Next-Gen GameFi: Financial Potential of Blockchain-Based Gaming Tokens

An investment thesis for $WINR, written for Oregon Blockchain Group’s Venture Capital style investment fund. This is written by students for educational purposes, not financial advice.

Bryson Ballew

Published in

Oregon Blockchain Group

15 min readMay 24, 2024

Analysts: Bryson Ballew & Kyle Petitt

General Background on Protocol

WINR protocol ($WINR) a company that was founded in 2022, is an infrastructure that is meticulously crafted for iGaming frontend operators and gaming providers, aimed at catalyzing the development of decentralized, transparent, and innovative products within the iGaming industry. By leveraging this platform, stakeholders can streamline the creation process while upholding decentralization, and transparency as core tenets. In addition, the platform provides essential tools such as smart contracts, a liquidity engine, and an incentive framework for developers and projects seeking to venture into the Web3 iGaming landscape. As stated on the project’s official website, this infrastructure essentially enables other projects to seamlessly integrate Web3 functionalities, allowing them to concentrate on crafting captivating games without the burden of managing complex Web3 elements. Ultimately, WINR Protocol facilitates innovation and collaboration within the iGaming sector, driving the advancement of Web3 technologies in the industry. This Arbitrum protocol allows users to stake both vWINR (vested) and WINR tokens to get actual yield in the form of WLP, which stands for the WINR liquidity pool’s underlying assets.

Macro Factors Impacting Protocol

Online gambling has drastically grown in recent years. As a result of the shifts that occurred in the late 20th century, Americans now have access to an abundance of legal online wagering options in the 21st century. In many states, online poker became accessible, and sweepstakes casino frontrunners introduced an entirely new method for individuals to play online slots and other games. These platforms provide lawful iGaming solutions through the use of virtual currency and a framework that does not require a purchase. Casino enthusiasts are enticed to an all-new world where cash prize redemptions are possible on select sites. This feature is particularly appealing to players residing outside the six lawful iGaming states.

Gross gaming revenue from legal sports betting in the US totaled $900 million in 2019. In 2023, that number jumped to $10.9 billion, making it obvious that this sector has grown exponentially within recent years. This 86.55% Compound Annual Growth Rate over the span of 4 years in the industry is mainly thanks to the introduction and normalization of online platforms. Traditionally this was dominated by major players like DraftKings, FanDuel, and BetMGM which have become household names for many. Just two years ago DraftKings stock ($DKNG) was at $12 per share, now it sits at around $40 per share. In DeFi, platforms like Stake have paved the way for many other platforms to arise as well. One of which is WINR.

Who’s the Team Building the Protocol

Not doxxed.

General Auditing Background for Protocol

In 2023, Paladin Blockchain Security conducted three distinct audits for the WINR Protocol, focusing primarily on protocols compatible with the EVM to enhance contract security. The WINR Protocol, which is deployed on the Arbitrum network, underwent thorough user-centered smart contract audits to identify vulnerabilities, logic errors, and potential issues from internal and external perspectives. The most recent audits, conducted in February and March 2023, consistently revealed risk mitigation measures predominantly rated as low severity. Across these audits, a total of 31 remediation instructions were issued, with 27 successfully resolved. Notable issues highlighted among these resolved notices included: “Users can still deposit even after the due date,” “Investor start and end times do not align with the actual vesting start and end times,” and “Users will appear to have very few gWLP tokens due to a decimal error.” The remaining four instructions were partially addressed, with some requiring no changes. Another audit, conducted in April 2023, focused on the WINR Protocol’s Genesis WLP Staking contract, specifically checking for vulnerabilities in the staking process. This audit revealed a higher severity of risks, likely due to the protocol’s first-time release of the staking concept, thus susceptible to errors. Five high-risk issues were identified, all of which were promptly resolved, ensuring effective operation. Among the remaining four low-level risks, three were successfully rectified, while one was acknowledged. The final audit, concentrating on the code, was performed by the auditing company WatchPug. Specializing in providing extensive audits for Solidity smart contracts and real-world security expertise, WatchPug identified only one critical error within the code, which was promptly resolved. Additionally, the six medium-risk remediations were successfully addressed.

