The Next Narrative
Trading the Metagame:
Cobie, the host of uponly, discusses the importance of understanding and capitalizing on the metagame during crypto bull-runs.
What Exactly is the Metagame?
“The metagame can be described as subset of the game’s basic strategy and rules which is required to play the game at a high level.” - Cobie
Essentially, the metagame can be any strategy that offers a slight competitive edge. In the world of crypto, the metagame is akin to “alpha”.
Similar to gaming, traders are constantly searching for any information or strategies that can help them play the game better - in this case by generating greater returns.
This provides the backdrop against Cobie’s larger argument that investing during a crypto bull-run is more akin to gaming, as opposed to traditional investing.
TDLR: Investing during a bull-run is more like gaming than investing
How Can I Win this Game?
“But, to play at the highest level and maximize wins, you had to identify and exploit the hot-ball-of-money rotations between assets at least a few times.” - Cobie
Gamers don’t like to stay idle. They’re constantly learning and adapting to the ever-changing landscape of competitive gaming. Cobie draws a comparison to League of Legends, in which the “strongest” characters today may not be the “strongest” tomorrow. To ensure their competitiveness, gamers must stay in-tuned with these minute changes and adjust their strategies accordingly.
Once again, this doesn’t guarantee success. It only promises a greater probability of winning.
To draw a parallel to crypto, many investors don’t like to sit idle. The “metagame” in this space is constantly changing. If you’ve spent some time on Twitter you’re no stranger to the constantly evolving narratives within this space. These different narratives, if correct and capitalized upon, can offer investors greater returns.
Below you can find some of the narratives that have characterized different periods in this space.
2020: DeFi Summer
2021: NFTs and Alternative L1s
2022: ???
TDLR: By identifying and capitalizing on emerging narratives, investors have the possibility of generating greater returns albeit at a greater risk
What’s the Next Narrative?
Personally, I believe GameFi/P2E/Questable DeFi will be the headline narrative dominating Q1 - Q3 2022.
“A rising tide lifts all boats”
Following the immense success experienced by Axie Infinity, investors have begun to realize the potential of the GameFi narrative. This lead to a capital influx into a wide variety of gaming-related projects. However, I believe this is just the start of GameFi.
With projects like DeFi Kingdoms ($JEWEL) and TreasureDAO ($MAGIC), we’re beginning to see the next evolution of gaming - namely, the seamless convergence of gaming and decentralized finance.
TLDR: GameFi/P2E/Questable DeFi may be the narrative dominating Q1 - Q3 2022
Why is GameFi Important?
GameFi offers the opportunity to onboard new users through the use of intuitive gameplay mechanics and lorecrafting/storytelling.
We’ll explore both below.
1. Intuitive Gameplay Mechanics
The world of DeFi is a convoluted and scary place to explore - especially for new entrants to this space. The concept of protocol-owned liquidity, impermanent loss, arbitrage, and lending can be difficult to grasp and understand.
But gaming isn’t! Games intuitively make sense. Games don’t require extensive youtube tutorials or reading through documentation to grasp.
Imagine if there was some way to package up convoluted DeFi concepts and present them to users in the form of a game.
Inevitably, it would reduce the friction associated with onboarding new users and more importantly, provide the “stickiness” required to ensure the retention of pre-existing users - a prominent concern for DeFi protocols.
Let’s take an example directly from Akoda’s Fundamental Analysis: The case for GameFi.
A game similar to Travian or Ogame where users collect resources to build stuff. Let’s assume, wood and iron. With those, they could create a pickaxe. This pickaxe allows them to mine gold. Gold can be traded for other items in-game.
If we integrate DeFi concepts, Wood and Iron would be two tokens put into farming pool. Pickaxe would be the LP token. Gold would be the farming rewards.
The example above highlights the ability of games to explain complex DeFi concepts in an accessible and intuitive manner.
TreasureDAO, in particular, has made significant strides towards abstracting away from the complexities of DeFi. Let’s take a look at their approach to gamifying liquidity into something even a 5-year-old can understand.
“Low liquidity is akin to extremely bad weather. Volatile, cruel, literally an existential threat to the protocol (or civilization). LPing a shitcoin is like riding a tiny boat through a huge storm, knowing at any moment your boat could flip and drown you.
