The Next Revolution in GameFi, "DigiDaigaku"

Sep 09, 2023

As a venture capitalist, I have executed investments in over 40 global Web3 projects, including STEPN.

What are Web3 VC investing?

January 18, 2023

A new year for Web3 is about to begin again. The collapse of Terra/Luna and FTX collapse had a significant impact on the market in 2022. Despite the negative news, the Web3 ecosystem has steadily grown. With Ethereum's Merge, GameFi and entertainment projects like STEPN have expanded to a wider range of regions and users.

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Given my experience, I am frequently asked, "What sector/project are you focusing on next?" If you ask me now, I would unequivocally say, "DigiDaigaku." For those unfamiliar, it might merely be perceived as an NFT project themed around an anime-styled girl, or mistakenly viewed as a globally renowned free-mint NFT project.

Perhaps, the "awesomeness of DigiDaigaku" has not been conveyed at all.

This isn’t just another free-mint NFT project. It represents the next step in the GameFi and tokenomics revolution, following giants like Axie Infinity and STEPN. Having engaged in discussions with Web3 entrepreneurs around the world from my base in Singapore, I have grasped the potential of this venture. I've decided to jot down the wonders of DigiDaigaku in this note.

For transparency, I own several NFTs from DigiDaigaku, including their Genesis. This is not investment advice recommending the purchase or sale of any specific NFT or token. It's merely my personal perspective.

What is DigiDaigaku?
1. The Impact of Free-to-Own
2. Community-Driven Value Formation
3. The Royalty Contract Revolution
In conclusion

What is DigiDaigaku?

DigiDaigaku is an NFT project designed with gamification in mind. It started in the summer of 2022, with the distribution of free Genesis NFTs. Here are some key facts to note:

The co-founder and CEO of the company behind DigiDaigaku, Limit Break, is Gabriel Leydon (also known as Gabe).
Gabe founded Machine Zone, a company renowned for pioneering mobile social games like "Game of War" and "Mobile Strike."
In 2020, AppLovin acquired Machine Zone for $500 million. However, the company was previously valued at $5 billion in 2016 and had raised $725 million in total.
Many members of Limit Break come from Machine Zone.
In August 2022, Limit Break raised a massive $200 million.
Despite not having launched their game yet, they made headlines in February 2023 by spending $6.5 million on a Super Bowl ad.
A core concept of DigiDaigaku is "Free-to-Own."

Now, let's delve into the three pivotal aspects that make DigiDaigaku unique.

The Impact of Free-to-Own

It all began when 2,022 anime-styled girl characters, called Genesis, were free-minted. This "Free-to-Own" model stands out.

Throughout the project's lifespan, various collections such as Heroes, Super Villain, and Giant Dragon have been added. All these collections are essentially airdropped to Genesis NFT holders, meaning they have the right to own almost every collection without additional costs.

The essence of "Free-to-Own" is that Genesis NFT holders can own all the digital assets of DigiDaigaku's collections (games). This is revolutionary, especially in a world where NFT projects and GameFi commonly rely on initial sales to raise funds.

Of course, airdrops to free mints and existing holders themselves are a common practice in other projects. However, while most are gifts of digital assets or in lieu of event participation rights, DigiDaigaku (partly speculative) is letting people own the game itself.

Free-to-Own" is a method that is not possible for GameFi, an NFT project that has been funded through the sale (primary distribution) of NFTs. It is truly shocking.

Community-Driven Value Formation

The enthusiasm and passion stemming from "Free-to-Own" are palpable within the community. Their Discord server is bustling with energy, vibrant discussions, memes, and exceptional onboarding for new holders.

Though free-minted NFTs are often perceived as less valued and sold quickly, Genesis NFT holders aren't quick to let go, primarily because of the successive airdrops. Additionally, these newly airdropped NFTs have significant value attached.

One reason DigiDaigaku's NFTs hold such a high floor price is due to the "Quest" tasks.

Unlike conventional NFT collections, where similar items are airdropped and then revealed, DigiDaigaku allows for a more intricate process. Holders can use the unique airdropped items (known as spirits or potions) to mint new NFTs.

Moreover, Genesis NFTs come with predetermined attributes, leading to varied resultant NFTs in terms of rarity and appearance based on different combinations.

This minting process is entertaining in itself and engages the community deeply.

"In the process of this quest, holders desperately want to acquire items they resonate with, even if they come at a high price. Conversely, items they don’t need can be sold (which attracts new users).

For anything unclear, the Discord community provides onboarding and solutions. Holders looking to "cash out" are relatively few. Transactions within the community, driven by the "fun" of such quests, form the basis for supporting the NFT floor price.

Indeed, this is how community-driven dynamics form the value of NFTs.

Incidentally, I first learned about DigiDaigaku from the news about Limit Break's $200M funding. The very next day, I had tea (literally Japanese tea in Singapore, hence the reference) with Gabby Dizon, co-founder of YGG, and Ryan from Delphi Digital. Those in GameFi would recognize these names as globally influential figures.

