Why we invested in YGG
March 11, 2024
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Crypto stands at the cusp of a new transformative cycle, and every cycle is marked by a breakout vertical getting real adoption. This time, we believe Web3 gaming will emerge as the key vertical driving innovation and new user adoption. With critical Web3 infrastructure needed to onboard new users like account abstraction/chain abstraction technology developing fast, and scaling technology like L2s and alt L1s maturing, there are no more technical barriers for Web3 games to onboard the next billion users onto Web3. 

We expect games to drive the majority of the next wave of Web3 adoption due to the massive number of active gamers (estimated to be ~2B worldwide), and the high potential for Web3 to disrupt the almost $400B traditional gaming industry. Unlike other forms of media or entertainment, gaming is inherently interactive, fostering a unique level of engagement and community building between games and gamers. Web2 games like CS:GO, World of Warcraft, Genshin Impact, and PUBG have already demonstrated their capacity to spawn vast virtual economies and thriving communities, and we expect Web3 games to rival and eventually exceed the experiences offered by Web2 games — offering a more democratic, transparent, and engaging experience in a player-owned economy.

Axie Infinity's breakout during Covid-19 gave us a first glimpse into what Web3 gaming can achieve. (Photo by Emfarsis and Coindesk)

Sceptics will be quick to point out the bubble of the previous cycle in Web3 gaming. But this time is different — real games with real gameplay have been funded with billions over the past few years and have been building throughout the bear cycle, ready to bloom in these next 1-2 years. For example, Pixels, a farming simulator, at the time of writing, boasts 1.1M players and >500K DAU, which is already comparable with Web2 titles, albeit with a fully diluted market cap of $4.78B. Parallel, which raised $50M, has launched a polished trading card game, with its rich mechanics attracting top Web2 strategy players like Bunnyhoppor, Hearthstone’s esports top earner and former World Champion.

If games are to drive the adoption of crypto in the future, the metrics defining the success of Web3 games need to evolve. Daily Active Users (DAU) and retention rates emerge as critical indicators of adoption for games, much like how TVL serves as a benchmark for the success of DeFi projects. However, in gaming, this concept of “player liquidity”, derived from the metrics of player activity, extends beyond mere participation and should capture the player’s level of engagement in the gameplay and community around the game as well. This focus on an active, engaged player base is super important, especially in the face of challenges faced by the Web3 industry from bots and Sybil attackers. These threats loom even larger in gaming than in DeFi, as the authenticity of player interaction is foundational to building a game that can stand the test of time. The presence of genuine players is not just desirable but essential for fostering a thriving ecosystem that encourages continuous engagement and growth.

5300 attendees showed up physically, in the depths of the bear market, to YGG's Web3 Gaming Summit in November 2023

In response to these challenges, guilds emerge as a novel and effective solution for safeguarding the integrity of Web3 gaming communities. Guilds play a crucial role in ensuring that participants are genuine players by cultivating a robust community of players, contributors, and moderators who are actively engaged in the game through carefully designed recruitment and retention mechanisms. This type of proactive involvement to attract valuable player liquidity will become highly desired by games that wish to create an environment where real, meaningful interactions can flourish between players to ultimately boost the game’s longevity and appeal. Guilds not only address the issue of player authenticity but can also enrich the gaming experience by making games more accessible and rewarding for all involved.

Yield Guild Games (YGG) stands as a pioneer among Web3 gaming guilds, and the only one persisting with the original vision: to onboard and guide gamers, and help them find their tribe. Rather than being a massive guild itself, YGG coordinates the formation, scaling, and governance of any guild — as a guild protocol or a guild of guilds. From its roots with YGG Pilipinas in the Philippines, YGG now supports 3 million gamers across eight regions. Guild partners like NYXL in North America, OLA GG in Latin America, and SKYGG in Korea foster competitive esports players. Across continents, localized communities have also sprung up, including W3GG in Southeast Asia, Kratos Studios (formerly IndiGG) in India, Brazil, and Saudi Arabia, YGG Japan, and AMG DAO in Eastern Europe. Each guild has its unique approach and operating model but stands to benefit from the joint network and resources of YGG.

YGG's recent Superquest with Pixels, a leading Web3 game, to launch its in-game guild system.

Web3 gaming is complex, with its intricate token mechanics, NFT integrations, and meta-gameplay layered on top of the game, often presenting a steep learning curve for newcomers. 

Recognizing this challenge, YGG has introduced Superquests, an essential tool designed to navigate players through the complexities of Web3 games. Superquests mirrors the tutorial stages commonly found in Web2 games, ensuring players are not only introduced to but are proficient in the core gameplay mechanics and progression systems. In Axie Infinity alone, Superquests has seen a total of 50,000 users.

Complementing the Superquests system is the Guild Advancement Program (GAP), which rewards gamers and community members for contributions to the games and YGG beyond just gameplay. This includes designing quests (tutorials), assisting in onboarding new players, and creating content. GAP has seen rapid growth — Season 4 saw a 147% increase in account signups to >6K and a 243% increase in quest enrollment to >33K.

GAP and Superquests together enable YGG and its partner games to create a highly engaged community of gamers, content creators, and moderators. This strategy ensures that YGG and its community become indispensable for Web3 games seeking to build up their communities.

In the coming year, YGG is poised to scale its guild protocol to bring the social aspect of gaming to virtually every hit title and platform in Web3 gaming. YGG has formed 101 investments and partnerships, including top games like Pixels, Parallel, Big Time, Overworld, and Sipher, and platforms like XPLA, Oasys, Polygon, Base, and Ronin. Beyond Superquests and GAP, more updates, from basic to cutting-edge, are in the works to enhance the feature suite of the guild protocol.

Gabby pitching ideas way ahead of their time in 2018, at LongHash Pitch Fest.

Since getting to know Gabby in 2018, we have been inspired by his forward-looking, tenacious, fun-loving spirit, and steady building through the harshest winters and blinding summers. And the co-founders and team that have rallied around this same spirit too, shipping through the years together. Now, with a new chapter on the horizon, we feel further re-energized and are thrilled to work together closely on YGG’s tokenomics and vision for an integrated guild protocol that will permeate Web3 gaming.

When we look back, often it is the people and memories we treasure, that will feel the most rewarding. YGG may not be a shiny new project, with world-changing promises to the scale of a superintelligent AI, but it has touched the hearts of true gamers, and it has stayed true to its mission — and we bet that the community will remember that. As the mania of new airdrops and new unicorns set in, newcomers will seek for trust. They will look for friends, a place to learn and grow, and they will find it in YGG.