As a disclaimer this thesis includes data sourced from various articles along with ENJ's Whitepaper. Consider it to be a comprehensive compilation of information about ENJ to provide the most balanced perspective and understanding for any current or would-be investors.
“Trustless ownership and liquidity of your game assets.”
Enjin’s Mission: “To bring fairness and purpose to gaming. To enrich gamers experiences and enable them to truly own their items and characters. To help game developers in their quest to discover, explore, and create new genres of games that will change the gaming industry at its very core.” - Maxim Blagov, Enjin CEO.
Introduction
Revered marine biologist, author, and conservationist Rachel Carson once said; “those who contemplate the beauty of the earth find reserves of strength that will endure as long as life lasts. There is something infinitely healing in the repeated refrains of nature -- the assurance that dawn comes after night, and spring after winter.” In other words, there is a simple comfort birthed from mother nature’s routine patterns. But why is this? Well, perhaps it’s because these patterns ensure a sense of order and familiarity amongst the nefarious, and often chaotic pantomime that contemporary society has become. Or perhaps, if you take the time to objectively observe the evolutionary narrative of life, it could also be because history and nature does nothing but repeat itself.
Arguably life is nothing but patterns on top of patterns, patterns that affect other patterns. Patterns hidden by patterns. Patterns within patterns. What we call chaos is just patterns we haven't recognized. What we call random is just patterns we can't decipher. What we can't understand we call nonsense. What we can't read we call gibberish. From where we stand the rain seems random. But if we could stand somewhere else, we would see the order in it.
And it is through such perspective - by studying patterns and the cause-effect relationships of history and nature - that we can see nestled deep within the elaborate passageways of our world are archaic, multi-faceted systems of governance (patterns) more than three billion years old. They are systems that, while taking decades to find a welcome embrace in society, continually contribute to the subtle, overarching structures of experiences we share as human beings. In brief, most (if not all things) could arguably be stated as a mere re-contextualisation, re-dressing of something which came before or something buried within life since time immemorial.
But how this all relates to crypto economics and the burgeoning investment class referred to as “tokens", is because there are a number of similarities between the characteristics of evolutionary networks in nature and cryptocurrencies built on blockchain technology. “Decentralization” is often even viewed as a blockchain’s entire raison d’être, but it is also one of the words that is perhaps defined the most poorly. It is essentially the process by which the activities of an organization, particularly those regarding planning and decision-making, are distributed or delegated away from a central, authoritative location or group.
Beyond a technological context, analysis of various published scientific research articles have shown that a variety of natural systems, including colonies of ants and bees and perhaps even neurons in the human brain, make decentralized decisions using common processes involving information search with positive feedback and consensus choice through quorum sensing. For example, in choosing a new nest or colony site—a decision that has huge implications for the survival of the group—decisions must be made without central control and with no single individual evaluating the total available information or any one individual making direct comparisons of the available options. These darwinistic networks are organised such that all information transmitted between individuals is transparent, all decisions are made meritoriously and incentives are proportionately aligned.
Upon analysis of these systems indelibly present in nature, it could be argued that the pursuit of a decentralized, private, and transactional network predates and was enacted prior to the digital revolution of Bitcoin. Bitcoin and its respected siblings are just part of a broader evolution of currencies that has taken place over centuries. At their inception, currencies were a solution to ease the impreciseness of barter trade, and for centuries metal coins with material value served as the currencies of choice. Fiat currency was an innovation beyond metal coins, as it was much easier to transport, but the entirety of its value relied upon the government’s stamp of approval and mandate of legal tender.
Furthermore, decentralized P2P systems based on cryptography were not new in 2009 with resources such as Kazaa and Bittorrent prior. What these earlier decentralized systems lacked was economic incentives, and the lack of baked-in economic incentives is arguably what stifled these early P2P systems from persisting and thriving over time. Satoshi added economic incentives to P2P systems when he created Bitcoin in 2009. It was previously believed to be impossible to achieve consensus among nodes (the Byzantine General’s Problem) to create a decentralized digital cash system, but Satoshi’s implementation of a proof-of-work consensus mechanism along with incentives provided a solution to this previously unsolvable problem. Satoshi’s combination of crypto and incentives resulted in a robust, thriving p2p payment network that today stores over $40B worth of value and processes over $600M worth of transactions daily.
Today the terms cryptocurrencies and Altcoins convey only a fraction of the innovation that is occurring in the cryptoasset economy. Not all of the more than 1000 existing cryptoassets are currencies. We are not just witnessing the decentralized creation of currencies but also of commodities and polished digital goods and services, as blockchains meld technology and the markets to build Web 3.0.
So in essence (and within the context of investing) one must learn to identify the patterns and consistencies of the past to understand, or gain some semblance (no matter how faint), of the future. One must look at the past and find, woven like the hidden symbols on a treasure map, the path that will point to a final destination. This in turn begs the questions; “which out of multitude of cryptocurrencies and tokens will continue their progressive, uncompromising stampede into the future Savannah? And what are the factors that will help players within this unique species of technology survive a process not too dissimilar to Darwins survival of the fittest?” To arrive at a holistic conclusion for these questions, one must first examine and acknowledge a very prevalent factor in the realm of tech. And that is, a notion called “the winner takes all”.
The 'winner takes all' effect:
In 1998, when Google was born, search was a competitive market with one clear leader, Yahoo, which had identified the need for a Web directory. Others, such as Infoseek, Lycos, and Excite, were falling behind. So the only way to beat Yahoo’s old, directory-style search was to do something different. That’s exactly what the Google co-founders, Larry Page and Sergey Brin, did. They correctly identified that the Web was going to grow exponentially, in size, scope, and usage. It would need a new, faster, simpler search engine that would update as quickly as the Web itself. And they would make it incredibly fast—the faster you received results when you typed in a query, the more likely you were to search again. It was a perfect behavior for a world that was going slowly from dial-up Internet to always-on broadband connections. Of course, to make this happen, they would need to build and own their own infrastructure, from networks to data centers to servers.
