While building the most technologically advanced, futuristic protocols imaginable is sexy, fundamentals are just as important. Olympus DAO exploded this year offering insane APYs with a singular goal: to become the currency on which DeFi is built. While such lofty visions sound ridiculous, there is a real need for crypto-native and decentralized options as building blocks for the space.
TreasureDao, or $MAGIC, is attempting to pull off a similar experiment in the NFT space. The team’s project is derived from Loot – a series of NFT ‘bags’ featuring item sets based on traditional RPGs. This ‘Loot for Adventurers’ series ranges from chain gloves to the “Pandemonium Bender” Long Sword of Titans (+1), whose bag is currently listed on OpenSea for 44,000 ETH. These items are not designed to be worn for status, like Bored Apes or CryptoPunks, they’re designed to be iterated and built upon; to be used as the foundation for building increasingly complex & nostalgic play-to-earn games. As of 1/11, there are an incredible 100+ different games, tools, and guilds built to interact with the platform.
This composability served as the keystone for the idea that launched the next project: Bridgeworld. Like Loot, Bridgeworld’s core goal is to create cross-ecosystem tokens, designed for use specifically in GameFi. However, while Loot sought to create the building blocks for games, TreasureDAO aims to become their currency and liquidity.
What is TreasureDAO?
At the center of this experiment is Treasure Marketplace- an ecosystem that has developed three new NFT platforms, Legions, Treasure, and Smol Brains, with a fourth to launch in the near future. Between the three platforms, Treasure Marketplace has averaged over 1mn $MAGIC in daily volume, and growing, over the past week. That’s around $3mn/day at current token prices (on 1/12), and $4.5mn/day at prices 2 weeks ago. To put that in context, while it still lags OpenSea significantly, it’s doing nearly the same daily volume as Axie Infinity’s platform, $RONIN. The platform has even accumulated almost 90,000 unique new users (+200 m/m) in the last month.
The reason for this rapid growth is the underlying technology fueling the ecosystem. As Treasure puts it, $MAGIC is designed to “‘power on’ NFTs and turn them from fantasy into productive, yield-bearing assets.” What this means is that by attaching productive assets, like liquidity positions, to NFTs, protocols can both gamify and incentivize long term LP-holding by hiding it where an average user will never see it. This then creates what they call an ‘actual proof-of-work’ economy, where the rarest assets are earned through incrementally more difficult tasks based around staking NFTs (liquidity). Think about it as GameFi, but built on fancier versions of the Uniswap v3 NFTs clogging up your wallet.
In practice, this system should remove much of the volatility and difficulties associated with traditional GameFi liquidity pools, which are just as mercenary as their DeFi twins. Attaching liquidity to stakeable NFTs creates slower, but more consistent liquidity growth for the protocols. This creates incentive for new projects, applications, and games built on NFTs to grow on TreasureDAO, rather than try to bootstrap their own liquidity.
Holding $MAGIC, or base NFTs also guarantees users interoperability of their assets across a variety of expanding use cases. When comparing this to traditional gaming, TreasureDAO wants to become a console, capable of playing a variety of games across publishers through the same core setup.
The backbone of the entire ecosystem is the $MAGIC token. The protocol is built for users to leave their assets staked; as the percentage of circulating supply locked rises, emissions paid out to stakers increases. This has resulted in an impressive 77.7% of circulating $MAGIC locked within the platform, which serves to lower tradeable liquidity and bolster token price.
Other projects, like Life, have encouraged users to leave tokens staked through gamification. Life features an “experiential board game”, with NFTs that age, fall in love, and die. The catch is, activity and growth are fueled by staked $MAGIC- if the token is removed, the character will die within two days.
Beyond short-term stickiness, TreasureDAO’s long term success is predicated on one thing: people launching projects on their platform, but with some good, old-fashioned flywheel mechanics. In this case, investors benefit on multiple symbiotic fronts when a new project launches:
Increased trading volume on the Treasure Marketplace- Simply, more projects = more reasons to trade on the platform. A royalty of 5% is taken – 2.5% fee to Treasure, and 2.5% royalty to the project creator. This is comparable to OpenSea, who offers 2.5% fees and 2.5-10% royalty.
Higher token price– Long-term, much of the protocol’s revenue is going to be driven by the Marketplace. As trading volume increases, fees accrued will rise in tandem, bolstering the treasury (currently at ~$5mn).
Scarcity- Different applications built on Treasure Marketplace will have different use cases for, and offer different yields on, the core NFTs. This should create secular demand for the assets, driving up floors and raising total fees.
One key point to emphasize is that, ideally, this form of tokenization would allow for both value accrual for holders both fundamentally (through $MAGIC rewards, fees) and secularly (NFT rarity, floor sweep). This is distinct from similar GameFi projects, which have tokenized, but have failed to capture the full value of NFT mania. A somewhat similar project, LooksRare ($LOOKS), recently launched to huge on-platform trading volume, but nearly 4x the market cap. Such a premium is still arguably justified with the majority of whales remaining on Ethereum.
As mentioned, the daily average volume transacted on Treasure Marketplace is ~1,000 Magic. That equates to between $3-4.5mn USD, daily, based on recent $MAGIC pricing (obviously heavier than average market volatility). Using a conservative estimation of $3.5mn/day in volume, with no assumed token price, fee, or marketplace growth:
For comparison, in July 2021, Axie Infinity ($AXS) was trading at a $1.2bn circulating Market Cap (vs. $80-100mn for Treasure), while doing ~$2.3bn annualized in total volume. At the time, that puts its P/V at just over 0.5. Based on the on-chain data seen for Treasure DAO, they’re trading at between 0.06x ($80mn cap) and 0.08x, a mere 12-15% of Axie. Given LooksRare’s youth and hype, it’s still too early to compare, but as volumes settle it’ll be another peer to keep an eye on.
On top of fundamental analysis, our data science team at the Tie helped me look into social media volume around $MAGIC and TreasureDAO. This is a small-scale case study, a lite version of the work we do for token issuers on a daily basis.
Based on our list of Key Opinion Leaders on Crypto Twitter, the number of tweets from influencers and analysts has been steadily increasing over the past month. On top of that, although more volatile, sentiment and language around $MAGIC has also been trending upwards. This means that the rise in volume is not necessarily being driven by negative conversation post sell-off, but rather increasing interest in the platform.
Obviously, with any platform there are the standard risks of smart-contract and secular/market risk.
In addition, the biggest risk that TreasureDAO faces is adoption of the platform. There are two key components to this. The first is that there is a fundamental risk of the NFT ecosystem ending up largely on Ethereum. That isn’t to say that there isn’t value in building on other chains, but simply that opening a shop on an empty street is intrinsically worse for revenues. Second, $MAGIC is a platform designed to be iterated and built on, not necessarily an end product or game in itself. This means that there needs to be engagement and demand for use from the community. Initial uptake has been good, which is positive, but momentum needs to be sustained and scaled for comparisons to peers like $AXS and $JEWEL to be justifiable.
While $MAGIC is currently deployed and focused on Aribitrum, cross-chain expansion would potentially allow them to develop relationships and NFT marketplaces on chains that are younger & have fewer resources, allowing them to bootstrap more quickly (with TreasureDAO benefitting).
Some isolation risk could be mitigated through the DAO’s new partnership with Mural. This would make NFTs from Ethereum EVM compatible, allowing users to bridge NFTs to Arbitrum and use them in the Treasure ecosystem.
This report is not investment or trading advice. Please conduct your own research before making any investment decisions. Past performance of an asset is not indicative of future results. The Author may be holding the cryptocurrencies or using the strategies mentioned in this report.