, and game makers themselves can earn a premium for their skills, the tokenomics will struggle.
High FDV
Max Supply is 5 Billion $WRLD tokens so the FDV is currently close to $1 Billion. Although still much less than Decentraland or the Sandbox, it is a high FDV for a new game. Having said that, I think it has a higher chance of attracting more users than the other two games.
Conclusion
Overall I think a small allocation to $WRLD is worth it on the basis of the above observations. While the value of land within the game has shot up recently, I suspect that the team will reduce the incentive to squat on the land and not develop it. Anything that speeds up the rate of experimentation is worth keeping an eye on in crypto. NFT Worlds has arguably taken that up dramatically. If they can get the tokenomics right, and keep scaling the game, it could take off and surpass all existing worlds.