As Google started to grow, its new, more algorithmic approach to search attracted new competitors—Simpli, Dogpile, Northern Light, and Direct Hit are some of the doomed companies that came out around that time. Another was a company called Powerset, which ended up getting acquired by Microsoft and eventually became a core part of what is now Microsoft Bing, which currently runs a distant second in the search-engine sweepstakes.
Looking back, Google’s success came from the fortuitous timing of being born at the cusp of the broadband age. But it also came about because of the new reality of the Internet: a lot of services were going to be algorithmic, and owning your own infrastructure would be a key advantage. The infrastructure—networks, storage, and computers—allowed Google to crawl the Web and rank the results cheaply. As Google acquired more money, it built better infrastructure, which allowed the company to serve up results more quickly, in the process training hundreds of millions of people to use Google whenever they wanted to search. The more people searched, the more data they gave Google to make its index better, smarter, faster, and, eventually, more personal. In short: as Google got bigger, it got better, which made it bigger still. Google is a winner that has taken it all. This loop of algorithms, infrastructure, and data is potent. Add what are called network effects to the mix, and you start to see virtual monopolies emerge almost overnight. A network effect occurs when the value of a product or service goes up with the number of people using it. The Ethernet inventor Bob Metcalfe called it Metcalfe’s Law.
Telephone services, eBay, and Skype are good examples of the network effects at work. The more people who are on Skype, the more people you can call, and thus the more likely it is that someone will join. While in the early days of networks, growth was limited by slowness and cost at numerous points—expensive telephone connections, computers that crashed, browsers that didn't work—the rise of the smartphone has essentially changed all that.
Facebook, which historically was one of the main beneficiaries of network effects (a social network becomes more valuable to you as more of your friends join it) has grown from two hundred million users to 1.2 billion in the past seven years, as phones have become the primary devices we use to get online. And that's not the only way that Facebook has created a near monopoly in social networking. In the past decade, it has ramped up spending on new data centers, hired a lot more engineers, and turned its news feed into a powerful algorithm. The more we use it, the more data we give the company, and the more it is able to control where we turn our attention. The company has more than a billion users around the world, and it has figured out how to become a dominant source of our mobile addiction. Facebook, thanks to this loop of algorithms, infrastructure, money, and data, is a winner-takes-all company.
Amazon has run away with online retail, leaving everyone else to fight over scraps. Microsoft, even today, controls the office-productivity business. Eight years into the smartphone boom, Google’s Android and Apple's iOS are the two dominant players, and even in chips it is still Intel and some others. There are two companies that dominate the public cloud—Amazon, followed by Microsoft’s Azure. Google’s G.C.E. is a distant third. There are some competitive markets, such as mobile payments, where Square, PayPal, Apple Pay, Android Pay, Samsung Pay, and Walmart Pay are some of the bigger players.
However the reason why different people take part in different networks has important implications on how fast they grow and how defensible they’re against startups and competitors.
Communication benefit: This is one of the most common uses of a network. Humans want to communicate with one another and if a network allows that, it’s a direct benefit. Facebook, WhatsApp, mobile carriers are examples of networks that provide this benefit.
Economic benefit: If a network facilitates economic transactions (i.e. exposes me to buyers or sellers), users join that network to either make money or to acquire services that they want. Uber, AirBnB, eBay, organizations are examples of this.
Entertainment benefit: If a network gives access to entertainment, users join that network to have fun. Youtube, 9Gag, Twitch, offline parties are examples of this.
Information benefit: If a network exposes useful information, users join it to get access better future opportunities or knowledge. LinkedIn, conferences, Reddit, Hacker News are examples of this.
Within the cryptocurrency landscape, where a plethora of coins and tokens all compete for top ranking, there will no doubt be majority rule as we’ve seen with the nature of Amazon, Facebook, Apple, and Google in the aforementioned examples. But one could also argue that despite this notion of winner takes all, there are still subtle patterns in the characteristics of a product or solution that help to maintain its strength and position on the short, mid, and long term.
Within an evolutionary context, we could liken these foundational characteristics to Richard Dawkins “replicators” that were known as the initial molecule which first managed to reproduce itself and thus gained an advantage over other molecules within the “primordial soup”.
The underlying patterns and consistencies we could argue that serve as the foundational or genetic “building blocks” for any investor to evaluate a cryptocurrency are inclusive but not limited to questions such as the handful I’ve elaborated on below. Specifically in relation to Enjin Coin, I cover how the product and the team fulfil these criteria throughout the remainder of this paper.
What Problem Does It Solve?
The first thing to consider when investing in cryptocurrencies is the question— what problem does the project try to solve? What are they trying to achieve and is there truly a need for a Blockchain or Directed Acyclic Graph (DAG)?
Token Value: By definition, investing “is the act of committing money or capital to an endeavor (a business, project, real estate, etc.), with the expectation of obtaining an additional income or profit”. When investing in a particular digital currency, investors need to consider — where does the value for XYZ come from? What makes XYZ’s price increase?
Coin Supply & Market Capitalization (Market Cap)
Before continuing, the following definitions are provided for clarification:
Circulating Supply is the best approximation of the number of coins that are circulating in the market and in the general public’s hands.
Total Supply is the total amount of coins in existence right now (minus any coins that have been verifiably burned).
Max Supply is the best approximation of the maximum amount of coins that will ever exist in the lifetime of the cryptocurrency.
Market Capitalization is one way to rank the relative size of a cryptocurrency. It’s calculated by multiplying the Price by the
Circulating Supply. Therefore, Market Cap = Price * Circulating Supply.
One frequent mistake many investors make is investing in a coin because the “price per coin” is cheap(er) . For example, comparatively there are two projects, Project A and Project X. Project A has a supply of 1000 coins worth $1 each. Project X has a supply of 10 coins worth $100 each. The value of both projects are exactly the same, as they both have the same market cap, however, many people are under the false impression that investing in Project A is a better choice. To make it as simple as possible — the more coins there are, the less valuable they are.
Consider the following:
What is the circulating, total and max supply? We advise investors to pay close attention to the difference between these three factors and always research to understand the economics of the coin, why there’s a difference and how it will be “bridged”.