Specific on What Protocol Does

The WINR Protocol uses an Elliptic Curve Verifiable Random Function (VRF) to generate random outputs securely and verifiably. This cryptographic algorithm ensures that the random values are generated in a deterministic manner and can be verified by anyone. This process involves generating a secret key and a corresponding public key, then using these keys to produce a random output and a proof. The proof allows anyone to verify the validity of the random output without knowing the secret key. This ensures fairness and transparency in applications such as gaming, where randomness is crucial for fairness.

WINR Smart Accounts provide a secure and user-friendly wallet experience, integrating easily with various platforms. These accounts allow for seamless cross-chain transactions, easy deposits, and quick, gas-free transactions. Users can manage their assets across different platforms within the WINR ecosystem using a shared account abstraction model powered by EIP-4337. This model ensures that users can authenticate across all WINR platforms with uniform credentials, simplifying the registration process and enhancing security through features like 2FA and social media account integration.

The WINR Liquidity Engine is designed to provide liquidity and generate daily yields for liquidity providers. The engine operates a liquidity pool where users can buy WLP (WINR Liquidity Pool) tokens, which represent a diversified index of stablecoins, BTC, and ETH. These tokens can be bought and sold at any time, giving liquidity providers flexibility and control over their investments. The liquidity engine ensures that liquidity providers earn from the platform’s total revenue, thereby managing risk in the volatile digital asset market.

The WINR Protocol incorporates a robust incentive structure to reward users. Every transaction on the platform earns users vWINR token incentives, which can be staked to earn a share of the protocol’s revenue. Additionally, there are random vWINR incentives and jackpot opportunities that make transactions even more rewarding. The protocol also includes a referral program, allowing users to earn based on the transaction volumes from their referrals, thus encouraging community growth and engagement.

These components together ensure that the WINR Protocol operates efficiently, securely, and transparently, providing a seamless experience for users, developers, and liquidity providers alike.

Why the Protocol Offering Matters to Consumers

Consumers are able to experience seamless and fair gaming with the plethora of unique features that are offered. One of which is the WINR VRF (Verifiable Random Function) verifiable random number generation. Utilization of non-custodial wallets for simple and easy transactions allows for ease of use at every intersection on the platform. Overall ease of use is a focal point to WINR so they have made a conscious effort to ensure quick deposits, quick transactions (no gas fee), along with a high sense of security as well. The platform also hosts the ability for websites like DEGENSBET which offer high-leverage perpetual trading using real-time market data and smart position sizing. Another benefit for players on the platform is that they can earn vWINR emissions and commission from the vWINR that is minted via smart contracts, thus making every transaction rewarding for the users. Staking rewards can also be earned in both WINR & vWINR tokens for WLP which means that the users will have a share of the protocol’s revenue. Possibly one of the biggest allures from a user perspective is the possibility of receiving the “jackpot” which is a large lump-sum that is set aside which is randomly awarded to wallets based on transactions.

Qualitative Competition Landscape

In the competitive landscape of iGaming and crypto casinos, WINR stands out with its robust infrastructure tailored for iGaming frontend operators and gaming providers. WINR’s protocol is built on a smart contract game engine that allows developers to create on top of it, promoting innovation and flexibility. One of the standout features is the high-leverage perpetual trading and the WINR VRF (Verifiable Random Function), ensuring fair and transparent gaming outcomes.

Comparatively, Rollbit focuses on being an innovative social crypto casino, offering features like Bonus Battles for social competition, user-hosted challenges, and high-leverage trading. Meanwhile, TG Casino integrates seamlessly with the Telegram messenger, providing a sophisticated and secure gaming experience through regular audits and a custom Telegram bot.

BCB, originally centered on decentralized betting odds for the FIFA 2022 Qatar World Cup, has expanded its offerings to include a fully audited platform with over 2000 unique casino games, a profit-sharing model, and non-inflationary tokenomics.

Investing in WINR is a compelling opportunity due to its infrastructure’s adaptability, its emphasis on high-leverage trading, and the implementation of advanced technology like the VRF, setting it apart as a leader in the iGaming and crypto casino market.

