Your Right to VOTE: Gamers Pull The Red Carpet & Polkadot Parachains Progress
Bits of Signum | 06.25.21
The Esports Awards has announced the 2021 finalists this week and released their invitation to VOTE on the 2021 leaders in esports. It was encouraging to see the engagement and the positive buzz in the online crowd. What we love about the approach of the Esports Awards is that it is community driven with an ethos of transparency and authenticity (no pay to play!) Bottom line is that the fans power the outcome and the community matters.
This was interesting in light of other news this week that the drama around the legacy awards ceremonies continues. Vanity Fair reported that a couple of Golden Globe voters resigned from the Hollywood Foreign Press Association, the group of international journalists that puts on the Golden Globes. It starts, “There is more resistance to change than I ever expected, and the lack of transparency from the membership was appalling.” The HFPA was described as an 87-member organization with “unwritten rules” like younger members shouldn’t be asking questions and should sit further back. We don’t need to go into the obvious challenges here - let's just call it a textbook example of a legacy player who would be well-served to embrace change and younger generations, while they appear to be doing the opposite.
If you would like to join Signum Growth Capital for an Esports and Gaming Brainstorm Dinner at the event in Arlington, Texas on November 20th, ping us and stay tuned!
In other gaming news, Epic Games reported that registered users hit 500m. Even though this is registered users, not DAUs, this is a notable increase from the company’s report in June 2020 of 350m.
In crypto, stay tuned for The B Word, an online conference to educate businesses about Bitcoin hosted by Ark Invest, Square, and Paradigm with the CEOs of Twitter and Square as speakers.
The clear highlight in crypto for us this week was the Polkadot Network’s milestone in the final phase of rolling out the network. The Polkadot Network’s canary network, Kusama, hosted its first parachain auction - DeFi network Karura has won the first parachain!
Kusama is referred to as a canary network, not a testnet, because real value is at stake on the network. (Polkadot’s testnet is called RoCoCo.) Think of Kusama as the place where new things are rolled out before they are rolled out on the Polkadot Network. The parachain winner will roll out their DeFi network called “Karura” on Kusama. Later, when Polkadot hosts its parachain auctions, understanding what to expect, the network is expected to roll out a DeFi network called “Acala” on Polkadot.
What did we learn from Kusama’s first auction? The winning parachain participation was strong, with more than 20,000 users committing over 500,000 KSM (~$96.5m in value) via a Crowdloan. In a Crowdloan, participants contribute KSM to secure the network, and at the end of the lease term, participants receive their KSM back. See below for a more detailed explanation of Crowdloans and see our earlier Primer on the Polkadot Network here.
Background/context: Parachains represent a higher bar for projects generally. Whereas ERC-20 tokens can be issued on the Ethereum network by simply paying the gas fees associated with smart contract deployment, the cost of integrating a network (and thereby its native token) with the Polkadot Network presents a far higher hurdle. The scarce nature of parachain slots suggests that networks and their wider community of DOT holders will have some skin-in-the-game, especially as facilitated by the Crowdloan module. Demand for parachain slots is competitive so the onus is on prospective parachains to have as complete a platform as possible to attract the most buy-in from DOT holders, as they will be locking their DOT in support of a network for six months to two years. A network competing for a parachain slot is akin to a traditional business that would first devise a profitable business plan before entering into a commercial lease. The opportunity cost for builders of locking in a parachain slot without a production-ready network is meaningful.
Finally, Ebay made an announcement in May that they would introduce NFTs as a product category for sellers and they have delivered on their promise. We did some digging in the Ebay Marketplace FAQs this week, and they are set up to sell NFTs with a 5% fee to be charged on the final sale value. This fee compares to OpenSea and Rarible at ~2.5%. It will be interesting to see how a marketplace giant like Ebay takes advantage of its user base to grab a slice of the NFT secondary market.
Thanks and have a great weekend!
Angie & the SGC Team
NFTs/Digital Assets/Crypto
Positives of China’s Bitcoin Crackdown (Coindesk): The crackdown on Bitcoin in China has set off major alarms for a lot of investors but there are actually a few reasons why the restrictions aren’t as bad as they may seem. Number one is that Bitcoin is still not actually banned in China. There is no reason that someone can’t hold bitcoin as an asset. The Chinese State Council wants to keep investors away from crypto because of the fear that the volatility could threaten the economic and financial stability of the country. So, while they have banned trading and exchanges, investors are still able to hold their crypto and digital assets.