There are 3 types of coins; inflationary coins which increase their supply over time, deflationary coins which decrease their supply over time and coins that are neither — their supply always remains constant. Ignoring external factors, inflationary coins drop in value when new coins are added to circulation (as they are now more abundant) and deflationary coins increase in value when coins are removed from circulation (as they are now scarcer).
What percentage do the coin founders hold? Always research how many coins do the founders hold, and if this is a significant percentage (let’s say over 25–30%) question why. Do they have a valid reason for holding such amount? What are they planning to do with it?
Team & Transparency
A very important factor to take into consideration when investing in a project is the team behind it. Some questions to think about are:
Does the team have any prior experience in the industry the project is tackling?
Is the team engaged with the community and provide timely updates? Are they on track to deliver their roadmap?
Investors & Partnerships Another key factor to consider for investments are current project investors and partnerships. The reason should be self-explanatory, but having the backing of well-established entities gives the project further legitimacy.
To help understand this process and evaluate the relative strength and alignment of a coin/ token with my values is Gartner’s Hype Cycle for Emerging Technologies
Gartner’s Hype Cycle for Emerging Technologies:
With regards to the progression of a new technology, and the way it evolves as it gains mental mindshare, is at the core of
Gartner’s Hype Cycle for Emerging Technologies (Gartner is a leading technology research and advisory firm), which displays five common stages of technology.
Innovation Trigger
Peak of Inflated Expectations
Trough of Disillusionment
Slope of Enlightenment
Plateau of Productivity
First is the Innovation Trigger that brings the technology into the world. While not very visible, just as Bitcoin wasn’t visible in the early years of its life, word spreads and expectations grow. Over time the murmurs gain momentum, building into a crescendo that is Gartner’s second stage, the Peak of Inflated Expectations.
The peak represents the height of confusion around the definition of the original technology, because people often apply it optimistically to everything they see. No technology is a panacea. As companies sprout to life and attempt to transition ideas into reality, shifting from proof-of-concepts to at-scale implementations, it frequently turns out that implementing a new disruptive technology in the wild is much harder than anticipated. The new technology must integrate with many other systems, often requiring a wide-reaching redesign. It also requires retraining of employees and consumers.
These difficulties slowly push the technology into the Trough of Disillusionment, as people lament that this technology will never work or is too difficult to deal with. When enough people have given up, but the loyal keep working in dedication, the technology begins to rise again, this time not with the irrational exuberance of its early years, but instead with a sustained release of improvements and productivity.
Over time the technology matures, ultimately ultimately becoming a steady platform in the Plateau of Productivity that provides a base on which to build other technologies. While it’s hard to predict where blockchain technology currently falls on Gartner’s Hype Cycle (these things are always easier in retrospect), we would posit that Bitcoin is emerging from the Trough of Disillusionment. At the same time, blockchain technology stripped of native assets (private blockchain) is descending from the Peak of Inflated Expectations, which it reached in the summer of 2016 just before The DAO hack occurred.
Cryptoassets beyond bitcoin are at different points between the Innovation Trigger and the Trough of Disillusionment. These differ because they came to life at different points after bitcoin and many are still emerging. Given the prioritisation of short to medium term adoption, I support technologies that provide the most value to current users of cryptocurrencies. As demonstrated by the aforementioned cycle of adoption, the crypto eco-system is in its early stages of development and thus the community is strongly represented by engineers, blockchain evangelists and technology early adopters. This suggests that the tokens with the strongest immediate demand will relate to infrastructural and architectural innovation because they provide the most utility to developers building the eco-system.
With this in mind, aligning the value of a token or coin with a community already familiar with the underlying dynamics and value of blockchain is a clear advantage considering the vernacular used to describe the space is highly technical, and is deeply rooted in the financial space.
In the same way acronyms like CDOs confuse everyday consumers looking to manage their money, words like “mining” in the crypto and blockchain spaces are equally confusing. This, in itself, is a large obstacle for both cryptocurrency and the underlying blockchain technologies—the fact that its value cannot be easily explained. Hence why we now continue to expand on a community outside of developers, technologists, and institutional investors that are perfectly aligned to further propel the widespread adoption of cryptocurrencies. Gamers.
Context matters - why gamers are perfect for cryptocurrencies.
The gaming industry is exploding with growth, but blockchain and utility tokens could disrupt the market in a big way. Early adopters of these new innovations have the opportunity to ride this wave of profitability, but the important thing is to know what tokens to purchase, and when to participate.
DMarket, a leading global marketplace that uses blockchain technology to transform virtual gaming items into real world assets, hosted a blockchain and gaming panel discussion during GDC. The purpose of the panel was to provide an explanation as to why cryptocurrency and blockchain technology are having an impact on the gaming sector, which is expected to become a $143 billion global industry by 2020.
Jared Psigoda, the CEO of BitGuild - one of the companies that spoke on DMarket’s gaming and blockchain panel at GDC - explained that the concept behind digital currencies has resonated with the gaming community for years.
"Gamers in particular understand cryptocurrency because virtual money has been a part of gaming for the last 10 years. For example, dating back to the World of Warcraft, there was a one-hundred million dollar market for buying digital gold. This was the main currency used in World of Warcraft to buy in-game assets, like dragons. However, it would take gamers a tremendous amount of time to acquire digital gold, so they would use real money instead to buy in-game assets.”
As a result of gamers using fiat currency (i.e.USD) to purchase gaming items, free-to-play games become very expensive to play, which is why gaming companies are able to generate so much revenue.To put this into perspective, recent findings from SuperData show that the gaming industry generated $108.4 billion in revenue in 2017. Mobile games were the biggest sector, generating $59.2 billion, followed by PC games, which generated $33 billion last year. Both the PC and mobile sectors were driven by “free-to-play”games. An estimated $82 billion was spent on these games.
Due to the additional expenses associated with free-to-play games, blockchain-based games are gaining traction primarily because blockchain technology allows gamers to use cryptocurrency to trade virtual gaming items with one another. This eliminates the need for gamers to use fiat currency to purchase items directly from game developers.
