What is Enjin Coin?
Enjin
To understand what Enjin Coin is, we first need to take a short detour to learn about Enjin existing business.
Founded in 2009, Enjin provides community management services (CMS) platform for gamers (developers, clan leaders, server owners, etc.). Enjin platform allows users to build websites, forums, stores, and many other modules including in-game plugins.
Some statistics about Enjin business:
18+ million registered users
250,000+ communities
60 millions global views per month
Millions of USD per month in virtual goods sales across Enjin community stores
The most popular game on Enjin platform by far is Minecraft. Many Minecraft communities are hosted on Enjin with largest one having over 1 million registered users. Some statistics about Minecraft:
121 million copies sold
~10,000 servers
40 million monthly active users
~avg. 200,000–300,000 users online
Acquired by Microsoft in 2014 for USD 2.5 Bn, it has massive followers and continuous development — for example, Minecraft for VR was launched last year with Oculus Rift.
Enjin Coin
Enjin Coin is a smart token that will be fully integrated on the Enjin platform, allowing communities to use it for many purposes. The key functionalities are:
1 ) Payment: many communities on Enjin have stores to sell virtual items, upgrades, in-game privilege, etc. Enjin Coin can become a preferred payment option, providing users and stores the added benefits that come with block chain — minimize frauds, faster settlement time, and lower transaction cost.
2 ) Create and manage virtual goods: developers can issue custom tokens, unique items, or privilege tokens (e.g., special access to certain areas of the game) all backed by Enjin coins — meaning Enjin coins are locked into a smart contract when they are created. Enjin coin can be redeemed back at anytime by users through smart contract, and the item will be burned.
3 ) Real-time subscription: instead of the typical monthly subscription, Enjin Coin combined with smart contract can create a pay-as-you-go subscription model where users can cancel game subscription anytime. Enjin Coin balance will only be deducted proportionately to the actual subscription time.
Along with Enjin Coin, the team is also developing a Smart Wallet that will streamline user experience by integrating it to Enjin websites. User can manage their virtual goods on the wallet in addition to the basic send / receive functions— making it easier for players to adopt new technology.
What pain points is Enjin Coin trying to solve?
High fee: this is the biggest pain point. The fee charges by credit card companies and Paypal to merchants comprised of fixed and variable portion. For example, Paypal charges 2.9% + USD 0.30 for a transaction. Given most of the items purchases are small amount (USD 20–30), the fixed portion makes fee as a percentage of total purchase value very high, compared to ETH where transaction fee can be in the order of few cents.
Payment fraud: according to Enjin, for every legitimate virtual item purchase, 7.5 items are lost to fraud — this is due to identity theft, stolen credit cards info, etc. This results in lost revenue to stores and damaged reputation, reducing people willingness to spend.
Slow to receive funds: It generally takes 48–72 hours before merchants receive funds from credit card transaction. Payment via Enjin Coin would get confirmed based on ETH network speed which reduces the time down dramatically.
Lack of true ownership: this is an interesting point; currently any virtual item you own in game is not truly yours. If a server shuts down or if your account got banned, there is a limited recourse on how you can get back value on those items. With Enjin Coin, you ownership is recorded on a block chain. You can also redeem back the underlying ENJ value attached to the item anytime through a smart contract.
No open standards: currently no widely-accepted standards for decentralized currencies and assets in games.
Overall, Enjin Coin is tackling some of the real pain points in gaming with lowering transaction fee and true ownership of items as its strongest value propositions.
Economics:
In this sections, I would like to do two things:
1 ) Estimates the size of economy that Enjin Coin can potentially come to represent: since Enjin Coin aims to become a virtual currency in the gaming community, we need to have an understanding of the size of virtual goods transaction volume.
Global virtual goods market size is ~USD 15 Bn, with Asia Pacific having more than 50% market share. While data around virtual goods is scarce, let’s try to get a sense of how much of this market Enjin Coin can penetrate.
In the short-term, given there are virtual goods being traded on Enjin platform in the range of millions USD per month, we believe the ~USD 30 Mn being raised is reasonable as its in the same order of magnitude of economic activity on the website. If a large portion of these transactions are done by Enjin Coin, its price will be well supported making the downside minimal.
For longer-term, according to its whitepaper, Enjin plans to develop plug-in for two games (Minecraft and Unturned) and SDKs for two gaming engines (Unity and Unreal) so let’s try to understand the size of these games and platforms:
Minecraft: 40 millions monthly active users
Unturned: on average, 20k active players on Steam (no data available beyond Steam)
Unity: over 770 millions gamers playing games powered by Unity engine
Unreal: team is secretive about total users on its platform; however we know that 1.5 million user was added between 2015- 2016
If we look at the current 18 million user base of Enjin, there will be a lot of room left for future growth and Enjin Coin appreciation.
Response from Enjin team: Other than [Minecraft and] the Unturned plugin, we’re going to be distributing Enjin Coins from our Marketing & Partnership pool to thousands of existing Enjin communities that play many other games. Beyond that, we will also be partnering with Indie and larger game developers to help them integrate Enjin Coin into their own games.
The Enjin Coin will also be integrating into our CMS, social network and mobile app. This will also expand ENJ beyond games and into community based rewards and activities.

