Yield Guild Games FOMO - A Digital Berkshire Hathaway?
Yield guild captures every meme at the moment. Metaverse, NFTs, gaming, banking the unbanked, ETH as the base layer, A16z. And somehow is still undervalued. The team are crypto game veterans, but have bridged the gap between top tier VC’s and grassroots gamers. The value prop is simple. Enable the best gamers to pool resources with play to earn games and share in the upside. The potential scale, combined with a crypto bull market, makes me think YGG at $8 dollars, is like Axie at $8 dollars.
For a basic outline of the project, read this introductory article. To use an analogy from the physical realm, they are set to become the biggest ‘asset managers’ in the metaverse. I’m going to focus on the factors that led me to allocate a good chunk of my portfolio so I won’t get into the specifics of the games they hold.
YGG encapsulate Chris Dixons essay about the next big thing looking like a toy. Buying digital land and battling with Pokemon like characters seems trivial. Until you realize it pays more than the average wage in the Philippines. One of the key insights Arianna Simpson of A16z shares in her interview with TechCrunch is the unique culture among YGG and AXIE players within crypto Twitter. The whole thing is worth a read.
Combine this idea with Ric Burtons ‘Cult following’ Tweet below and you get a game format that has a 90% retention rate.
Reflexive
YGG is good for Axie and visa versa. As Yield Guild gamers earn more in the game, it adds to their treasury, which in turn allows them to breed, buy more land, and AXS. This drives up the value of AXS and the loop continues.
Top talent -
Jon Jordan, an NFT OG podcaster, wisely observed that Gabriel Leydon is now involved. Someone who has amazing experience in marketing games.
Luis Buenaventura was early to Axie and worth following to get an unbiased sense as to how Axie is developing. As Axie is the main source of YGG revenue at the moment, he is a key follow.
A16z Raise. = Validation for copycat VCs. Many of whom missed the Axie run. I expect a short term run up driven by this alone. Assuming BTC and ETH don’t suddenly drop.
Zima Red Podcast
Excellent, nuanced view of the promise that Gaming Guilds hold. Andrew is on of the best interviewers in the NFT space. https://anchor.fm/andrew-steinwold/episodes/Gabby-Dizon---The-Future-Of-Gaming-With-Yield-Guild-Games---Zima-Red-ep-63-e144ku8
Listing. YGG is currently only available on Okex, Huobi, Poloniex and Dex’s like Sushiswap. Needless to say a coinbase or Binance listing would boost retail buying.
Funding is reasonable. Still floating between negative and positive on a daily basis. Sustained high funding is always a bad sign.
VALUATION
The best valuation Thread I have seen so far has been this:
Very reasonable assumptions get the author to a PE of 13 and a token value of $20 which I think is conservative.
Challenges - YGG is making most of its money on Axie for now and Axie are way ahead of any other crypto game. But YGG can survive and grow within Axie very quickly. And the early signs from Illuvium are very promising. I’m cautiously optimistic about a second breakout game coming soon, but it might take longer than expected.
Conclusion
Ultimately all early stage bets are bets on the founders ability to navigate a growing market. Having followed Gabby Dizon for a couple of years now, I’m confident that he is one of the best in the space. Often these articles are just me adding justification for an instinctual feeling I have about something. Gabby and his passion for the Guild is that instinct. The rest is just other people waking up to it. A bet on YGG is a bet that lots of people are yet to wake up.