The use of cryptocurrency in gaming also solves the problem behind ownership of in-game assets, as blockchain-based games tokenize all gaming items. This means that once gamers acquire assets, they remain in their possession within a digital wallet until they decide to trade or sell the tokenized asset – just like any other cryptocurrency.
“Greed can be seen in free-to-play games since lots of money has to be spent in order to acquire certain assets. This is an industry problem, as all of the major companies are driven by profit. But, do these companies value profit over everything? If so, is that good for the player base – probably not. Blockchain technology finally allows gamers to own their in-game items, while providing a strong focus on trade and the gaming economy. Moreover, player ownership of assets allows for a proportion of game revenues to go back to the player base,” Psigoda explained.
How blockchain can fix the Gaming industry
What started out as an industry comprised of traditional offline media has now progressively changed into a multi-billion dollar industry. The last 5 years alone have seen the emergence of a range of new business, competition and forms of entertainment through the latest technologies and innovations such as Augmented Reality, Virtual Reality, Adaptive Artificial Intelligence and so on. As the industry has evolved to bring us the best in gaming, it has also brought many challenges and problems.
Currently several challenges are being faced due to the centralised framework that is implemented by the online gaming platforms. Just to list a few:
The opaque and arbitrary Revenue Sharing Model
Troubles for overseeing Control of Assets
Cyber Attacks and Frauds
The blockchain is the shared electronic ledger underlying Bitcoin, a cryptocurrency, and Ethereum. It is the solution to the challenges faced by the Gaming Industry as it removes the need for third parties since it provides a gateway for secure registration and transfer of control. This, therefore, is applicable for online gaming as the technology has demonstrated its value as a transparent and dependable platform.
The opaque and arbitrary Revenue Sharing Model
In order for small studios and indie developers to maximise their publicity and sales for the games they develop, they are often forced to depend on intermediaries such as Steam, GOG and other major app stores. An extensive revenue cut is taken and a complex benefit model is offered. To add onto this frustrating process, a game developer’s earnings can take up to 60 days before it is received. On the other hand, blockchain can create a sturdy platform for a transparent gaming economy. Since it lacks the need for an intermediary to authenticate or settle transactions, developers are able to be directly compensated by gamers for playing their games.
Troubles for overseeing Control of Assets
Virtual economies have been born due to the arrival of virtual assets which can be bought and amassed through in-game payments. In order to collect virtual valuables, players can spend a ridiculous amount of hours in gameplay and money. Special in-game items have resulted in gamers trading with one another but can often lead to fraudulent scams.
These game assets have been kept under severe regulation by the gaming companies themselves in an attempt to prohibit the illegal copies and deception. This consequently leads to a lack of gamer's control over the assets, which may value at thousands of dollars, outside the game. Once again, to make matters worse, the servers themselves have become targets of cyber-attacks. Blockchain prevents double-spending, well actually, the blockchain itself does not prevent double-spending; instead, a confirmation process protects the blockchain until all transactions posted to the blockchain are verified. The blockchain becomes posted publicly and permanently once the transactions are confirmed.
Therefore, by preventing the double-spending of crypto currencies, Blockchain has demonstrated its authenticity in maintaining legitimate control of the virtual assets without depending on third party intermediaries. Blockchain transactions are set in stone once they are publicly posted. This means they are more bulletproof against fraud and cyber-attacks as compared to the game companies’ crude but effective proprietary systems.
Blockchain technology offers unprecedented possibilities for peer to peer settlements. Basically it is ‘an open, distributed ledger [register] that can record transactions between two parties efficiently’, that is move value and represent ownership. Blockchain runs as global, shared infrastructure. That is why it is perceived as a perfect tool for optimisation of any kind of digital transactions. Blockchain technology and cryptocurrencies that run on it are disrupting many industries including banking, insurance, properties, but also art and music. It is being popularized due to the possibility of full transparency, decentralization, democratization, minimal margins and delays in cryptocurrencies transfers.
The video game industry has specific system problems that can be resolved with blockchain. It is especially fortunate that this market is significantly digitized — as much as 87% of revenues are generated through digital channels. Thanks to blockchain-based Ethereum platform and smart contracts companies and developers can propose a new way of games distribution, which is based on the most fundamental economic relation: producer — buyer. There is also the option of adding yet another layer to counter the problem of games discovery and thus propose a new way of game distribution & promotion: producer (game developer) — endorser (influencer) — buyer (gamer). The blockchain-based distribution model puts the game developers and artists back in the centre of the economy and minimize the cut for skippable third parties.
Ethereum smart contracts are the key element here. Smart contracts are ‘applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third party interference’ . They enable to create entire markets, stores, promises — without the need of middle man or counterparty risk. One can think of it as a type of a modern vending machine — a device that implements the conditions of an agreement and grants the security. There are specific rules written that are clear, accessible to everyone and that cannot be changed. Using reference of vending machine, smart contracts work like this: if you put one dollar it gives you a soda. If you put less than a dollar — you don’t get soda, but it returns money. If you put more than a dollar — it gives you soda and the change. The whole process runs on the Ethereum platform, which is fast and secure.
Below I've elaborated on the gradual dynamics of Enjin Coin. We’ve also listed more specifically what factors further confirm my evaluation of ENJ being strongly positioned for short, mid, and long term growth.
What is Enjin Coin:
Enjin is the largest gaming community creation platform online with more than 18 million users. The company, based in Singapore, was launched in 2009 and now sees more than 60 million global views a month. Enjin contract is a platform that gives game developers, content creators and gaming communities the required crypto-backed value and tools for implementing and managing virtual goods.
Enjin® has introduced Enjin Coin (“ENJ”), a new cryptocurrency (ERC-20 Token) and smart contract platform that gives game developers, content creators and gaming communities the required crypto-backed value and tools for implementing and managing virtual goods. Enjin will develop a powerful framework of open-source software development kits (SDKs), wallets, game plugins, virtual item management apps and a payment gateway platform.
