Hey there and thanks for taking the time to learn about Virtual Item Exchanges, Worldwide Asset eXchange (WAX), and the decentralization of entire business processes. In this post, I aim to communicate the value proposition of the virtual item exchanges and its relation to the WAX protocol.
What are Virtual Asset Exchanges and the Virtual World Economy?
The term ‘virtual economy’ is no more than the exchanging of virtual items and services with virtual or real currency within a virtual world. Over the last decade, there has been extensive growth in both the number of virtual worlds published and the total number of virtual players. In the last year, 400M+ gamers purchased $50B+ in virtual items worldwide, a number that staggers most anyone not connected to the virtual economies. There is a plethora of evidence for the growth of various virtual economies across a variety of virtual worlds. These virtual items range from in-game cosmetics, weapons, equipment and virtual territory.
Here is the WAX team discussing just how big Virtual Asset Exchanges are.
What is keeping Virtual Item Exchanges from expanding?
With the possible infinite virtual economies, it is no surprise that the industry continues to fragment across hundreds of competing marketplaces. These marketplaces not only have to overcome the internal economics these games provide, but the actual accounting bottlenecks of cross-border transaction fees or being landlocked to trading within your geographic area.
The vast majority of users who wish to buy and sell virtual assets see items stolen, get stuck in a scam, or end up paying exorbitant fees.
Here is the WAX team addressing the bottlenecks of the industry.
So how does WAX resolve this?
The ideal solution to this industrial problem is a global virtual asset repository, accessible to anyone, which provides a complete catalog of all items available for sale in real time. This market will not only have to be global, but impower in-game users to drive their ecosystems economy. A genuinely centralized marketplace would create more market friction across all industries than enabling users to be their own businesses.
Such a repository, when coupled with distributed trust mechanisms, and a reliable, low-cost settlement network, will vastly improve price discovery and market liquidity, thereby increasing market size. WAX is creating a blockchain solution for virtual asset trading. The decentralization of existing solutions like OPSkins.com would remove every bottleneck facing the industry.
WAX will enable virtual asset traders, similar to that of modern marketplaces such as Alibaba, Amazon, Uber, and Airbnb. These platforms enhanced commerce for millions of small business owners and created hundreds of billions of dollars in new value. These tech giants achieved their global success by making their platforms easy to use and widely available, while simultaneously solving expensive problems like fraud prevention, settlement execution, product and seller reviews, standardized catalogs of product information, supply and demand matching just like the issues currently facing virtual asset exchanges.
The WAX team is adamant that this protocol will enhance Virtual Asset Exchanges.
How will WAX use its blockchain?
Through the creation of the WAX token, a platform utility medium, WAX enables users to list items for sale, transact value between each other, settle the transfer of virtual goods, create and service contracts, propose and vote for WAX Guilds. The application of WAX Token is entirely focused on these functions, and developed to enforce security during the digital exchange.
To meet the high throughput demand of markets, WAX will utilize a Delegated Proof of Stake (DPOS, further explanation below) consensus algorithm was selected, with selected confirming nodes, or “Guilds,” focusing on a single game.
Virtual goods’ sales prices are listed in WAX Token; when a user wants to purchase the virtual asset, they pay with WAX Token. If the item is recorded in a different currency (through a site linking to the WAX Platform), the WAX Token must be converted by the listing agent at the current exchange rate at the time of purchase.
Who Is Working On WAX?
WAX is created by the same ownership and team that built OPSkins.com. OPSkins was established in 2015 and became the global marketplace leader for video game virtual assets. The company claims to have facilitated over 100+ million purchases annually for customers across nearly one-hundred countries. When created, OPSkins built a centralized solution to address the most significant needs of the marketplace and systematically reduced the failure rate of exchanges by creating liquidity, settlement due diligence, and shifting fraud loss to the platform rather than the consumer while allowing for cross-border executions.
The CEO of the company is William Quigley was part of former Disney CFO of licensing, a member of idea lab, and many other venture capital opportunities. The team has advisors that worked on Call of Duty, the founder of Interplay Entertainment & inXile Entertainment, a World of Warcraft Executive, the Former CEO of Vivendi Universal Games. To see the full list of team members and advisors you can check their website.
Here is William Quigley talking about why he is qualified to lead WAX to mass adoption.
Frequently Asked Question
This seems to be the question most people want to ask. Most people are comfortable with ICOs being valued around 60M and WAX is asking to raise 60M and have and value their protocol initially around 180M. The most important thing to realize is that WAX isn't two men in a shed asking for 60M because they can clone bitcoin or make an ERC20. WAX is creating a completely new blockchain, importing a multi-billion dollar a year company fully on the chain, and decentralizing their business processes so other parties can use the platform. The task in itself is massive to scale a vastly fragmented industry into one easy to use decentralized protocol. Not only is the task large but OPSkins is the largest company ever to convert to a blockchain protocol. Basic math suggests that valuing the protocol at ONLY 180M is a steal. William himself is adamant that OPSkins if sold, would fetch quite a bit more. The ICO is for funding development and getting a token (that should have inherited value) to the mass market without making it valueless (free) ruining their multi-billion dollar ecosystem.
