Treasure and the $MAGIC of Community-Driven Lore
The Project Building What "Loot" Was Supposed To Be - Can it Work?
This research memo is for educational purposes only and not an inducement to invest in any asset. Subscribe to Blockcrunch VIP to receive in-depth project analysis, interactive token models and exclusive AMAs from our research team - all for the price of a coffee ☕ a day.
At first glance, Treasure has a difficult premise.
For seasoned investors in the gaming world, Treasure’s biggest selling points almost seem like red flags":
The success of the project seems reliant on third-party game studios and developers, who are expected to build games for Treasure’s ecosystem;
It wants these games to use Treasure’s own cryptocurrency, $MAGIC, regardless of game type;
Oh, and the kicker? The team has little to no gaming experience at all!
But despite these its challenging thesis, Treasure claims to have onboarded over 100,000 gamers and facilitated over $264M in volume on their marketplace, across 9 partner games and 40+ NFT projects in under a year since launch.
So what exactly is drawing games and gamers in Web 3 to Treasure? This week, we will examine the power of community-driven creation, lore-before-gameplay, and dive into:
Contents
What is Treasure?
Origins of Community-driven Metaverses
Loot and Its Relationship to Treasure
The Team Behind Treasure
Key Products in Treasure
MAGIC: Treasure’s Unit of Account
Cartridges: Game Titles in Treasure
Trove: Treasure’s Own Steam
MagicSwap: Treasure’s Own Uniswap
Treasure’s Network Effects
Upcoming Events for Treasure
As a disclaimer, Jason is an angel investor in Treasure and holds locked $MAGIC tokens.
What is Treasure?
Treasure is an ecosystem of Web 3 games and the infrastructure thereof.
Currently, most of this is built on Arbitrum, but the team intends to expand to Layer 1 Ethereum, and eventually to their own app chain. The core products built by the Treasure team are meant to be shared resources between all current and future game titles in the Treasure ecosystem. Today, that consist of:
A gamified staking experience for its main $MAGIC token (Bridgeworld);
A live NFT market (Trove) that lists assets from Treasure games; and
A decentralized AMM exchange (MagicSwap) that allows users to trade $MAGIC against other game tokens
These building blocks in turn facilitate the game economy of game titles built by third-party developers in the Treasure ecosystem, called Cartridges.
Treasure’s core thesis is that games in Web 3 will be open and composable, and that this requires standardized infrastructure and a unified economy.
Unlike virtually every gaming title today both Triple A and indie, Treasure believes that games should contribute to and benefit from each others’ network effects, and that there is massive value to be unlocked by enabling different games to talk to each other. This idea may seem contrarian, but is hardly new.
Let’s examine the origins of community-driven lore.
Loot and Community-Driven Lore
As early as 2018, in a time before NFTs, we interviewed a little-known crypto project called Cellarius (now defunct).
The project, backed by ConsenSys, was fascinating, but way ahead of its time. Its founders noticed the fervor of fandoms around franchises like Star Wars and how they would create fan-fiction, cosplays, short films and stories around a common beloved lore. As fans themselves, they also felt the frustrations of those whose works were embraced by fellow fans but ignored by rights owners when it came to canonicity (related read: Why Disney Killed Star Wars’ Expanded Universe).
And so, Cellarius was born: a dystopian sci-fi lore whose rights belonged to the fans. The team planned to attract artists, designers, filmmakers, writers and game developers to band together and create experiences around the seeds of a lore that they planted.
But the incentive for their community-driven creation was weak: there were no financial grants or venture funding offered by the team for anyone willing to create quality content. The lore itself was new and didn’t have much of a following, especially compared to global franchises such as Star Wars. The only promise to creators was attribution of creative rights, documented via the Ethereum blockchain, such that any future commercialization may benefit the original creators, but there was no explicit promise.
The project eventually shut down.
4 years later - when all outlandish ideas were given legs due to a massive cryptocurrency/ NFT bubble - a spark was rekindled and this appeared across people’s social media feeds:
A series of virtual cards featuring texts describing items commonly found in fantasy games suddenly began trading as NFTs. While the initial mint was free, the NFTs resold for an average of 21 ETH ($84k at that time). One particular NFT even resold for 420.69 ETH or $1.4M at the time (the price has since come back to Earth, or at least its upper atmosphere, at $1,065)
The project was Loot.