Some notable aspects that help crystallise Enjin Coin’s position include;
Millions of engaged gamers : Enjin’s millions of highly engaged users socialize and work together to create unique communities, game content, and virtual economies. By providing the tools they need, Enjin empowers these creators to monetize their content.
Game value & content creation: Sandbox games, such as Minecraft, are the most popular games on Enjin. Using Enjin Coin will promote a culture of passion, collaboration, and pride by giving players more control over their game content. Players that feel valued will keep coming back, and increase revenue and engagement for publishers and content makers.
Enjin adopts Enjin Coin: Enjin is uniquely positioned in the virtual goods market to promote and establish a cryptocurrency. We give gamers, communities and game creators high quality tools for monetizing their gaming world.
Functional Benefits : Enjin will develop tools that enable game publishers, game servers, and communities to manage virtual goods and in-game items across multiple platforms. Monetization using Enjin Coin will be a key focus with robust features and toolsets provided. Great benefits will be gained by utilizing a decentralized platform and the supporting frameworks.
Problems Enjin Coin Solves For Developers
Monetization — Less than 3% of gamers buy items. By raising the intrinsic, functional and emotional value of the virtual items developers offer it is a foregone conclusion that they will raise their revenues significantly. The blockchain will also enable developers to regulate secondary markets and generate profits from those sales while minimizing losses caused by chargebacks and fraud.
Player Retention — Genuine ownership over items will bring realistic socio-economic principles to gaming. The rich dynamics of trade, governed by realistic supply and demand principles, is certain to become a game within itself. This will revolutionize gameplay and enable more community-driven games, resulting in deeper in-game connections and more customer loyalty.
Continued Gameplay — Once a player has finished a game, its developer will no longer have to say goodbye and watch them disappear into the sunset. If a developer has created multiple games they can enable their players to move smoothly into their next game, taking all of their possessions with them. They can also work together with other game developers by pooling their economies and allowing players to move back and forth between their gaming worlds. This enables them to pool their marketing resources and create fluid gameplay experiences that players now only dream of.
Community Building — The blockchain based solutions Enjin is developing will allow for cross- platform integrations. This will enable vertically integrated communities where virtual assets can potentially be used, managed and traded on any app, platform or device which connects to the internet. The potential this gives developers to galvanize communities across different platforms is mind-blowing and the full scope of potential impact is yet to be investigated.
Fundraising — Crowdfunding is a popular way for indie developers to raise money. By creating digital items on the blockchain developers can create gaming assets before even building their game. This will enable them to hold “Initial Asset Offerings” (IAO’s) through crowdfunding platforms where they can reward their backers by instantly delivering rare, valuable and/or discounted in-game assets in anticipation for the games’ release.
Crowd Marketing — Virtual items stored on the blockchain can be used to activate gaming communities into marketing machines, by offering them rare and valuable items to sell at a profit. This will motivate gamers and influencers to promote in-game products while allowing developers to gain free advertising and a percentage of all sales revenues. All transactions and management of this process can be automatically handled by the blockchain. Developers can simply distribute their gaming assets and let the blockchain do the rest.
Download Ownership — It is possible to create ownership tokens that provide access to games, which will allow players to have authentic ownership over their downloads. This can create many possibilities such as collector’s editions with proven rarity, regulated peer to peer on-selling which enables developers to gain promotion and earn commission through crowd marketing, trade-in programs where players can return the access token for one of the developers’ games in exchange for a discount on another.
How Enjin Coin Works:
Enjin Coin is an ERC20 token built on the Ethereum network. With that, the project not only acts as a cryptocurrency but also has smart contract capabilities. It’s also one of the first projects testing the Raiden Network, Ethereum’s version of the Lightning Network. Referencing a published article on the Enjin Coin blog, I’ve elaborated on the more granular dynamics of Enjin Coin below.
- Acquisition
At this point in time, game developers are able to acquire Enjin Coin in two ways:
An official partnership with Enjin.
Purchase from a cryptocurrency exchange.
Enjin Coin’s whitepaper states that 10% of all tokens is reserved for marketing and strategic partners; 100m Enjin Coins will be used to incentivise partnerships. Once those supplies run out, the only way game developers will be able to acquire Enjin Coin is via cryptocurrency exchanges.
- Minting
“Minting” is another term for “Turning Enjin Coin into custom tokens”. Game developers might mint in-game currencies, items such as swords, guns, tanks, plots of land, planets. Essentially, any object in the game, or even the game itself can be minted. Basically, every minted digital asset has real-life value. Enjin Coin is used to create it. The most important variable when minting a large volume of in-game items (currencies, or mineable resources, for example) is the supply model. Efinity, our upcoming game channel network, will support six different token supply models, in order to meet the needs of game developers in regards to the game economy design.
- Gaming
There are several ways gamers can acquire Enjin Coin-based digital assets:
In-Game Rewards finishing a quest and getting a sword referring a friend and earning a bit of in-game currency
cutting down a tree and ending up with a tokenized branch with which you can craft a bow
Purchases either in-game and/or via official marketplaces from game developers peer-to-peer, directly or via approved, regulated secondary marketplaces
- Trading
Enjin Coin-based virtual items earned or purchased by gamers are not kept on the game servers — they are held safely in their private, secure Enjin Wallets. Every trade transaction, whether it’s trading items for items, or Enjin Coin for items, will have to be confirmed by a gamer via his or hers Enjin Wallet.
Efinity will support escrow of multiple tokens — which, combined with trade confirmations, will result in a layer of security that should eliminate most, if not all types of scams in multiplayer games.
With this said t’s important to note the difference between an items intrinsic value and it’s Enjin Coin-backed value. A wizard's staff might have only 10$ worth of Enjin Coin-backed value — but it could be sold for hundreds or thousands of times more. This all depends on its utility, rarity and/or other game-specific variables. The intrinsic value of a tokenized item could depend solely on it’s creator — consider a famous Twitch streamer that crafted an enchanted sword, a talented artist that created a skin for a rifle or a real-life architect that built a magnificent castle.