Numerous GameFi participants are taking note of DigiDaigaku. It's impressive that its founder, Gabe, has over 1.2 million followers. But more than the sheer numbers, the value lies in influential industry influencers backing it.

What I anticipate most from DigiDaigaku is its reign as the 'BAYC for GameFi'. As you may know, BAYC (The Bored Ape Yacht Club) is the largest NFT collection, boasting a floor price of 51.45ETH as of May 2023. Many NFT projects, both officially and unofficially, have collaborated with BAYC holders by offering airdrops or whitelists at launch.

But what about GameFi? While there have been collaborations with BAYC, I believe most BAYC holders aren't gamers. A blue-chip exclusive to GameFi will emerge. And just like BAYC, once it reigns, it'll transform into a brand that no one can catch up with. Think high-brand-value companies like LVMH or Apple.

The time is now.

Post the buzz of Axie Infinity and STEPN, a new GameFi movement is bound to rise. And that spot is still open.

Until now, the focus of GameFi has been on Dual-Token Tokenomics combined with DEX and other DeFi elements. But the right Tokenomics design is no longer a distinguishing factor for GameFi projects. The shift will be towards Tokenomics based on NFT-centric value creation.

It's significant that the NFT marketplace dominance is transitioning from OpenSea to Blur. Without delving into details, with the advent of Blur, the NFT focus has shifted from art to gaming. Projects like DigiDaigaku, community-driven with value concentrated in Genesis NFT, are expected to increase. I believe STEPN's airdrop to Genesis holders follows this trend.

The efficacy of concentrating value in Genesis NFT will eventually become evident.

The Royalty Contract Revolution

What's remarkable about DigiDaigaku is the foundational design and technology development that support the aforementioned points.

I often describe creating NFT collections as "constructing a family tree." Just like a family tree, how each collection connects, the parent-child relationship, siblings, and rarity depiction matter. In DigiDaigaku, the lineage of Genesis - Heroes - SuperVillains(Villains) - Giant Dragons(Baby Dragons) is well-balanced.

And as mentioned above, because of the quests at the time of NFT minting, supply and demand on the holder side, not on the management side, will ultimately determine the balance of NFT rarity (the management, of course, predicts this to some extent). For those who are not familiar with the situation, it is easier to understand the story if you consider that Genesis is the highest level and the rarity is "Genesis > Heroes >= SuperVillains" (actually, it depends on the rarity, so please do not use this as a reference for your purchase).

DigiDaigaku's most excellent NFT ecosystem design is the 'Bloodline' system. For instance, look at the attribute data of SuperVillains on OpenSea.

The highlighted section in the image above indicates from which 'Genesis' and 'Hero' this SuperVillain originated. Attributes for Origin Genesis and Origin Hero are embedded, marking the family tree information on-chain. To my knowledge, no other blue-chip project has implemented this.

Here, DigiDaigaku's quest is an on-chain game. Given that many existing GameFi projects struggle with Dual-Token Tokenomics, some believe "why not stay off-chain?" Integrating and operating this on Ethereum is a significant feat (from a holder's perspective, the gas fee is too high)."

Dynamic NFTs are ones that change dynamically based on their metadata, triggered when certain conditions are met. This represents a paradigm shift in NFT projects, gamifying any NFT project through Dynamic NFTs.

DigiDaigaku is investing in the technology to realize these mechanisms. For instance, they have independently designed and made public a protocol called "Adventure ERC-721," which extends the existing NFT standard.

Furthermore, the "ERC721-C," a new creator royalty contract (a standard for creator compensation), is of utmost importance.

From the latter half of 2022, a fee-cutting war erupted amongst NFT marketplaces, where creator royalties in secondary trades were either negligible or set to a minimal percentage. The blockchain was supposed to revolutionize the industry by providing perpetual fees (royalties) to creators. Still, current structures have proven flaws, preventing this ideal scenario.

That's where "ERC721-C" comes in. It ensures trades are conducted following the on-chain rules, guaranteeing creators, minters (those who mint the NFT), and holders receive predetermined percentages of rewards.

Example: Creator: 5% Minter: 2.5% Holder: 1.5% Affiliate: 1%

New NFT collections are set during issuance/minting while existing collections are set when minting a Wrapped NFT.

I intuitively believe that this could be a "game-changer for GameFi."

While I won't speculate any further, combining the features of DigiDaigaku with this royalty contract would most likely lead to groundbreaking innovation.

In conclusion

I've discussed DigiDaigaku using keywords such as Free-to-Own, community-driven value creation, and Dynamic NFTs. I hope I've been able to convey even a fragment of its brilliance.

Frankly, what I've written here is just a fraction of what I think about DigiDaigaku. I have several approaches and hypotheses about how GameFi and Web3 entertainment will evolve.

I would love to discuss this further with Web3 entrepreneurs. Being an investor, I'm open to investment consultations, as well as discussions on tokenomics, NFT ecosystem design, and introductions to international players (exchanges/L1-2/VC). Feel free to DM me on Twitter anytime.

To all the Web3 entrepreneurs aiming for the world, let's together create a new form of entertainment and media in Web3!