Original author: 0XYARO,0XRAMEN,ANDOUROBOROS CAPITAL
Compiled by: Mars Finance, MK
Ronin: Retail Beta + Outstanding Fundamentals + Undervalued + Catalysts for Multiple Upgrades
Retail is slowly coming back. Even as Bitcoin prices approach all-time highs, a full retail recovery appears to have yet to materialize. We think there's a good reason behind this - mainstream media coverage and traction in retail takes time. This creates an empirical lag of approximately 2-3 months between Bitcoin price and cryptocurrency Google search volume (which we believe reflects a proxy for retail interest).
Source: CoinGecko, Google, Ouroboros Research
We have a soft spot for games. We’ve been digging into which investment ideas are suitable for the long term and have strong ties to the retail sector – gaming being our top choice (meme coins have their place, too, but that’s a topic for another article).
Choosing the right strategy is crucial. While advocating for the resurgence of Web3 gaming is relatively simple, picking winners in a winner-take-all market has historically been challenging. We could theoretically consider picking a range of gaming tokens, but we believe infrastructure projects offer a better risk-reward ratio due to being subject to fewer specific factors and broadly covering a large number of games.
We have become increasingly bullish on RON, which stands out in a number of ways:
Ronin's network effect is the best among its peers, and its indicators far exceed those of competitor chains, reaching 50-1000 times. Still, RON is priced relatively low.
The chain is witnessing strong and continuously growing UAW metrics, and its growth potential is even greater as more games are added.
RON has several catalysts that could prompt a re-rating of its valuation, including 1) increased launchpad appeal and airdrops, 2) changes in token economics, 3) listing on CEX, and 4) the launch of its ZK L2.
investment thesis
#1Top gaming chain at a reasonable price
The gaming platform is essentially a two-sided market. New platforms often struggle to attract both gamers and developers, as both parties want to see the other active before joining the platform. Game developers desire instant access to large numbers of users, while gamers expect exposure to high-quality games (and/or incentives).
Ronin has built network effects. Built by Sky Mavis, the creator of Axie Infinity, Ronin cleverly circumvents this conundrum by bringing Axie’s massive user base on-chain. This brings instant network effects at a scale not seen on other crypto platforms.
Source: DappRadar, Avax Subnet statistics, Ouroboros Research
Featuring unique metrics that are 50-1000 times greater than other gaming networks. Ronin has 1,000 times the number of active wallets, 80 times the number of transactions, and 50 times the dapp transaction volume of its peers. We believe that he is a unique indicator of gaming networks. Ronin has 1,000 times the number of active wallets, 80 times the number of transactions, and 50 times the dapp transaction volume of its peers. This in itself should provide a higher valuation for RON, in our opinion. However, in comparison, BEAM trades at a 60% premium and IMX trades at a whopping 260% premium.
#2User numbers are at an all-time high and are expected to continue growing
Ronin hosts the largest Web3 games. Although the Web3 gaming world is still in its infancy, a handful of games have reached over 1-10k daily active users (DAUs). Here are some games hosted on Ronin, marked in yellow:
Source: Coingecko, various gaming websites, Ouroboros Research
Axie Infinity (AXS): Peaked at 2 million users in 2021 and currently has over 350k active users across its Axie Classic and Axie Origins games.
Pixel (PIXEL): Recently launched, it already had 260k daily active users before its token debut, growing to ~700k now, and is poised for more growth from Chapter 2.
Wild Forest (WF): This real-time strategy (RTS) game had over 10k daily active users before the token launch.
Apeiron (APRS): This upcoming game completed a $3 million worth of token sale last week, with over $75 million in RON available for distribution.
Kaidro: This upcoming game received over 346k minted in its first NFT mint (maximum 1 NFT minted per wallet).
The symbiotic relationship between Pixels and Ronin will attract more gaming partners. Historically, Ronin had a large user base due to Axie. The exponential DAW growth since Pixels joined Ronin (migrating from Polygon) shows that non-Axie games can be successful too. In effect, this shows that Ronin not only benefits from the existing user base joining the game, but also contributes to the growth of the game's user base, forming a mutually beneficial relationship.
Source: Jiho’s tweet
Source: DappRadar
Ronin flywheel effect. We believe that other game developers have noticed this "Ronin effect" (the growth of users after joining the chain) and will be happy to migrate to the Ronin platform to gain more users. We believe this will trigger a flywheel effect:
Excellent games are transferred to Ronin → Grow the user base → Verify the “Ronin effect” → Attract more games to join
As the list of upcoming games continues to grow, we wouldn't be surprised to see top AAA games join Ronin as a way to reinvigorate its user base. Upcoming games include: The Machine’s Arena, Axie Champions, Tribesters World, CyberKongz, PlayFightLeague, and more.
#3Multiple Catalysts: Launchpad, changes in token economic structure, listing on centralized exchanges, L2 ZK technology implementation
Ronin occupies a substantially stronger position against the competition and we foresee continued growth. In addition, we see four major catalysts that may help realize the value of its tokens:
Ronin Launchpad: Staking Earning = Demand for RON + Airdrops to RON Stakeholders. Ronin has partnered with Impossible Finance and will launch on-chain games in the future. In order to obtain new gaming tokens, RON holders will need to stake their tokens, which will naturally drive demand for RON. Pixels also set the precedent for airdrops for RON stakers, resulting in RON value increases ranging from 10% to 3700% (based on current RON and PIXEL prices).