Those types of ENJ-backed items will be possible due to token bundles — again, one of Efinity’s features. Token bundles will allow for compound items: crafting a sword from 10 pieces of steel that has 0.1 ENJ in backed value each, and ending up with a sword that has 1 ENJ in backed value. Enjin Coin’s second development update introduced two nifty features : whitelists and bound tokens, which, when combined, can allow game developers to regulate (or obliterate) secondary marketplaces, and apply a trading fee on all marketplace transactions.
As game developers lose up to 40% of their revenue on gray marketplace trading, this seems like a useful value proposal and an innovative monetization model.
- Melting
Gamers can obtain Enjin Coin (ENJ) in several ways:
By “melting” ENJ-based virtual items.
Purchasing Enjin Coin via a cryptocurrency exchange.
“Melting” is a term used to describe turning Enjin Coin-backed virtual items back into Enjin Coin. The process is the exact reverse of minting, basically, with one key difference — the percentage of Enjin Coin that can be acquired by melting an item.
The percentage depends solely on the choices made by the game developer that minted the item — and it can never be less than 50%. (eg. a sword that was minted with 2 ENJ, then melted — a game developer would receive 1 ENJ, the gamer would receive 1ENJ).
One thing that needs to be understood about melting is that it’s not recommended — this means that the digital items intrinsic value is less than it’s ENJ-backed value.That said, the melting feature does provide a type of an “insurance”, and will provide an incentive for a vast majority of gamers to purchase in-game items which they wouldn’t get otherwise. Additionally providing an ethical way to implement microtransactions.
Considering purchase of cryptocurrencies is currently a complicated process, the Enjin Coin team plans to also enable seamless fiat-to-crypto conversion (and vise-versa) inside the Enjin Wallet itself — thus providing gamers with an easy interface to cash-in and cash-out.
Other Use-Cases
Gamifying Social Media
Enjin has partnered with NRG eSports who will create NRG-branded tokens and distribute them as rewards to their fans in return for social media activities and interactions.
Gamifying Retail
Enjin has received interest from businesses who want to upgrade from outdated coupons and loyalty stamp cards. They want their own custom branded crypto assets to use as loyalty points, discount tokens, Groupon style coupons and gift vouchers.
Gamifying Workplaces
There are potential use cases Enjin will explore that involve workplaces offering employee reward points, achievement awards and discount tokens that coincide with retail gamification. There are possibilities of web integrations such as wall of fame platforms and branded online points-based stores thanks to the EnjinX API.
The Meta-Economy
The economy ecosystem revolving around Enjin Coin will involve cryptocurrency investors, game developers, gaming organizations and gamers.
Investors are likely to trade (from day trading to long-term hodling) Enjin Coin in order to profit. Once the Enjin Coin partnership pool is depleted, the only way game developers and gaming organizations will be able to obtain large quantities of ENJ is by purchasing it, thus providing further incentive for investors.
Game developers will be acquiring Enjin Coin for three main reasons — it’s problem-solving capability, the ability to increase revenue, and the possibilities for the gaming industry that it allows.
Gaming organizations such as esports teams, gaming guilds, clans and communities might acquire Enjin Coin to monetize their servers, or increase engagement and growth.
Gamers will be both selling and buying Enjin Coin — first group to make a profit, second to use it for in-game purchases.
Market Information
The global gaming market is experiencing explosive growth, reaching US$108.9BN in 2017 and a projected US$128.5BN by 2020. Enjin PTE LTD is headquartered in Singapore, providing the perfect springboard to further target the Chinese, Japanese and Korean markets. 8%of the growth in 2016 came from Asia-Pacific countries. Virtual good sales now account for over $70 billion in revenue per year and only 3% of players buy items. — A small increase in buyers equals a large increase in revenue.
There are 2.2 billion gamers in the world. — From a holistic overview of research articles coupled with references from Enjin Coin’s native research material, believe that 25% of the world’s population will own digital assets that contain Enjin Coin or some other form of gaming cryptocurrency.
Virtual Goods market
It’s estimated that, the overall value of the Global Social Gaming market by 2019, is to reach US$17.4BN. Virtual goods, advertisements, and lead generation offers are the main revenue generation sources of the global social gaming market . Among these, the virtual goods segment is likely to expand the fastest at a
compound annual growth rate of 15.20% over the forecast period.
Mobile Game Market
With the recent release of the Enjin Mobile App, featuring communities, forums, wall feeds, messaging, notification, rich content creation, and friends management, Enjin is growing rapidly in the mobile app sector. 2.2 billion gamers across the globe are expected to generate US$108.9 billion in game revenues in 2017 . Mobile is the most lucrative segment, claiming 42% of the market. In 2020, mobile gaming will represent just more than half of the total games market.
The Virtual Asset Marketplace
Although virtual asset trading existed before Massive Multiplayer Online Role-Playing Games or MMORPGs, this genre of games made a niche trading system into a global industry. The persistent world and item rarity levels create the ideal ecosystem for real money trading of digital assets. An entire sub-industry of ‘gold farmers’ make a living simply from generating in-game currency as efficiently as possible. However, many of these currencies weren’t designed to extract real-world money from their users. Virtual assets are a different matter.
Blizzard, already well known for World of Warcraft and their gold farming issues, introduced an auction house for their new game, Diablo 3. In this auction house, users could pay real money for in-game items. Theoretically, this should have removed the black-market aspect of item trading. They tweaked the game to make it difficult for players to make money off the auction house. Blizzard later removed the system, but item trading in Diablo 3 remains prevalent.
Enjin’s ENJ token offers a means to trade these assets safely. Users offer up their item or currency in exchange for ENJ, through the platform itself. The automated system within the platform acts as a neutral party, executing the trade only when both sides have fulfilled their transfer. ENJ can then be traded for fiat through cryptocurrency exchanges – or used as a universal currency between gaming platforms.