Citi Launches ‘Digital Asset Group’ in Wealth Management Division: Citi has opened a new group which will focus on the “fast-growing space of blockchain enabled finance”. Several large-scale banks have been opening up divisions and sectors specifically for crypto, blockchain, and digital assets and Citi is the latest to do this. As big banks adopt the idea of digital assets for their clients, the reputation and sentiment around the sector will become more positive and less scary.
NFT Artis Beeple launches WENEW, NFT Marketplace: Mike “Beeple” Winkelmann is most famous for selling a single piece of artwork for $69.3 million at an auction. He is now co-founding a marketplace which will be selling NFTs based on memorable moments in sports, pop culture, history, and more. It has also been said that some of these NFTs will include physical products and other bonus items to come with it. This is another step for normalizing the purchases of NFT digitized moments that people want to remember.
Impossible Finance Loses $500k to Hackers: In a flash loan attack, hackers took as much as $500,000 in user funds. This was the same exploitation used by criminals to steal $7.2 million from BurgerSwap a couple months ago. There have been several attacks exploiting the same issue of a vulnerability “in the liquidity pool’s smart contract”. The attacks have sparked a lot of conversation about the security of token platforms and how to protect against groups which look for ways of exploiting these systems to get away with stealing large amounts of money.
People’s Bank of China to Stop Facilitation of Crypto: The PBOC told the country’s major financial institutions to stop facilitating virtual – currency transactions. After this announcement the price of Bitcoin dropped sharply to almost $32,000 and ether dropped below $2,000 for the first time since May. The announcement by the PBOC spread a negative sentiment about cryptocurrencies through the market and caused the decrease in value. While there is a lot of growth for crypto around the world, China has been cracking down on mining and exchanges very severely which has hurt the value of the currencies.
Portugal Grants First Crypto Exchange Operating Licenses: The Central Bank on Portugal announced that the crypto exchanges Criptoloja and Mind the Coin will be able to operate in the country. This is the first time the Central Bank of Portugal has licensed a cryptocurrency exchange ever. This is a big step for digital assets, it shows that more countries are beginning to accept the exchange of these assets as mainstream currency.
Chinese Bitcoin Mining Firm Relocates to Kazakhstan: Amid the crackdown from the Chinese government, many mining companies are relocating. The firm, BIT Mining, is a great example. The company has delivered its first batch of 320 mining machines and plans to follow with 2,600 more. This is a huge indicator as to what the future of Bitcoin mining holds. The relocation of these companies will force countries west of China to begin to regulate Bitcoin mining. The migration will more than likely force governments to make decisions on how they feel about Bitcoin, which will set a precedent for the future of the cryptocurrency.
The House Passes Two Crypto Bills: Two bills were included inThe Consumer Safety Technology Act which was passed and included direction for The Consumer Product Safety Commission to launch a pilot program which explores the use of “artificial intelligence in commerce”. Essentially the bills called for regular study and discussion about the possibility of using blockchain as well as digital tokens. For a while now, the idea of a digital U.S. currency has been talked about on occasion, but this bill would call for more regular discussion and development on the idea.
Bitcoin ETFs Begin Trading on Brazil and Dubai Stock Exchanges: Brazil and Dubai have launched their first Bitcoin exchange – traded funds. QR Capital’s Bitcoin ETF now trades in Brazil, and in Dubia 3iQ’s Bitcoin ETF now trades on their exchange. This is a great sign of developments to come in both regions and may allow for investors to feel safer investing in crypto. This could also cause some investors to get curious and investigate how viable these companies are and then decide to invest which would lead to more Bitcoin ETFs and companies entering the market or even expanding to other countries.
El Salvador Citizens Receive $30 Free Bitcoin: The president of El Salvador announced in an address to the country that if citizens sign up for the state-sponsored crypto wallet Chivo, they will receive $30 in Bitcoin for free. In this same address, President Nayib Bukele gave a tutorial showing how to use the crypto wallet. It has also been announced that the country plans to install about 1,500 crypto ATMs throughout the country. These announcements are very significant because it is one of the first times ever where a government is incentivizing its citizens to use Bitcoin or crypto. The benefits that Bitcoin brings to El Salvador will certainly be noticed by other countries and could start a domino effect in the future.
Jay-Z to Sell, ‘Reasonable Doubt’, NFT: It has been announced that the rapper will be selling an NFT based on his debut album ‘Reasonable Doubt’. Notably, the NFT will be sold in a Sotheby’s auction. This is not the first time NFTs have been sold in a Sotheby auction and it is becoming much more popular to see these works of art selling for millions. As more mainstream artists get involved with NFTs, more bidders will become interested and grow the popularity of these NFTs art pieces.