Protocol Go To Market Strategy Versus Competitors

How Token Extracts Value

The WINR Protocol operates on a dynamic dual-token system, consisting of the primary token, WINR, and its vested counterpart, vWINR, which serves as a reward mechanism. Upon earning rewards, they are distributed in vWINR format, entailing a vesting period of 180 days. However, users have the flexibility to opt for shorter vesting periods, the briefest being 15 days. In such instances, a portion of vWINR is burned upon conversion to WINR. Illustratively, for a 15-day vesting period, the conversion ratio stands at 1:0.5. Furthermore, users have the option to stake both WINR and vWINR tokens, enhancing their engagement within the ecosystem. Additionally, the protocol features the WINR Liquidity Pool, complemented by the WLP token, offering liquidity providers a liquid asset with a tangible fiat currency value. Therefore a bribing system begins due to the fact that when individuals start playing games on the WINR platform those games will connect to WLP. Regardless of if the player wins or loses they will receive vWINR on each transaction. Because of this there is a drive to increase player volume in WLP which is correlated to being positive due to WINR Protocol being viewed as “the house” and as everyone knows the house always wins in Vegas, hence more often than not, players will be losing. The bribe mechanism within the protocol incorporates a dynamic multiplier that fluctuates with each epoch, ranging from 0.0075x (0.75%) to 0.0125x (1.25%) of the wager. This multiplier’s adjustment in each epoch correlates with the revenue generated by the WLP, ensuring its ongoing vitality. For example, suppose the current epoch’s bribe multiplier stands at 0.008x. In the scenario where a player conducts a transaction valued at 0.1 wETH, the WLP contract would execute a payment of 0.0008 wETH as a bribe within the same transaction. When WINR receives the bribes the following distribution looks like this -

As players continue to receive their rewards, known as vWINR, they are allocated to incentivize as early participants in the staking initiative. The rewards facilitate this process by minting vWINR tokens and injecting them into the staking pool. The distribution of vWINR tokens into the staking pool is executed in proportion to the annual percentage rate (APR) generated by the WLP relative to the staked principal amount of WINR/vWINR. This means that the more WINR/vWINR tokens a participant stakes in the pool, and the longer they stake them, the greater their share of the vWINR rewards. The APR generated by the WLP serves as a metric to gauge the growth and profitability of the staked tokens within the liquidity pool. There is also In the WINR Protocol, two fee mechanisms that drive its operations. Swap fees are generated during trading, promoting balanced targeted weights for traders, while buy/sell WLP fees are collected as liquidity providers add liquidity. These fees vary based on the input token’s weight relative to targeted amounts, incentivizing balanced liquidity provision. Finally, the WLP index will be absorbing at least 2% of all the volume generated by the platforms built on top of the WINR Protocol as revenue.

Tokenomics/ Vesting Schedule

This Arbitrum protocol allows users to stake both vWINR (vested) and WINR tokens to get actual yield in the form of WLP, which stands for the WINR liquidity pool’s underlying assets.

As players lose tokens while participating on the online gambling platform, these losses are then reflected in the WLP, increasing its value over time. These assets are subsequently included in the index composition. Staking vWINR tokens entitles the addresses to vote on WINR DAO voting proposals. On the platform, WINR tokens work as a gas token, and cover transaction fees. Within each transaction a portion of the WINR token gets burned, which creates a deflationary mechanism to enhance the token’s long-term value. There is a total of 1 billion tokens in the WINR supply, though it is subject to a possible decrease through the WINR burning mechanism. Since there is an opportunity to convert your tokens from WINR to vWINR, the ratio is currently sitting at 42% to 58% respectively. Additionally, 10% of the supply was sold through the public sale on Camelot (50% WINR, 50% vWINR) and 5% of the supply is allocated to Protocol Owned Liquidity (100% WINR, 1% vested over time).

Participating in the WINR Protocol offers an array of exciting incentives that make every transaction an opportunity for substantial rewards. Holding vWINR tokens not only ensures continuous earning but also grants access to additional benefits. By staking vWINR tokens, users can unlock the potential to earn WLP tokens over time, entitling them to a share of the protocol’s revenue. This investment mechanism not only fosters financial growth but also aligns users with the protocol’s success. Adding to the thrill are jackpot opportunities, where stakers stand a chance to multiply their rewards by up to 100 times, based on the platform’s revenue. This element of unpredictability adds an exhilarating dimension to the earning potential of the protocol. Moreover, staking vWINR tokens opens doors to community engagement, as users can share referral codes to facilitate growth and expansion. Each referral not only contributes to the community’s vibrancy but also earns the referrer additional WINR tokens, fueling a cycle of growth and opportunity.

