GameFi guilds have become the lifeblood of the play-to-earn ecosystem. Guilds solve a fundamental issue common to many of today’s most popular play-to-earn games: a rising cost of entry. As these blockchain-based games continue to grow in popularity, gamers can face lofty price tags of hundreds of dollars just to start playing.
Guilds solve this problem by bringing gamers and investors together. Investors that want to get in on the play-to-earn boom or simply have unused in-game assets on hand can provide these to guilds, who act as middlemen that then rent these to gamers — or “scholars” — in exchange for a percentage of future earnings.
This has created a win-win environment in which players and investors both profit together. However, not all guilds are created equal, and each organization has their unique advantages and disadvantages. For example, some guilds may take higher percentages of income from their scholars, while others may have more democratic governance and voting systems.
How can you tell if a guild is really worth its salt? Look no further — we’ll break down the four primary factors for investors to consider when evaluating high potential guilds.
Qualities of High Potential Guilds
History
Rome wasn’t built overnight, and neither was YGG, Merit Circle, Avocado Guild, or any of the other top dogs in the GameFi arena. Thankfully, we have fairly detailed records of guild histories through verifiable publicly accessible information. Because most established guilds operate as decentralized autonomous organizations, or “DAOs,” their operations are transparent, decentralized, and recorded through blockchain-based voting mechanisms, which offer visibility into everything from treasury-related decisions to transaction histories.
Prospective investors should thoroughly investigate the fiscal responsibility and relative transaction volumes of potential guilds. Understanding the length of guild operations, treasury size, cash flow consistency, and current holdings all provide significant insight into the current momentum and future growth potential of a guild.
Distributed Token Allocation
As previously mentioned, because most guilds are operated as DAOs, they employ governance tokens as a tool to make important strategic decisions. Each token acts as a single vote, and the largest token holders naturally have larger input into the future direction of the guild.
It’s precisely for this reason that it’s recommended to conduct background research on where the majority of governance tokens are held. Are tokens well dispersed across a wide range of wallets? Or, is the power over many held by the hands of few? Should governance tokens be spread across the community, a guild will have a more democratic community-led operational structure. This presents investors with higher influence over guild-wide votes and, ultimately, more input into their own profitability.
Be aware, however — should a small number of wallets hold the majority of the tokens, the guild will naturally skew towards centralized operations through a concentration of voting power and investors may find themselves without much input on major management and operational decisions for the guild.
Good Guild Finances
It’s important to dig a little deeper when digging through a guild’s financial history. Fiscal responsibility is critical for maximizing return on investment (ROI), so it’s vital to become fluent in any potential guild before investing resources into a proverbial black hole. Investors will want to pay particular attention to several key guild metrics:
- Number of active scholarships: How popular is the guild? Does it have a growing stream of future revenues? Is it gaining a reputation within the industry as a reliable organization?
- Amount of NFTs in the treasury: Is the guild making good use of its on-hand assets? How many in-game NFTs are actively rented out compared to those that remain unused? How efficient is the guild in deploying its resources?
- Scholar fee percentages: What are the average earnings? How quickly can an investor break even on their investment?
- Diverse revenue sources: Does the guild efficiently use its on-hand capital? Does it have an investment arm? How resilient would guild finances be to an industry downturn or a slowdown in scholarship revenues?
- Aggregate monthly income: Is the guild profitable? How long has it been profitable for? How does its financials compare to those of its competitors?
Some of this data may take a little sleuthing and spy work to discern but remember — never be afraid to engage with guild members with any burning questions! Members are the most direct source of information and are typically well-versed in the competitive advantages of their guild.
Diverse Revenue Sources
While guilds may have begun as simple organizations that specialize in renting out idle in-game assets, they have since evolved into so much more. As the guild ecosystem has developed, revenue channels have also expanded, and guilds have become more financially savvy. While scholarships provide stable future revenue streams, they are not the only way to generate income. For example, guilds have also been known to track arbitrage opportunities and flip undervalued NFTs rather than reserve them for scholarships.
Another example comes in the form of Kyoko.Finance. Kyoko’s cross-chain asset lending platform offers the ability for guilds to borrow and lend NFTs across different gamechains to players and other guilds. This allows them to optimize the usage of their idle assets and increase the asset utilization ratio of their resources — thereby increasing profitability. Therefore, even if its treasury is limited to assets from a single blockchain, a guild can more cheaply borrow NFTs to expand scholarship support to games on other chains and diversify revenue sources. And, for guilds that have too many on-hand resources but have urgent liquidity needs, they can hop over to Kyoko’s DAO-to-DAO lending platform and collateralize their NFTs — or other ERC tokens — for access to USDT. This liquidity can then be used to launch new revenue sources and further grow operations.
Treat Guild Investments Like a Business
While guilds fall a way off from traditional companies, they are still bound by the same general business principles. They require a consistent source of revenue, reliable employees (scholars), adequate risk management, prudent financial management, and more. Because of this, it’s important for investors to evaluate potential guilds similar to how they might value traditional companies. While it doesn’t take Warren Buffet to turn a profit in GameFi, it surely never hurts to be an Intelligent Investor.
About Kyoko
Kyoko.Finance is a DAO-to-DAO and cross-chain GameFi NFT lending market for guilds and players. Kyoko’s DAO-to-DAO lending offers liquidity to promote web3 development, while its guild-to-guild lending, P2P NFT lending, and cross-chain asset lending platforms aim to solve the most pressing issues challenging the GameFi market, including the rising cost of entry and siloed in-game assets across different blockchains. Kyoko’s metaverse will also allow Guilds to display their history, progress, and other accomplishments, while players can connect with others in a world that can be built in, developed, and sold off.
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