Given the long list of upcoming games, we expect RON to face increased buying pressure as users seek to acquire these games.
Value accumulation/tokenomics changes. Currently, Ronin collects fees from several dapps, including Katana DEX (0.05% commission on transaction volume), Mavis Marketplace (NFT market, 0.5% commission on transaction volume), and Ronin Name Service (30% commission). These fees are currently collected in the form of RON and deposited into Ronin’s treasury. Although RON holders do not currently receive direct value accumulation from it, co-founder Jiho stated that value accumulation may be achieved through staking rewards and/or buybacks, which we believe may prompt a re-evaluation of the token.
Listed on a centralized exchange. Ronin was recently listed on Binance and completed its listing on Coinbase. We expect the Coinbase listing to significantly expand Ronin’s presence in Western markets (current exposure is primarily Asia-centric). At the same time, we also see the possibility of listing on Korean centralized exchanges - AXS and IMX are currently listed on Upbit, while RON is not yet listed.
Not just a chain, but a game ecosystem. Phuc Thai, Ronin’s lead researcher, hinted at a Layer-2 ZK implementation, R2, that would allow Ronin to not only improve its performance and capacity, but also introduce more blockchain-customized games (such as Maplestory on the Avalanche subnet).
Valuation + Conclusion
Base scenario target: Considering its superior indicators, we foresee that RON's market capitalization can at least reach the level of BEAM/IMX, that is, there is 60%/260% growth space, or the price reaches US$6.0/US$13.5 respectively.
Bull Case Target: If the various catalysts are realized, Ronin is expected to become the platform of choice to promote the development of Web3 games and compete with major game publishers and distributors such as Valve and Epic Games. Considering that Web3 games have significantly higher user monetization capabilities than traditional games, we expect RON’s valuation to exceed that of these companies (Based on Bloomberg data, Valve is valued at $7.7 billion and Epic Games’ recent valuation is $225 One hundred million U.S. dollars).
We conclude this investment report by highlighting the following key points:
Ronin clearly outperforms its peers on metrics, but its valuation is significantly lower.
Ronin creates a flywheel effect by introducing high-quality games → attracting users → and this process has just begun.
Although fundamentally undervalued, multiple catalysts are expected to help it achieve a revaluation, including increased launch pad appeal, structural changes in the token economy, centralized exchange listings, and the release of ZK L2.
We believe that the Ronin ecosystem has launched a powerful flywheel effect that attracts gamers and games, and the next generation of Web3 games that will disrupt the industry will emerge from this "king maker."
Appendix #1: References and Acknowledgments
We are especially grateful to the Sky Mavis team (especially @bottomd0g) for their support in our research, as well as other peers who provided us with valuable information and feedback: @s4msies (Ronin: New Era), @DarkForestCap, @JavierAng_, @ahboyash , @NotSoAnonJoo, @isaac_mung, @0xMize.
Addendum #2: Myth Cracking
Rumor #1: Ronin suffered a huge bridge vulnerability attack in 2022. Is the Ronin chain still sound?
The answer is yes. Although validators’ private keys were leaked, allowing attackers to successfully steal $600 million from the bridge, some of the losses were recovered and fully reimbursed by Sky Mavis’ balance sheet, allowing users to be fully compensated.
Ronin has since moved to a delegated proof-of-stake model, and Sky Mavis has only one of 22 reputable validators, showing their commitment to decentralization.
Rumor #2: Ronin’s inflation is concerning.
In fact, about 500 million RON will be gradually released over a long period of 7 years, while most other projects have a release period of less than 4 years.
Rumor #3: FTX Estate still holds RON and could lead to further selling pressure.
Since Ronin was listed on Binance, FTX Estate has completed the sale of RON through Binance. As of the time of writing, they have sold a total of 10.2 million RON and sent the last batch of 1.2 million tokens a day ago.
Addendum #3: What is Ronin?
A sidechain designed specifically for gaming. Ronin is a blockchain platform developed by Sky Mavis in 2020-2021 to solve the scalability and cost issues of traditional blockchain networks. Focusing on the blockchain game and NFT market, as an EVM-compatible blockchain, it provides an optimized environment for a large number of low-cost transactions, becoming an ideal platform for its flagship project Axie Infinity and other Web3 games.
Ronin is not only a gaming platform, but also brings together player communities/guilds. With the initial success of Play-to-Earn (P2E) games in 2021, the Ronin ecosystem has established a strong foothold in the gaming community in emerging markets. This is helped by strong collaborative relationships with various P2E guilds, particularly Yield Guild Games (YGG), which facilitate user onboarding through the guild’s extensive network and content localization.
Ronin also offers a mobile wallet designed for mass adoption. One of the key factors in Ronin’s ability to effectively penetrate the mass market is integrating Ronin wallets into mobile devices and making it the norm. This experience is particularly important in emerging markets with high mobile penetration, providing users with convenient access methods.