Japan Issues Warning to Binance: Japan’s Financial Services Agency sent out a warning to the crypto exchange, Binance. The warning indicated that the exchange was operating without registration with regulators. As the largest exchange by volume, the regulation challenges have been tough on the company. The exchange is still currently up and running in Japan but warnings like this are indications that in order for crypto exchanges to become more commonly used, there is a lot of hard work that has to be done to pave the way as these are the first of their kind.
Goldman Sachs and JPM completed the first successful blockchain based UST repurchase agreement, employing JPM’s blockchain technology to execute a UST repo trade via smart contract. For context, a repurchase (repo) agreement is an agreement in which one party sells a financial asset to a counterparty, with the obligation to buy that asset back at a predetermined date. Corporations, governments, and financial institutions all use repo markets as a critical means for swift and secure collateralized funding, and the Fed estimates that there is currently $4.6T in outstanding repo assets, and a blockchain based system could reduce many of the complexities of the current processes of central securities depositories (CSDs).
Esports
eFUse CEO Matt Benson Developing Pipeline for Collegiate Esports: The gaming discoverability platform eFuse has launched a new program called Pipeline. This new program includes a ranking system which showcases the top 100 collegiate eligible esports players. Pipeline makes scouting and being scouted for college level esports a lot easier. The program allows players to display their in-game stats, as well as academic data and career goals to colleges. This is yet another huge step for esports to integrate into grade school and invest in the next generation of players. There have been several programs in recent weeks around the U.S. which have been aimed at encouraging grade level students to pursue esports as a career, whether that be on the player side or the business side. It is slowly becoming more and more normal for schools to have esports clubs with school funded gaming computers for students to use. In schools, esports are truly becoming seen as real sports and careers for students. This trend could foreshadow a huge growth in the esports world and may bring the industry to the level of mainstream sports.
Team Vitality to Launches Fan Token with Socios.com: The esports organization has announced that tokens will soon be available to the public that allow fans to engage with the organization and earn rewards on the app Socios.com. The tokens will launch July 1 and will have a “lifetime supply” of 7 million priced at about $2.38 each during the initial sale. This is a big step for the esports organization but also for the stable coin industry as well. Tokens like this open the door for so many developments in the future such as economies used specifically for small fan communities.
G2 Partners with Ralph Lauren: Ralph Lauren has been named the official exclusive fashion provider for G2 Esports. In addition to the partnership, Martin Larsson, or Rekkles, will be featured in Ralph Lauren’s Wimbledon Campaign alongside a variety of other high-profile athletes. The partnership really shows that high quality brands are beginning to engage in the relatively new world of esports and gaming. The fashion industry has been slowly building a relationship with the esports industry and this is another step for the growth of their bond. Additionally, the featuring of an esports player alongside professional sports players is a big development for the general sentiment around esports.
Video Games
Borders Blurred Removes Boundary Between Music and Video Games: The UK-based company has launched its agency which attempts to combine video games and music performances. The project is led by music journalist John Robb and video gaming and esports consultant John Armstrong. Upcoming projects include, musical artists live streaming performances within video games as well as performing live at esports events. The project is very interesting and provides a unique take on combining the two industries.
Global Gaming Markets Valued at $295 Billion by 2026: A piece that was released by, ReportLinker, dove into a forecast of the gaming market. The piece explained that the gaming industry is poised for huge growth and that esports is arguably the main driver. Another notable stat provided by Statista is that by the end of 2021, there will be 2.81 billion gamers and there is predicted to be over 3 billion by 2024. These statistics really show the growth that companies are seeing in the industry and why they are jumping on sponsorships with organizations.
Fortnite to Expand Virtual Concerts: Combining music and gaming has been the initiative of several companies recently such as Borders Blurred who seeks to normalize virtual concerts and concerts of big artists at esports events. About a year ago, Marshmello virtually performed in Fortnite, and ever since then Fortnite has looked for more ways to include virtual music concerts in the game. Most recently, the band Easy Life was featured in a musical experience in the game. Players enter a virtual re-creation of the O2 Arena in London where they travel on an interesting journey in the game while dancing to the music played by the band. Projects like this push music concerts to slowly become virtual and mix with video games. This could be an indicator as to where the music/video game world is headed.
Acquisitions and Fund Raises
Nvidia’s $40B Arm deal hinges on European regulators: Nvidia’s goal to wrap up the acquisition of ARM Ltd by March 2022 seems far-fetched as regulatory departments of different countries across Europe are getting involved in the process. The deal is attracting so much regulatory attention because ARM licenses software to some of the biggest and direct competitors of Nvidia. We believe Nvidia looks at this acquisition as a segway into the mobile chip manufacturing world where it hasn’t been able to make any headway and present itself as an alternative to Qualcomm. This move also helps with Nvidia’s vision to expand into the growing data centers industry.