Growth in liquidity could thematically correspond with stronger structures to protect the Legions against the natural world. Or, an even more fantastical version of this idea would be that as liquidity grows, the Legions are increasing their power to control the weather and use it for their advantage.” - Treasure Documents
In this example, liquidity is abstracted away as the weather. Other potential solutions include abstracting liquidity as time or spatial reach. By employing such strategies, TreasureDAO is able to abstract away the complexities of DeFi and begin to gamify liquidity.
As a former gamer, I’ve spent countless hours sacrificing time to ensure the survival of virtual lands or populations. The feeling of accomplishment and autonomy provided through these virtual victories helps to minimize the financial commitment I’ve placed into such games.
In a similar manner, TreasureDAO’s approach to gamifying liquidity serves to shift concerns away from impermanent loss. As players become enveloped in these virtual environments, they’ll feel a greater connection and commitment to maintaining these worlds. Through this process, players come to view providing liquidity, not as a financial commitment but rather as a personal commitment to ensure the flourishing of these virtual worlds. In this light, providing liquidity offers users an intangible benefit of self-satisfaction that helps to minimize concerns regarding impermanent loss.
Ultimately, the gamification of liquidity ensures consistent liquidity for trading pools while simultaneously exposing new users to fundamental DeFi concepts in a fulfilling and engaging manner.
2. Lorecrafting/Storytelling
The alternative approach is to explain such concepts through the use of lore or storytelling. As humans, we’re able to deeply resonate with stories. Effective storytelling can evoke profound emotions and resonate far more than cold hard data or whitepapers. This additionally offers users to ability to contribute to the lorecrafting process - reciprocally, generating greater buy-in by the community.
Let’s take a look at TreasureDAO’s effective use of lorecrafting.
This is where our story begins.
The Bridgeworld, The Origin Enclave, The Stasis Dimension.
A splice of worlds.
Through the ages, there have been countless songs and legends that told the tale of this world. All suspended in time, eclipsed from space -- silent. It was said that this world had no origin; a blank slate. A mere bridge connecting the multitude of other worlds together, from the beginning to the end of time.
Until -- the celestial ones gazed upon this abstract world. They found a world of remains filled with debris from other worlds rich with lore and essence that existed long ago.
It was a world of Treasures, of long forgotten relics, and of effaced legends.
The Treasure World.
The celestial ones deemed this world the nexus of all worlds. It weaves other worlds together in perpetuity. Legions were elected to study the Magic that sustained this world -- to guide, to govern, and to protect it.
This is where our story begins.
I’ll let you decide. Would newcomers to the space rather hear about “composable economic resources to act as bridges between the growing network of metaverses” or an emotionally-impactful story that encapsulates that vision?
To be clear, this is not an endorsement to abandon fundamental analysis of potential investments. Rather, it’s intended to highlight the benefits offered by GameFi that could enable the onboarding of the next cohort of crypto adopters. Ultimately, this adoption is critical to ensure the continued growth and price appreciation of GameFi projects.
TLDR: GameFi can onboard new users to DeFi, provide a greater retention of pre-existing users, and reduce barriers to understanding DeFi
Conclusion:
There exists a parallel between investing during a crypto bull run and gaming. Both domains contain a subset of rules and strategies, often referred to as meta or alpha, that offer players/investors a competitive edge. To capitalize upon this advantage, players must remain informed and adaptable to our ever-changing landscape. Doing so offers the potential of greater returns, however, this comes at the cost of greater risk.
Of these narratives, GameFi possesses the uncanny ability to onboard new users through the use of intuitive gaming mechanics and lorecrafting/storytelling. Nevertheless, this is only one of many potential benefits offered by GameFi.
We’ll continue to deep dive into GameFi in upcoming articles.
Disclosure:
“Well, being “early” is not about buying the coin on the first possible day. Being “early” is about buying the coin at a valuation that is lower than its potential.” - Cobie
It is my belief that projects such as DeFi Kingdoms ($JEWEL) and TreasureDAO ($MAGIC) are valued lower than their potential. Accordingly, I’ve allocated some of my capital towards GameFi, specifically $MAGIC, as I expect it to outperform traditional assets throughout 2022. Nevertheless, none of this is financial advice!