Enjin Partners with Unity, Minecraft
Of course, the more game developers involved directly with the ENJ project, the better. Enjin’s pre-existing relationships with many major developers helps facilitate this. Recently, the hugely popular Unity gaming engine introduced an Enjin Coin SDK into their development tools. Developers wanting to use ENJ internally within their games can now easily integrate that functionality. Considering the number of games built on the Unity engine, this is a huge opportunity for ENJ. Similarly, popular culture phenomena Minecraft also introduced their own Enjin Coin SDK. Minecraft modifications, additional content created by users for other users, can now include ENJ transactions as a part of their platform. The ability to pay for premium content with ENJ opens new avenues for the coin, while still maintaining game interoperability.
Unique Applicability as a Cryptocurrency
While most cryptocurrencies jockey to seize the top slot as a digital currency or a smart contract platform, Enjin Coin’s focus is elsewhere. Their use as a specific bridge-currency for virtual assets sets them apart from other tokens. ENJ’s use case is unique, and that uniqueness pays off. Their price per unit recovered nicely after the recent market correction. The associated platform remains in early stages, and a successful release could pay off for early investors.
Room For Growth
Economies of Scale — Real-world production models govern the Enjin Coin’s ecosystem. Producing more of an item decreases the price per item, making it more affordable and likely for game developers to purchase ENJ.
Diminishing Supply — When assets are created out of Enjin Coin the cryptocurrency gets locked inside. The ENJ within the item is removed from circulating supply unless the item gets melted back into Enjin Coin.
Currency Deflation — As the supply of ENJ diminishes and the price rises, the cost of production will scale down so developers can afford to buy ENJ at the higher price; therefore, raising Enjin Coin’s intrinsic value.
Enjin Wallet
The Enjin Smart Wallet is the world's most secure cryptocurrency wallet available for Android and iOS— supporting BTC, ETH, LTC, ENJ and all ERC-20 tokens. The Enjin Smart Wallet has over 150,000 downloads via Google Play, Apple Store and directly via Enjn’s website. Building on existing light wallet design, the Enjin Wallet streamlines the user experience further by integrating with games and websites that the user trusts. User accounts on each trusted platform will be synced to the user's Ethereum address.
Mobile Wallet The Enjin Wallet will also exist as a Mobile (iOS/Android) application and implement the same features mentioned above. Many users will prefer to accept transactions on their phone while playing a game on their PC. The mobile wallet can be set-up quickly by scanning a QR code that contains settings. The mobile app will receive Push notifications from Enjin and any trusted platforms. If a transaction request is pushed, the mobile wallet will verify funds exist and ask the user to Accept or Deny the coin transaction. This will allow players in-game to easily send coin transactions by using their phone as the authentication device.
Adoption Strategy
Enjin Coin’s roadmap is geared towards swiftly delivering tools for gamers and developers.
The team has an aggressive adoption strategy and has since made excellent progress:
Enjin communities hosting over 1.5m users have already signed up to use Enjin Coin.
Enjin’s partnership with Unity provides access to 770 million gamers.
Enjin has received enquiries from hundreds of developers.
The team will integrate Enjin Coin into their network of 19 million users.
Liquidity
Enjin Coin is currently listed on 14 exchanges including; Binance, OKEX, HitBTC, Tidex, EtherDelta, Livecoin, KuCoin, IDEX and many more with even further listings still underway.
Enjin Coin Token Model
Allocation: Only 1 billion ENJ tokens will ever be created. The ENJ tokens are intended to be allocated as follows:
40% (400,000,000) to be sold by Enjin to pre-sale purchasers pursuant to a Simple Agreement for Future Tokens (“SAFT”) offering or through Enjin Approved Affiliates.
40% (400,000,000) to be sold by Enjin to Crowdsale purchasers minus any bonuses applied in the pre-sale. The Enjin Coin pre-sale sold out in September 2017 , and there are approximately 300,000,000 remaining tokens available for the public sale.
10% (100,000,000) reserved by the Company to incentivize community, beta testers, marketing and strategic partners.
10% ( 100,000,000) to be distributed by the Company to the Enjin Coin Team and Advisors.
According to Enjin Coin’s whitepaper, all funds contributed in the Crowdsale will used solely for the development, promotion, and growth of Enjin Coin Platform. Below is the preliminary allocation and the distribution and may be subject to change.
50% Development This refers to the development and operational costs of all technology described in Enjin Coin’s whitepaper, including smart contracts, wallets, SDKs, APIs, game plugins, third party plugins, and any other Enjin Coin-related updates. This will also cover hiring additional full-time developers and consultants to accelerate development so that we meet or exceed the roadmap goals and expansion goals.5% Security : The team are taking the necessary steps to ensure that optimal security standards are followed in every release. This includes professional code audits and penetration testing on all APIs, smart contracts, Mobile and PC wallets, plugins and SDKs.
5% Hosting & Infrastructure : This will cover a minimum of 5 years of increased costs required for expansion of the web servers, firewalls, load balancers, DDOS protection and network for anticipated increases in Traffic to the web platform and public JSON-RPC API.
30% Marketing & Growth : The marketing budget allows for a constant and relentless promotion of Enjin Coin to gamers in multiple target countries and gaming segments. This will be used for video and in-game advertising, promotional events & tournaments, sponsorships, mobile & social media ads, and liasoning with studios.
5% Legal: Enjin will obtain the appropriate legal advice to always ensure that the team operate in accordance with the laws and regulations of each jurisdiction that we do business in. Funds will be held in reserve for any future issues or challenges that may arise in any region.
5% Contingency : This amount will be set aside for unforeseen costs.
Token Supply Models
The original Enjin Coin whitepaper specified fixed-supply gaming tokens, but the team have since developed a system that allows for different models of token supply:
Fixed maximum supply
Annual supply % increase
Annual supply % decrease
Periodic increment/decrement by fixed amount
Settable by token minter
Smart contract or Oracle
A supply model can be chosen when the item is defined, and provides flexibility for games that may need more items in the future as the game evolves. The item’s supply model will be part of the item details, in all Enjin Wallets.
2018 Roadmap
Referencing a recent blog post, Enjin Coin’s roadmap has been overhauled to reflect our larger team’s bandwidth — and for strategic reasons.