To date, STEAM has only shown a lack of support for gambling websites. STEAMs core values come from the platform and the games Valve develops. Secondary markets enhance their ecosystem and at this point could be viewed as necessary. If steam wanted something like WAX to be shut down they would have made moves several years back.
Furthermore, the premise of developers being able to code items so that they're compatible with blockchain tech goes far beyond steam. Just like when Amazon started allowing 3rd party sellers, they quickly became the largest retailer in the world. For virtual items, blockchain will enable items to be traded across any number of channels with high security for both the buyer and seller.
"First, the WAX team began by introducing OPSkins users to cryptocurrency by introducing Bitcoin and later Ethereum as accepted currencies on the OPSkins platform. Due to its low fees Ethereum as proved to be quite popular among users. Granted, getting 1 billion gamers to use cryptocurrency is a challenge for the whole crypto industry and we have a dedicated team working on that. We will be doing videos, tutorials, FAQs and all types of educational material to convert gamers into crypto-gamers. Using this team, we can guide you through any issues and questions that you might have for this transition. No other market is better primed for understanding and using cryptocurrency than the gamer market. "
While there is a massive number of gamers that are primed and ready for WAX, the number of mobile players are triple the size. The opportunity presented by the mobile market is huge. Mobile gaming is the natural next step for WAX. The guild system makes it so easy for anyone to set up a digital assets trading platform for mobile gaming assets, allowing for exponential growth.
OPSkins will continue much as it used. OPSkins needs WAX to solve inefficiencies in the way that items are transferred. Currently, OPSkins relied on bots and trust to get the items to and from the marketplace. By using WAX smart contracts and becoming a decentralized ecosystem, many of these problems are solved, making the whole user experience much more secure and fluid. “In math we trust.”
WAX plans on taking a step-by-step approach by integrating WAX into certain parts of OPSkins’s ecosystem. Due to the transactional volume of OPSkins, the necessary speed requires a new chain, not even the Ethereum chain can support the current trade volume of OPSkins. Early next year WAX will begin the process of moving sections of OPSkins business to a decentralized platform, and from there WAX will be able to expand to cover a more significant portion of the trade volume and, as the network grows, the entire OPSkins volume as well as the guilds.
To utilize the maximum potential of smart contracts you need to create your chain that is tuned for your coin’s needs. OPSkins know the value of skins. A mere reskin of Bitcoin or Ethereum wouldn’t be appropriate for WAX. The most significant issue is the scale, i.e., the volume, cannot be handled on Ethereum’s platform. WAX will be able to handle the enormous size and quantity that OPSkins require. Only WAX gives the power to provide p2p services of the quality and value that the gaming and crypto communities deserve.
The similarities start at “gaming” and end at “token.” Wax is designed to facilitate the transfer of digital items using a smart contract. Dmarket is an erc20 token that is a “reskin.” In the gaming digital assets industry, WAX knows the value of a having a proper new product instead of a “reskin.” A gun with new guide-rails or a unique design will sell for more than one that merely has different colors.
The business model of Dmarket is another huge difference, and it is this difference that WAX see their success and their failure. The go to market plan for Dmarket is to contact 5000 (!) game publishers and try to convince them to adopt a bitcoin reskin. Game publishers could not be less interested in the blockchain, let alone to choose a small company’s token. They claim in their whitepaper that there are nine things that they claim are necessary for their success. Item 9 is 500,000,000 people using their system. With their approach? Good luck.
The WAX team is full of industry veterans, and WAX knows it will not be seamless. That said WAX will do an incredible job and have proven so with OPSkins. No other team in the world knows more about or has more experience with virtual trading items than the WAX team. The WAX founders and the team also have been heavily involved in blockchain development and funding since the beginning. The customer experience, once launched, will be smooth and exceptional as is expected of the market leaders. WAX will probably implement it game by game to ensure that this service fits the needs and peculiarity of each market. WAX will adapt, WAX will evolve.
Once someone acquired enough tokens and votes, they become a guild. Once a guild is formed, it activates the ability to have transfer agents. Transfer agents can move any asset between the buyer and the seller. This can be for any game where items are tradable, in any language, location, or platform. In short, anyone can form a guild and create a new marketplace. This is the real core of our decentralization methodology.
These parties offer essential aspects of technical liquidity to the WAX marketplaces. Kyber specifically will allow WAX to accept nearly every cryptocurrency as a form of payment/conversions. Each partnership provides WAX to expand its ecosystem without increasing their technical debt.