The Loot NFT launched in late August 2021 and took the NFT space by storm. Created by Dom Hofmann, the co-founder of popular social media platform Vine, the series featured 8,000 NFTs featuring strings of white text against a black background, all describing items you would find in any fantasy role-play title. While it was undeniable that excessive shilling from traders contributed to its meteoric rise in value, many were drawn to its daring, bottom-up philosophy.
The lack of art and roadmap were pitched not as flaws, but as intentional features of Loot, and the community was expected to create content around the seeds planted by Hofmann. Think of the NFTs as writing prompts; the rest of the story is up to the community.
Treasure: What Loot Could Have Been?
In just 5 days after Loot’s launch, the community built numerous infrastructure, utilities, guilds and derivative projects: Treasure being one of them. However, when Loot’s community voted to use another currency project known as Adventure Gold ($AGLD) instead of Treasure’s $MAGIC, Treasure’s team decided to create their independent gaming ecosystem.
Over in Loot land, a conundrum began to emerge: without a dedicated community beyond speculators, Loot could not attract serious builders to create content and games; and without serious content and games, Loot could not sustain a dedicated community beyond speculators.
The misalignment in incentive was obvious as well: if someone were to put in the effort to create actual content for Loot’s lore, why would they give away even part of the value of their hard work to the original progenitor of a low-effort NFT, instead of creating their own series of Loot NFTs to capture everything?
To make matters more chaotic, a myriad of derivative projects emerged, showcasing the weaknesses of a completely decentralized project like Loot: without a dedicated committee to kickstart and organize the initial phase of a project and garner enough critical mass in community size, it was difficult to convince third-party creators to onboard and transition the initial hype and chaos into meaningful progress.
While inspired by Loot’s bottom-up approach, Treasure’s team quickly recognized that a dedicated committee with organized efforts was necessary to kickstart and build a thriving gaming ecosystem. Therefore, whilst retaining the bottom-up approach via community governance, Treasure’s team improved the structure with dedicated team members responsible for building the critical infrastructure for the fledging gaming ecosystem and executing Treasure’s vision.
Treasure’s team focused on actively curating a high-signal community first via extensive documentation of its values, goals and plans, as they recognize that the community is the main draw for any third-party creators.
Today, $MAGIC trades at a $115 million fully-diluted valuation, while $AGLD trades at 80% less – only $25 million.
Treasure Team
Treasure’s team is more crypto native than gaming-centric - and readers will find out why this is important below. Today, Treasure is led by co-founders John Patten and Gaarp.
John leads Innovation at Treasure and was the core contributor for Growth at Osmosis, an AMM Chain in the Cosmos Ecosystem. He has been in the crypto space since 2018, which allowed him to spot the potential and benefits of a unified currency for metaverse ecosystems.
Gaarp is in charge of Growth at Treasure. Prior to Treasure, he claims to have spent 7 years managing Corporate Strategy and Ventures at 2 large Australian media companies and claims to be a Management Consultant at Deloitte for 6 years. He also claims to have co-founded a boutique blockchain consultancy company.
Operations is headed by Karel, who was an early employee and Chief of Staff at Sagard, a multi-strategy asset manager with $14 billion AUM. Prior to that, he was General Manager at Diagram and helped build 4 companies – one of which was acquired by The Graph.
Now that we know where Treasure came from, what it’s trying to do, and who is behind the project, we can dive into each part of this multi-faceted project.
Key Products within Treasure
Below, we will cover the various products that make up the Treasure ecosystem.
MAGIC: A Unifying Unit of Account
Despite its many parts, the core feedback loop of Treasure is actually quite simple, and held together by one things - its native token, $MAGIC.
The feedback loop for the entire Treasure ecosystem goes something like: Treasure emits $MAGIC tokens → creators in the ecosystem receive $MAGIC → creators are incentivized to create games that accrue value to their $MAGIC.
In addition, players need to own $MAGIC to begin gaming, as all partnered games’ tokens and NFTs are paired against $MAGIC. This is not dissimilar to how most NFTs (and many tokens) on Ethereum trade against $ETH; however, unlike $ETH, $MAGIC has the flexibility to fine-tune its emissions to target specific KPIs - such as to fund the development of cartridges (more below).
Additionally, $MAGIC is used to vote in governing the future of Treasure and used by the DAO to support the growth of new and mature projects within Treasure’s ecosystem.
Cartridges: Treasure Ecosystem’s Game Titles
This analogy likely flies over the head of our younger readers who are used to fully digital games, but “back in my day”, we had to purchase plastic cartridges for each game title, blow dust off the bottom, and slide them into the good ole’ N64 before we can play Mario Kart.
