Broad thesis (the market for virtual items will be huge)
An obvious trend witnessed over the last twenty years is the steady movement towards the online environment. As the world continues to digitize, the trend towards online life will only accelerate.
Gaming, especially the virtual worlds created within games, is still in its infancy – but it is already a huge industry. With around USD 140 billion spent on games in 2018, the gaming industry is bigger than movies and music combined — and it’s growing fast. Revenues increased over 13% between 2017 and 2018, and double-digit growth figures are expected for years to come.
As more and more people spend more and more time in the virtual worlds created by game developers, it’s only natural that economies will be created in those worlds. We’ve already witnessed this with experimental virtual worlds like Second Life, which at its peak in 2015 had a GDP of approximately USD 500 million.
Just as people pay money for things they need in the physical world, the same must happen in virtual worlds. There are already, for example, virtual gaming economies in which people pay for characters that have been “pre-played” for days or weeks in order to build up the character’s virtual holdings and increase the character’s utility in their virtual environment.
And just as in the physical world, people in the virtual world are willing to assign huge value to items that have no obvious inherent utility. Adorning your character with fashionable wear and one-of-a-kind items gives you status in the virtual world just as it does in the real world.
This has been demonstrated with the likes of Crypto-Kitties which is essentially a virtual fashion show. Even in that simple “game,” the value of some of the items is already huge. The highest price paid for a Crypto-Kitty so far is USD 170,000.
Enjin coin’s position in the gaming world
If you believe in the long-term premise that virtual items will have real value, then you may consider taking a bet on Enjin Coin capturing some of that value.
Founded in 2009, Enjin launched the Enjin Network in the same year. Their “gaming community platform” has since grown to 20 million users.
In 2017, Enjin pivoted to the “virtual items with real-world value” environment by entering the blockchain space with a USD 18.9 million ICO that created Enjin Coin (ENJ). Enjin Coin is used for the creation and management of virtual goods in games.
There are two main purposes the coin:
Using the ERC-1155 token standard, game developers can mint unique gaming assets such as scarce weapons, clothing, mighty heroes, and so on. Game developers must lock-up ENJ for each item they mint in their virtual world. This gives each item a minimum value (equivalent to the value of the ENJ locked within it). On top of this base value, it’s entirely possible that virtual items backed with ENJ can derive additional value based on the uniqueness of the item and its utility in the virtual world that it exists in. According to Enjin’s April AMA, “millions of ENJ has already been locked into over 40 million items,” including “the Monolith” which has 1,155,777 ENJ (approximately US $94,181) backing it.
The second purpose of ENJ is so that game developers can use it to back the currency of their in-game economy. Game developers can essentially issue their own currencies within the game, and those currencies will be backed by staking ENJ.
Note that for both of the above use-cases of ENJ, if meaningful adoption occurs, the value of ENJ should rise.
The main challenge for Enjin is to actually get real game developers to integrate ENJ into their games, and for those games to attract large numbers of players. To address that challenge, Enjin has released a software development kit (SDK) that aims to entice game developers to integrate ENJ into their games by making it easier to do so.
Part of Enjin’s SDK includes an integration with leading game creation engine Unity. The SDK enables developers to “easily create & integrate ERC-1155 Ethereum blockchain assets into games for over 25 mass market platforms,” according to an Enjin blog post.
Unfortunately, we are still in the primitive early days of the economies in virtual worlds. As such we are still, for the most part, stuck inside the proprietary virtual worlds of the companies who create the games. They don’t let characters or their assets move outside of the virtual world (into another one) and there’s no trading between virtual worlds. Enjin addresses this challenge by encouraging the creation of its Multiverse, a “parallel world of connected games where true item ownership and real economy exist.”
However, most of the value in gaming currently is dominated by a few huge studios. None of these studios has adopted ENJ or any other crypto project. These studios all view their characters as intellectual property, and as such guard their property rights closely. They don’t cooperate with other game developer studios. From their perspective, allowing competitors to enter their already profitable walled gardens is a risky move.
Unless one of these giant game studios can be convinced to adopt ENJ, the project will have to rely on small and medium-sized developers adopting the ENJ protocol in their games, and for some of those games to take off in a major way. This is not inconceivable, but it is a considerable challenge.
ENJ also faces competition within the crypto-sphere. WAX, LOOM, and UNIKOIN all attempt to create marketplaces that offer the creation and management of virtual items.
ENJ has performed better than most during the latest crypto bear market. It has experienced a few “pumps” in 2019, the biggest of which was a jump of over 90% when it was announced that the Enjin app/wallet would be one of just four crypto-apps listed on the Samsung Galaxy Store for its Galaxy X10 phone that has crypto-wallet functionality.
As with almost all cryptos, the short to mid-term price depends on what BTC does. With that being said, Enjin’s positive media presence has created enough awareness (hype) around ENJ that it is likely to be a bigger than average mover to the plus side if/when the market cycle switches to Alt-season.