“After meetings with multiple game developers who are adopting Enjin Coin, we’ve added new features to support more advanced items systems on the platform. Speed and scalability has also become a major topic of focus, and our plans are described later in this update.
Enjin Wallet Update — Now that the Enjin Coin Android wallet has been released, the iOS wallet is well under way, slated for release this quarter, with a similar feature-set.
We have also started working on the EnjinX blockchain explorer to be released this quarter, which will provide a web-based interface to multiple blockchains, and rich browsing of Enjin Coin game assets in the near future. Here is our current up-to-date road-map. This outlines our development plans for 2018. Please note that we may add, remove, or adjust the timeline of certain items in the road-map as we move forward in our development timeline.” - Enjn Coin Team.
Q1 2018
Efinity Research & Development
iOS Enjin Smart Wallet Release (Pending Apple Approval)
EnjinX Blockchain Explorer Release (Web)
Unity SDK MVP & Demo
Minecraft Plugin MVP & Demo
PHP Platform API
Java SDK
Enjin Wallet Transaction Requests MVP
Enjin Wallet Game Item Support MVP
Escrow Smart Contract
Item Supply Model
Non-fungible Tokens
Token Bundles
Token Whitelists
Internal Simulation Tools
Internal Coin Exchange Currency API
Enjin Wallet Audit Security Report
ENJ at GDC 2018 (Game Developers Conference)
Q2 2018
Efinity Testnet
Smart Contract Audit Reports
Unity SDK Release
Minecraft Plugin Release
C # SDK
Virtual Goods Manager & Mint App
Enjin Wallet Game Items & Transactions
Enjin Wallet Coin History & Markets
Godot Plugin MVP
Game Developer Community Portal
Q3 2018
Efinity Release
Secret Game Project
Unreal Development Kit SDK
Javascript & NodeJS SDK
PC Enjin Smart Wallet
OSX Enjin Smart Wallet
Webstore Ecommerce Module
Enjin Network Integration
Unturned Plugin
Ark Plugin
Q4 2018
Lumberyard SDK
Mobile SDKs
Payment Gateway SDK
ENJ Subscriptions
Item Exchange Platform
Global Item Marketplace
Top Lists System
Summary: The Investment Opportunity for Enjin Coin
The Enjin team is comprised of competent managers, seasoned developers, tech-savvy marketers and game industry veterans (ex-Activision, EA, BioWare, IO Interactive), bringing decades of experience to a fast-growing company. The Enjin Network was established 9 years ago and has since grown into the largest social gaming website platform in the world, reaching 19 million users in December 2017, after 300,000 users signed up in a single month. It currently serves 60 million monthly views with 1.4 million monthly global uniques. Furthermore 1.4 million Enjin Network gaming communities numbering 1,470,000 members have signed up to use Enjin Coin once the team releases their plugins.
Additional factors such as the games market potential projected to reach a yearly revenue of $143 billion by 2020 and virtual items currently accounting for approximately 65% of the gaming industry’s revenue, coupled with the deflationary currency ENJ used to create virtual items being stored within those items and removed from circulation - all contributes to perpetual increases in buying pressure caused by ongoing diminishing supply and a large supportive network base.
As digital currencies promote economic growth in innovative ways, Enjin Coin offers investors an opportunity to build more efficient portfolios by leveraging the clear value they provide and solve for the current gaming landscape being; the opaque and arbitrary revenue sharing model, control of assets and cyber attacks along with fraudulent activity.
Slow global growth, secular-high debt burdens, deteriorating effectiveness of monetary policies, and low yielding assets are all contributing to a savings crisis that threatens the economic welfare of future generations. We have entered a low return environment with significant downside risk, rendering it difficult for many investors to achieve their target returns.
There are two options available to investors. They can:
Increase exposure to risky assets already held in their portfolios in hopes of generating higher returns. However, this will mean holding more concentrated, less diversified portfolios, with higher risk of ruin; or Identify uncorrelated assets with positive expected returns, and use them to build more diversified portfolios.
However through a holistic overview of the aforementioned factors, I believe that Enjin Coin demonstrates and recreates the ingrained evolutionary characteristics and patterns consistent to products and companies that are able to perform well over short, mid, long-term market landscapes. To elaborate briefly these are;
Differentiated product or service: Given the differing aspects of Enjin Coin such as their internal smart wallet, decentralised payment gateway, virtual goods store amongst a myriad of many other features - we believe the team displays high uniqueness, strong competitive advantages and technological sophistication.
Strong Industry team: The team of Enjin Coin has shown validated and relevant credentials in the industry in which the cryptocurrency will operate. They also maintain strong technical expertise with specific experience in blockchain development and cryptography.
Development activity: Enjin shows an accelerating momentum in development activity, a verified and robust code base, and active participation from contributing developers as a gauge of technological adoption.
Clear and Consistent Project Roadmap: Through observing the development of Enjin Coin, we believe the team and product display strong signals for short to medium term adoption.
Network effects: Through observing the large community user base supporting Enjin and growing subscribers, I believe Enjin Coin shows strong signs of defensible network effects.
Aligned economic incentives: As millions of USD per month are already generated through virtual goods sales across Enjin community stores, coupled with features such as mining, exchanging coins, and internal trading economies, we believe that Enjin proportionately rewards all contributors in its network meritoriously to ensure sustained organic growth.
I believe that decentralisation will disrupt inefficient legacy systems and the longstanding mindsets on which they have been built. Historically, there has been a power asymmetry in human civilisation whereby authority has been centralised at the top. This hierarchical structure orients control to individuals who show the most prominent qualities of influence. Political affluence, social status and compelling rhetoric. These individuals become decision makers and are bestowed with the responsibility of allocating scarce resources such as information, governance and capital. However, tellingly, the qualities that give rise to their power do not proportionately reflect their own contribution of value to the system.
By supporting the innovation of blockchain technologies and the evolution of cryptocurrencies, I take an antithetical stance and seeks to invest in companies decentralising this locus of power and reorganising a fractured status quo. These represent the protocols of the future because they operate meritoriously and are governed by collectives rather than by individuals.