Treasure likens itself to a “decentralized video game console”, wherein games that plug into Treasure’s ecosystem and utilize the $MAGIC token are called “Cartridges”.
The Treasure ecosystem games are interconnected beyond just sharing a platform; they share the same currency $MAGIC and even in-game items (NFTs). Each Treasure game retains its individuality and invents its own lore for how $MAGIC is utilized and emitted.
Examples of Cartridges
Bridgeworld
Bridgeworld is the first flagship game of the Treasure ecosystem developed by Treasure’s team. Bridgeworld gamifies the emission of $MAGIC tokens, as the core game loop within Bridgeworld is to extract $MAGIC using various NFT resources.
“Players” can stake $MAGIC to earn more $MAGIC, or stake in Harvesters -giant in-game machines represented by smart contracts - to compete for more $MAGIC emissions.
Users can choose to join Harvesters by obtaining specific in-game items, which can be bought in Trove, Treasure’s NFT marketplace, or built in Forge, the crafting mechanism for in-game items. Those who stake with Harvesters are incentivized to craft, collect, purchase, combine and stake the optimal amount of in-game assets to beef up their Harvester’s ability to mine $MAGIC in order to compete with other Harvesters.
Instead of simply emitting its reward tokens based on some simple, pre-set formula like most token projects, Bridgeworld has made a game of its emissions. It takes inspiration from complex (and boring…) emissions governance from projects like Curve and creates a “meta-game” around what would otherwise be a vanilla token emission scheme.
By doing so, Bridgeworld ensures that it will emerge as the center metaverse within the Treasure ecosystem, as what happens on Bridgewater determines where token rewards are emitted and which parties get funded. This encourages the emergence of social coordination between players to form alliances/guilds to strategize as a collective to maximize resource accumulation.
BattleFly
BattleFly is one of the more popular cartridges within the Treasure ecosystem. Season 1 of BattleFly gameplay is an idle strategy game where players can stake their BattleFly NFTs with $MAGIC to either earn resources that help improve their BattleFly’s combat performance or enter battles against other players’ BattleFly.
Players are incentivized to strategize according to the strengths and weaknesses of their BattleFly NFT, as players will lose a portion of their staked $MAGIC each time they lose a battle. Each BattleFly is created with the potential of having a positive return regardless of its trait, rarity and starting resources; it is up to the player to find and execute the right strategy to deliver it.
There’s also a mini-game called BattleFly Racer, where players can race their BattleFly in an obstacle course to earn in-game resources.
As part of Treasure’s interconnected metaverse, players that stake their Treasure NFTs within the Bridgeworld metaverse receive additional perks such as increased chances of earning rare resources.
The Beacon
The Beacon is a fantasy action roguelike RPG (Role-Playing Game). Unlike Bridgeworld and BattleFly, which have more passive and strategic gameplay, The Beacon is more action-packed as players enter dungeons and battle their way through hordes of monsters and environment traps.
The Beacon features a roguelike gameplay, wherein each “run” is unique as dungeons are randomized and procedurally generated every “run”, and the player’s progression does not carry over to the next “run” after their character dies. The roguelike aspect offers players a ton of re-playability since players do not know what to expect with each newly-generated dungeon and have to optimize accordingly.
Players can play the game for free, and while they may receive a subset of token rewards and incentives, they will not be able to withdraw or trade them, i.e. not exchange or sell for a profit unless they paid for their character.
Currently, the development team is still working on the game, and players can expect to access its alpha launch in the first half of 2023.
Trove: Treasure’s Own Steam
To facilitate the exchange of in-game NFTs across its cartridges, Treasure created Trove, its own NFT marketplace.
Since launching in November 2021, Trove has facilitated over $260 million in trading volume and accounts for more than 95% of NFT volume on the Arbitrum chain. Currently, Trove only supports permissioned listing for Treasure’s Catridges.
Partnered Cartridges that incorporate $MAGIC tokens directly into their projects and whose NFTs are denominated in MAGIC are listed as Treasure Collections.
Generalized Collections are NFT collections that may have subtle integrations with Treasure but can also exist as a standalone project. They are denominated in ETH but still require the permission of the DAO council to list on Trove. In the future, Trove will allow permissionless listing of NFT collections.
