PlotX : Onboarding The Next Billion With Games
Observations on how a billion users can be onboarded to crypto through games
Hey there,
TL:DR - We explore how real money gaming in emerging markets could be a catalyst for adoption of digital assets and dig through PlotX's on-chain metrics to understand the opportunity size. Along the way, we break down how a scaling solution can impact the internal numbers of a venture.
Tuesday was an odd day. For the first time in my life, I saw my fellow Indians celebrating a 30% tax. The finance ministry clarified that the government would levy taxes on income from digital assets in the future. It mattered because developers, traders and investors in the region have been wondering for years if engaging with digital assets is against the law. I am by no means a legal expert, and this piece won't be digging into the regulatory aspects of things. But I think this matters because it opens up a nation of 1.3 billion people to the digital asset ecosystem. Historically, one of the criticisms about digital assets has been the high-cost aspect of being onboarded to the industry. Depending on the use-case and avenue, users have to sign up for an exchange, set up a wallet, and wait on asset transfers. One of the ways to circumvent this is by offering end users crypto-currencies digitally without having them buy them. A transition of tokens from merely speculatory assets to instruments for participation and coordination is underway. Projects that lead that transition will acquire much of the mindshare of the next wave of users coming on-chain. Today I wanted to write about a project named PlotX doing just that.
What is PlotX
PlotX is built as an x-to-earn platform where "x" can eventually be anything. For the moment, it is similar to a prediction game that is primarily an exchange where users trade on the probability of certain events happening. For instance, consider a prediction market for determining whether Donald Trump will be president. Initially, the values of both "yes" and "no" markets will be set to 50:50. Then, the market reprices the probability as more events come to the news. Finally, if either outcome happens - that is, if Donald Trump is voted in as president or fails to be the president, the relevant outcome will be repriced to one. You can refer to this breakdown by FTX to understand how a market for Trump's presidency would work. Prediction markets are used for a wide variety of applications, from speculation to hedging against a real-world event's impact on a firm's financials. This market to bet on whether Tether will collapse entirely before 2024 is an excellent example of such a market. Users worried about the collapse of Tether can use the "Yes" option here for a relative hedge.
On-chain prediction markets are not new. Augur, Omen and Polymarket have been around for a while. Part of the appeal for blockchain-based prediction markets is the transaction finality. So long as an oracle provides a verifiable source of truth that all parties can agree on within that market, the winners receive their payouts immediately. The speed of settlement and lack of reliance on human intervention for market settlements drive interest in blockchain-based prediction markets. In cases where the prediction is based on data that the platform can query on-chain, there is little room left for dispute.  Interestingly, PlotX’s end goal is not to be a prediction market but to be more akin to a skill based gaming ecosystem with real money involved. They spent 1 year building the infrastructure, chose a very simple crypto price prediction game, got 150,000 paying users in 4 months, and are now diversifying. I was chatting with the founders and I hear that a new rebrand is in order as well.  For context, the real money gaming segment in SEA is one of the fastest-growing gaming subsets. India generates some $1.7 billion in revenue, with the average user spending up to $50 per year. It may seem like a small niche but consider this. PlayGames - one of the region's largest gaming publishers commands close to 100 million users. Mobile Premier League - a platform for skill-based games has close to 90 million users. In my opinion, games will be one of the crucial outlets to onboard the next billion users to crypto. This is how they are building towards that vision.
PlotX claims to be building an integrated layer that allows any third party to come in and create an "x-2-earn" ecosystem. The current product is focused solely on attracting a large enough userbase through a simple activity. Which is making predictions for the moment. But once they have enough users, they can partner with external firms or roll out applications internally for all kinds of use-cases. This could vary from solely providing data (eg: filling in surveys) to more complicated functions such as building apps. The goal is not to build a prediction market. It is to create a curated community with a consistently accurate track record over time. Consider this. A platform can charge a high premium if it can prove with on-chain data that a subset of users are consistently in the top 1% of accuracy for predicting outcomes. Both brands and researchers have a good incentive to use that community to collect opinions and estimate probabilities. In the next iteration of the platform, users will not even be required to spend tokens or real money. Individuals can build reputation in the platform by solely predicting. The real money aspect comes into play only if the user determines they are consistently accurate and choose to use their skills to make a livelihood.