EA Purchases Playdemic for $1.4 Billion: The mobile game developer owned by WarnerMedia has been purchased by EA for a very large investment. Playdemic is specifically a mobile game developer and is known for the game Gold Clash. This acquisition is following another purchase by EA of a mobile game developer called, Glu, for $2.1 billion. There have been several studies published highlighting the extreme increase in mobile game’s popularity. This could be a sign that a lot of companies have seen mobile game’s growth and also believe the huge growth is here to stay.
Securitize raised $48 million dollars in Series B funding co-lead by Morgan Stanley and Blockchain Capital to help private companies raise money by issuing tokens. Securitize is a digital marketplace for private securities and a SEC approved transfer agent, meaning it can take on the role of tracking changes in ownership of securities. Not only is the raise a large step towards the further digital transformation of the securities market, but the participation of Morgan Stanley represents a firm commitment from another key financial institution to the digital asset space.
Blockchain Capital recently announced the close of it’s new $300M dollar fund, with participation from Visa and Paypal, showing additional corporate interest from financial service leaders.
Polkadot Network - MORE on Parachains & Crowdloans
Two Ways For Builder Teams to Secure a Parachain.
Builders who are interested in using a parachain slot will enter a parachain auction with the ability to bond enough DOT to secure the parachain for a period between six months and two years. They can either use their own DOT balance or engage their community’s support to source enough DOT to secure a parachain slot.
The builder team may aggregate their DOT into a single designated address on the Polkadot Network and bid in the respective parachain auction.
Polkadot Network DOT holders may utilize the programmatic Crowdloan module to support a builder team by trustlessly delegating their DOT to an address on the Polkadot Network relay chain. This aggregated DOT equates to the team’s parachain auction bid funds. These DOT are never in the possession of the respective builder team, and they are locked until reclaimed by holders following the lapse of the parachain slot period. Note: The agreements are between DOT holders and the Polkadot Network and between builder teams and the Polkadot Network. This is not a loan in the traditional sense as there is no interest paid, no exchange of money, no collateral, no contractual privity, and no claim to the builder team’s assets.
For the second option, builder teams may also choose to use the programmatic Crowdloan feature in the Polkadot Protocol to source the DOT required from its community. These DOT are not transferred to the builder teams and are locked for the duration of the parachain lease. The following is an example of the process:
Parachain candidate team decides to run their own Crowdloan campaign and receives a CrowdLoan ID and account registered on the Polkadot Network relay chain.
Users participate by submitting a transaction with the CrowdLoan ID and the amount they wish to contribute. The chain registers the contribution in the CrowdLoan at a designated address on the Polkadot Network relay chain.
If the team wins the auction, and the CrowdLoan has sourced enough DOT, the parachain is onboarded and each user’s DOT is held on the relay chain, “bonding” the parachain to Polkadot Network’s shared security model.
When the lease period ends, each user can submit a transaction to unreserve their DOT. Each user must unlock their DOT within a certain time period (TBD); or contribute their bond to the Polkadot Treasury. This encourages usage of the Polkadot Network. The cost of a parachain slot is completely determined by the market forces present in the auction, not by on-chain governance, a third party, and certainly not by Web3 Foundation.
A project team who is sourcing the required DOT from its community may choose the type of award, if any, offered to participants for locking their DOT in the event of a winning bid. The decision on the type of award to offer for a successfully secured parachain slot is completely in the control of the project teams and will not receive any input from Web3 Foundation or Parity Technologies. As one can imagine, awards will take many forms and may vary widely among projects, from a network’s native token to certain goods or rights as directed by project teams and accepted by community members. Because of the Polkadot Network's shared security model, parachain networks do not necessarily need to allocate native tokens to users, miners or validators as would be the case in a solo, siloed network. Native tokens may still be the preferred way to coordinate governance and build community in parachain networks, but ultimately the shared security model manages to separate network success away from token speculation and attract community members who are interested in making a commitment to the success of a project.
As noted, the Polkadot Network is a Layer-0, metaprotocol technology. As noted previously, upon the release of the sudo key in July 2020, Web3 Foundation no longer controls the network. In the same way that trading platforms may list tokens outside of the control of the Foundation or other parties, builder teams may build or fund the build of their networks without Web3 involvement.
|Angela Dalton angela@signumgrowthcapital.com | Keshav Holani keshav@signumgrowthcapital.com | Chris King chris@signumgrowthcapital.com | Karen Bader karen@signumgrowthcapital.com |