WINR Protocol has stated in their whitepaper the following distribution plan:

WINR Protocol Crypto offers a dynamic ecosystem filled with enticing opportunities for users. With the chance to receive 100 times random vWINR incentives on transactions, participants are constantly presented with exciting prospects to boost their earnings. Moreover, the platform features a growing jackpot, fueled by its own revenue streams, providing users with the potential for significant rewards. Additionally, users can enhance their earnings through a straightforward referral program, contributing to the community’s growth while benefiting personally. This comprehensive approach reflects WINR Protocol Crypto’s commitment to fostering engagement, incentivizing participation, and creating a thriving ecosystem for its users.

Quantitative Comparable Analysis

The gaming industry has witnessed significant growth over the past few years, as evidenced by the projected global revenue forecasts. According to the following data from Statista, the global revenue for sports betting, casinos, and lottery segments is set to increase from $95.1 billion in 2023 to $131.9 billion in 2027. As seen in the timeline below, the chart reflects a compound annual growth rate (CAGR) of approximately 14.32%. This growth trend underscores the expanding market potential and the increasing capital flow into the gaming sector.

A closer look at the competitive landscape of key projects in the gambling/igaming industry reveals diverse market capitalizations, fully diluted market capitalizations (FDMC), and trading volumes:

In the competitive landscape of cryptocurrency protocols, WINR stands out as the most compelling investment choice for several reasons. Despite having a smaller market capitalization of $12.94 million compared to Rollbit’s $220.13 million, WINR demonstrates a strategic balance of supply and burn rate that positions it for substantial growth.

WINR’s annualized cumulative token burn of 43,664,096 tokens, paired with a manageable maximum supply of 915,761,228 tokens, indicates a well-calibrated deflationary mechanism. This burn strategy, while less aggressive than Rollbit’s, ensures a steady reduction in supply, potentially increasing token value over time without overwhelming the market.

Furthermore, WINR’s annualized burn rate of 4.8% strikes an optimal balance, enhancing value through scarcity while maintaining enough liquidity to support market activities and investor interest. This approach mitigates the risks associated with overly aggressive burn rates that can sometimes destabilize a token’s value.

While Rollbit’s high market cap and significant burn rate highlight its current dominance, WINR offers a more sustainable and calculated growth strategy. The smaller market cap of WINR provides a greater upside potential, making it an attractive investment for those looking for significant returns as the protocol scales.

Additionally, the transparency in WINR’s tokenomics and its commitment to a balanced approach make it a trustworthy and strategic choice for investors. This level of transparency is crucial for building investor confidence and fostering long-term engagement.

In summary, WINR’s well-balanced token burn strategy, manageable supply, and substantial upside potential make it the best pick among its competitors. With 0 inflation, Its approach ensures sustainable growth and when combined with its value we believe that WINR is undervalued and has a lot of potential.

Road Map

WINR Protocol has done a great job in staying up to date on completing its roadmap. Their goals have all been completed in Q1 with the intent of launching “JustBet”, specific types of slot games to be added, and then new games developed on Unity, which all got effectively completed.

While their ambition may seem grand within the 2024 year, it’s crucial to remember that as a startup in the gambling industry, rapid growth is imperative to stay competitive. Rather than reinventing the wheel, they must efficiently pursue their goals. Thus far, they have demonstrated adeptness in this regard, indicating they are on the right trajectory for growth.

Investment Thesis

Online gambling has grown exponentially and diversifying our fund into this sector is promising. With the rise of cryptocurrency adoption into everyday life, gambling will no doubt be one industry that will benefit greatly. Similar to meme coins, crypto natives are notorious for “aping” into small-cap projects with little to no due diligence and are willing to roll the dice. Igaming fits right into this high-risk/speculative native that cryptocurrency still retains.

The online gambling industry is poised for significant growth, particularly with the integration of cryptocurrency, which enhances transparency and accessibility. WINR Protocol stands out in this space due to its innovative architecture, including token burns, robust liquidity pool mechanisms, and secure smart wallets.

WINR Protocol’s market share is growing due to its comprehensive decentralized infrastructure. The use of Verifiable Random Function (VRF) ensures fairness, while the WINR Liquidity Engine and smart accounts enhance security and user experience. The protocol’s tokenomics, including strategic token burns, further drive value by reducing supply and increasing demand.

I’m bullish on the WINR Protocol because it offers a unique value proposition through its, technological framework. The liquidity pool mechanisms support seamless transactions and incentivize participation by offering rewards. Moreover, integrating smart wallets ensures secure and transparent fund management, setting a new standard in the iGaming industry.