The Numbers
With all that context - I wanted to go through PlotX's numbers and shed light on how the team is enabling the arrival of a newer subset of users in crypto. The founders were kind enough to open up their metrics to show how growth has been. Â PlotX launched early last year and initially ran only on Ethereum's layer one. The possibility of scaling the userbase without spending heavily on acquiring large crypto whales was initially difficult. The average revenue per user until July the last year was around $27,000, but there were only about 100 users on the platform. In other words - capital was flowing in the system, but it was concentrated in a handful of users. The team decided to implement building on Polygon to see how user behaviour changes. We will be using a bunch of KPI related jargon later on in this piece, so for consensus, here is how the team defines its metrics.
(1) New User - Users that come to PlotX for the first time and makes a prediction. Depending on the frequency and size of predictions, they are bucketed into predicting users or a power user.
(2) Predicting User (PU) - This branch represents the group of all paying users of PlotX. This includes both new users (users acquired in the calendar month) and returning users (acquired in a previous calendar month).
(3) Average Revenue Per Predicting User (ARPPU) - Average revenue generated by a Predicting User. This number is a product of two factors: (1) Average number of predictions made by Predicting Users, and (2) Average $PLOT used for a prediction by Predicting Users
(4) Monthly Gross Merchandise Value (GMV)- Total amount of $PLOT used in predictions on PlotX in a given month.
(5) Monthly Revenue - Monthly Revenue is the LP fees, which is a sum of:
2% of prediction amount taken from all predictions made on PlotX in a given month, and 5% of the winning pool from each settled market.
PlotX's goal has been to onboard users to crypto in around 5 minutes with $5 spent by the user. I checked on this myself. The platform lets you sign in with a Twitter or Facebook address and auto-opens a wallet on the platform for you. Users are then required to transfer crypto from a third party exchange as the on-ramps are still being integrated. .In my view, x-to-earn models like those offered by PlotX likely have a much larger market than consumption products like NFTs in emerging markets. Part of the reason for this is the low entry barrier and high return for engagement - more on this later. In addition, unlocking regional markets like South-East Asia and Africa allows researchers to unlock regional intelligence on the possibility of an event occurring without necessarily having boots on the ground. However, the platform needs active traction before that can happen, which we will focus on today. In late July 2021, the team decided to roll out support for the Polygon network. Implementing a scaling solution in PlotX was of strategic significance because it could help in two ways.
Users get put off by having to bridge to another network. The more friction there is between a user and the key action on the platform (predicting this case) - the higher the odds of the user dropping off.
Users welcome the change because users could now place more minor predictions at a fraction of the fee needed earlier.
Six months on, the platform's numbers are out, and in some sense - it gives a sense of why more blockchain applications should consider scaling by using alternatives. Here's why - view these two charts exploring the total number of PLOT token holders on Ethereum(top) and Polygon (bottom).
The number of PlotX users on Polygon has been on an exponential ride throughout the past year. On Ethereum - the network had around ~3000 holders. The figure has been stagnating ever since. On Polygon, it has scaled from ~2k to 20k throughout Q4 2020. One way to argue against this metric is that it is cheaper to hold assets on the Polygon network, so more users do it there. On-chain growth in holders has translated to a meaningful shift in predicting users. How meaningful? An almost 500x increase in 4 months.
So one has good reason to believe these were meaningful users that believed in what the platform has to offer. Having a high growth rate due to a switch of networks on its own does not mean much. Ultimately, a platform has to show revenue for said growth to be meaningful. Users making predictions on PlotX can make a prediction using any token, but in the back-end, the asset gets converted to $PLOT for making the prediction. The "house" - or the network, in this case, receives a percentage of the $PLOT used for the prediction. Currently, that figure is at ~2%. The product is a volume play where having an increasing number of users engaging with the product has two-sided effects
On one side, users' inbound assets (USDC, ETH etc) create buy-pressure from users looking to make predictions on the platform.
On the other hand, the 2% rake fee that goes to the house i.e the PlotX treasury temporarily reduces the overall supply in the market for the $PLOT token.
During January  2021, the platform had some 48,000 users contributing to a GMV of ~$6.8 million. This brings the GMV per user to an optimistic figure of ~$140. Annualized it should be around $1700. The platform has a take rate of ~2% so that brings the revenue per user to about $34. Naturally, I am taking numbers from the high end of the curve here and you can call me out on it. If we presume the platform is able to retain ~30% of that figure for the coming year, the number should be $11 per user. This is roughly four times the revenue Facebook makes from users in the region.
Retention rates measure how many users stick around from a particular day over a while. They are measured on D1 (the next day), D7 (the next week), D30 (the next month) and so on. For example, your open rate is likely by the hour if you use Instagram. On the contrary, an app measuring fitness, mental wellbeing or financial wellbeing is likely opened less frequently and, in many cases, never opened again. This matters in gaming apps because it explains how often a user returns to the platform. The metrics below from Gameintel are a good look at how D7 metrics look like for most casual gaming apps today.