Unlike the typical NFT marketplace, whose only function is to facilitate the buying and selling of NFTs, Trove is interwoven into the Treasure ecosystem and gamifies a user’s experience as a collector, gamer and trader. As users trade on the marketplace, they gain experience points and level up, which unlocks different features such as analytics and rarity toolings and greater levels of customization for their inventory, such as site personalization, cosmetics and more. As players progress and achieve goals in the partner Cartridges, they may also earn achievement badges that can be displayed on their profiles on Trove.
In the same way that Steam is the hub for Web 2 gamers, Trove strives to be the same for gamers of the Treasure ecosystem.
MagicSwap: Treasure’s Uniswap
Treasure recently launched their DEX, MagicSwap, which uses an Automated Market Making Pool (AMM) design like Uniswap. By launching its own exchange, Treasure could collect the trading fees on the pool and reinvest them back into the ecosystem - similar to the verticalization approach that StepN employed by phasing out third-party DEX Orca and building their own (which we covered here).
In line with our thesis that composability is primarily a means of bootstrapping activity in DeFi, Treasure relied on SushiSwap as the primary DEX for trading $MAGIC in the beginning. Should Treasure have decided to move its Sushiswap pool to MagicSwap, it could theoretically have generated $3.3 million in fees over the past 11 months (calculated using past 30 days' trading volume data and 0.75% fee based on this proposal)
Currently, only $ELM tokens (the token of Tales of Elleria, one of the partnered Cartridges) are listed on MagicSwap. More tokens are expected to be listed on MagicSwap in due time.
Benefits of launching on Treasure
There are 3 different levels of integration with Treasure’s ecosystem – Treasure Marketplace integration, Participating in $MAGIC emissions and Receiving Bootstrapped Liquidity and Funding. Projects interested in building within Treasure must undergo a rigorous application to assess their eligibility.
So why are projects willing to go through the application process, instead of forking Treasure and capturing all the value themselves?
The answer is Treasure’s community.
Currently, more than 150,000 gamers have onboarded the Treasure ecosystem, and metaverses immediately benefit from being exposed to the 150,000 (and counting) crypto-native gamers that are ready to try new games. Treasure’s community of crypto-native gamers help solve one of the most significant problems new games face: bootstrapping players.
The composability of NFTs is another critical feature, as the cross-pollination of communities within the Treasure ecosystem builds more utility for the NFTs and, consequently, their value.
Treasure is similar to Steam, Nintendo or Playstation, where game developers utilize these major game platforms to reach a large existing audience. However, in true Web 2 fashion, these large publishers are often predatory and take up to 30% of a game developer’s revenue. Treasure aims to extract as little value as possible from the game developers – they provide grants to help kickstart operations and only plan to take up to 30% of the amount given via treasury swap (yet to executed).
Furthermore, it is not like partnered cartridges would give up all of the possible upsides of creating its own game token by utilizing MAGIC – they can still create their individual in-game token, or even 2 like Tales of Elleria did.
Admittedly, integrating with MAGIC is not without its risks. Partnered Cartridges are entrusting part of their game's future in the hands of Treasure’s team and other partnered Cartridges. Since Treasure and all the partner games are deeply interconnected via $MAGIC, any events that could cause a massive (downwards) destabilization of $MAGIC’s price, such as exploits or mismanagement, could negatively affect the entire ecosystem since it devalues the prices of player’s assets and tokens.
DeFiKingdom is one of such example. The staking game on Harmony recently announced their shift from Harmony to Klaytyn chain, presumably because of the Harmony hack back in late June where hackers got off with $100 million from hacking Harmony’s cross-chain bridge to Ethereum. The hack caused Harmony’s token, $ONE, to lose 40% in value (after it was already down 90% from its all-time high).
While platform risk exists for projects onboarding onto Treasure, on the flip side, each new Web 3 game to onboard onto Treasure benefits from the stability of more mature Cartridges that came before.
Tokenomics of $MAGIC
$MAGIC has a total token supply of ~350 million tokens, of which approximately 200 million (~57%) of is currently circulating. The team deliberately opted for high inflation at the beginning to create long-term sustainability – the high initial emission is typical of successful DeFi protocols to help bootstrap a community and liquidity, and to prevent large supply overhangs.
$MAGIC emissions mimic Bitcoins’ halvening, but this event happens yearly rather than every 4 years. $MAGIC holders should remember that $MAGIC’s halvening occurs on 1st September of every year, which recently happened.
Now, weekly emissions have fallen from 778k to 417k.