As you can see - casual, adventure-based multiplayer games (eg: Fortnite) see the highest retention rates due to the cult-following they make. These games also typically tend to have reward mechanisms embedded in the product that require users to open the app every day and engage with the game. On the other hand, trivia-related apps see much lower retention rates. For example, an app with a ~25% retention rate on the seventh day of a user's first opening is in the top 2% of multiplayer games. As it stands, the retention rate for PlotX puts it somewhere in the top 15% for 7-day retention and top 25% of gaming apps for 28-Day retention. The figures on their own are not stellar, but it is worth noting that we are comparing very traditional web2 metrics with a product that is primarily transaction-heavy and requires users to own crypto. So on one side, you have the gross merchandise value of the application trending upwards, and on the other, you have retention rates that are increasingly becoming similar to web2 gaming apps. There has to be a trick in some of these cases. Some dApps use a trick of trickling airdrops to retain users. In these cases (arguably) an airdrop is the price of acquiring a new customer. PlotX currently employs a similar mechanism except that instead of giving a single airdrop, they drip it over time.
In this case, we define CAC (cost of acquiring a customer) as the total money spent on marketing to get a user to predict the platform. Currently, PlotX spends ~$1 on getting a user to make the first prediction (for free). After that, if the user likes the experience and wishes to make more, they are mandated to either (i) win on the previous prediction or (ii) spend their own money. Compared to the industry standard of ~$33 CAC for similar apps where real money is involved - PlotX currently spends around $4 per user. Roughly half of what they used to before migrating to Polygon.
The reason for this is multifold, in my opinion.
Prediction markets offer individuals a way to experience the thrill of investing in digital assets without tying up the entire sum of money.
Moving to Polygon meant more individuals with smaller ticket sizes could now trade on the platform.
That initial offer of giving $1 meant users could try using PlotX without providing much information on themselves.
Since settlements occur on-chain and by the hour, winners in the market can access their capital right away.
What's Next
PlotX’s medium-term strategy is to evolve beyond market-data and to enable users to create trivia based pools for all kinds of data. Long-term they want to allow devs to create more skill based games in the PlotX ecosystem. One of the immediate applications the platform can enable is a market for predicting the floor price of a certain NFT. This would allow users to have fractionalised exposure to the price of the asset without necessarily having to buy an entire NFT. The real money gaming segment is likely going to be one of the fastest growing in the years to come as it offers the same experience of trading without necessarily knowing the nuances of a digital asset. The subsection of the market that understands basketball, movies, cricket or music is far larger than digital asset experts. I don’t see much holding the team back from faster growth if the team is able to launch a mobile first product in the months to come.
This is part of the platform’s intent. One of the metrics I found interesting while researching for this piece is that only about 4% of Indian Facebook users interact with the website from their laptops alone. 96% of them access it from their mobile devices. This is why Axie Infinity found the kind of success it did. It was one of the first few crypto-native mobile applications that anyone could use. It will be interesting to see how the platform scales once PlotX launches its mobile app and allows anyone to create trivia based applications with token rewards embedded into it. Ultimately, the team's vision is to not tie itself down with the token they use but to enable anybody to come and use tokens as an instrument for coordination. Teams like Numer.ai have used a similar model to find specialists in the past but they could not scale as it was focused on an extremely niche part of the market. The next wave of crypto users will be on-boarded as a function of allowing anyone to be a part of the industry. The college kid that knows a bit too much about cricket? Your uncle with an understanding of how commodities trade? Your mum's opinion of whether a political leader will come to power? All of that can be accounted for through what the team is building. To me, that has been what is most fascinating about the venture. You can realistically combine institutional expertise with wisdom of the crowds as a counter balance in such products. It will be interesting to see how the two pan out in the year  to come.
The team just closed a raise from Hashed, Polygon's ecosystem fund and Animoca brands to scale the platform. If their broad vision interests you, consider applying for this technical role we recently listed on our community Pallet. Also if you are comfortable with staking and the like, consider exploring PlotX' staking programme. The yields are around 54% APY. I will see you tomorrow with a long-form on gaming, the metaverse and guilds.
P.s - Make sure to come hang out in our Telegram if this piece interested you.
Regards
Joel
Note.
1. Tokens are a high risk investment asset class.
Do not invest what you cannot afford to lose.
2. This is not financial advice.
3. Entities I am associated with, may have exposure to the team behind PlotX
4. Opinions stated here are of my own and not of entities I am linked to
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