Apart from the daily emissions, players who hold $MAGIC should also be aware of the release of staked $MAGIC tokens locked in BridgeWorld’s Atlas Mine (staked to earn more $MAGIC), as re-introduction of supply into the market could cause temporary volatility. For example, approximately 700K $MAGIC tokens were unlocked on 24th September 2022.
Currently, 73M $MAGIC (36% of circulating supply) is locked in Atlas Mine, of which 59M is locked for 12 months. Assuming that most of these were locked from Day 1 of Atlas Mine, 73M $MAGIC will progressively be unlocked from 26th January 2023 onwards
Upcoming Catalysts
Migrating to it’s own app chain
To avoid competing with other users on the Arbitrum blockchain for block space in the future, Treasure’s team decided to migrate over to its individual app chain to provide the fastest and cheapest transactions possible for players while being secured by Ethereum.
Treasure’s app chain will be powered by Arbitrum AnyTrust. For clarity, AnyTrust is a technology built by Offchain Labs (the team that created Arbitrum) that allows applications like Treasure to spin up their individual chain, allowing for much lower cost and faster withdrawals to Ethereum in exchange for a minimal extra trust assumption.
Instead of being a trustless rollup like Arbitrum, the chain relies on a committee of self-selected nodes to operate the chain i.e. validate and vouch for the validity of data. If the committee doesn’t sign anything, crashes or refuses to cooperate, the chain can still operate by falling back to the Arbitrum rollup chain.
We believe that the additional trust assumption is a non-issue and well worth for the improvement in user experience and lower transaction costs, which is a top priority for building games. Furthermore, Treasure can potentially appoint $MAGIC as the gas token, further increasing $MAGIC’s use case.
Onboarding more users onto Arbitrum
There are only approximately 1.3 million unique addresses on the Arbitrum chain, representing only 0.63% of the total unique addresses on Ethereum. Comparatively, the most popular Layer 2 scaling solution, Polygon, has 171 million unique addresses, which is a 130x increase in users should Arbitrum receive the same level of adoption. A few upcoming catalysts for Arbitrum may be beneficial for general adoption and awareness of Treasure:
Arbitrum Nitro (live since 1st September): Upgrade to the previous Arbitrum chain (Arbitrum One), which increases throughput, lowers fees and increases compatibility and interoperability with Ethereum
Arbitrum Odyssey (awaiting resumption): Marketing campaign with Project Galaxy to onboard users onto the Arbitrum chain. In exchange, users get to mint exclusive NFTs. The campaign was so popular that the Arbitrum team had to pause it just one week after launching. Odyssey should resume soon, and we expect it to have a similar if not better performance and user experience than the previous campaign now that Nitro is live
Arbitrum Nova (Mainnet Beta live since 9th August): Nova is an AnyTrust chain created by Arbitrum’s team that focuses on games and social applications. Thought it may seem like a competitor to Treasure’s chain, we think that any efforts to onboard users onto the Arbitrum ecosystem are a net positive for Treasure as users are bound to spill over. For example, Nova has onboarded the popular forum site Reddit onto their platform. Reddit has more than 1.5 billion registered users and a monthly active user count of 430 million.
We expect these events to successfully onboard more users onto Arbitrum and become part of Treasure’s community. We are already starting to see the inklings of increased Arbitrum adoption, as the number of daily active users has increased approximately 3x compared to the start of 2022.
Closing Statement
The challenge of harnessing a community’s fervor to create a lore and supporting games is a tough one.
Many projects have tried, but few combine economic design, community governance and crypto nativity the way Treasure has. While it remains to be seen whether a universe of games tied to a single economy can give rise to diverse and enriching gaming experiences, the early efforts and reception we have seen are promising.
Resources
Treasure
Partnered Cartridges
Good Tools & Data
DISCLAIMER
The Blockcrunch Podcast (“Blockcrunch”) is an educational resource intended for informational purposes only. Blockcrunch produces a weekly podcast and newsletter that routinely covers projects in Web 3 and may discuss assets that the host or its guests have financial exposure to. Views held by Blockcrunch’s guests are their own. None of Blockcrunch, its registered entity or any of its affiliated personnel are licensed to provide any type of financial advice, and nothing on Blockcrunch’s podcast, newsletter, website and social media should be construed as financial advice. Blockcrunch also receives compensation from its sponsor; sponsorship messages do not constitute financial advice or endorsement.
 | A guest post by
|