1. Quantify the incentive for developers / community managers to adopt Enjin Coin: understanding the incentive would inform us the likelihood of Enjin Coin being adopted.
   I will focus on the incentives from lower transaction fee in this analysis. While there are also monetary benefits from receiving money sooner, its dollar impact is lower and harder to estimate (need to understand company’s working capital requirement, loan rate, etc.)
   I make estimates of the # of transactions and avg. USD / transaction based on articles and reports I have read.
   Avg. USD / transaction: $5.00

of transactions / month (medium — large community): 25,000

Current transaction fee: 2.9% + USD 0.30 per transaction
Enjin coin transaction fee: ~USD 0.10 (estimate; actual fee based on on gas price, ETH/USD exchange rate, etc.)

Quick Summary:
If you are already familiar with Enjin Coin and just want to know what we think about it, we have summarized what we like about the project as well as some of our concerns in this section.
What we like:
Proven concept: GameCredits and MobileGo showed that virtual currency focused on gaming industry is a viable concept. We have also seen successful example of virtual currency on Minecraft. (Minecraft is the largest gaming community on Enjin)
Interesting use cases: in addition to being a virtual currency to handle payment, Enjin Coin has additional interesting use cases. For example, it can be “attached” to in-game items, giving those virtual goods Enjin-backed value which can be redeemed back anytime; many other use cases can be customized by developers.
Utility token: ENJ token is unlikely to be classified as security by regulators; easier to get listed on prominent exchanges. The team also published a detailed Howey Test which categorized its token as “unlikely” to be security.
Large captive audience base on a vibrant game platform: 18+ millions registered users on the Enjin; compared to average gamers, Minecraft players are much more active. It is also comprised of young demographic, making them more likely to adopt a new technology.
Sizeable economy and incentive for merchants: millions of USD worth of virtual goods being traded on Enjin platform monthly. If Enjin Coin becomes widely adopted, the ICO valuation at USD 30Mn is sensible as the coin would come to represent those trades; merchants also stand to receive 5–10% higher revenue from lower transaction cost.
Heavy focus on marketing and adoption: 30% of fund raised will go towards marketing and growth; this should help accelerate adoption of their already large user base.
Some of our concerns:
Heavy reliant on one game: Minecraft is the primary target for adoption and largest community by far on Enjin. Potential risk if Minecraft declines in popularity in the future
Early developmental stage vs. competitor: GameCredits already has a working product; If many platforms start adopting GameCredits when Enjin Coin is still being developed, it could become harder to get users to switch to Enjin Coin
Priority from the team: team members also have roles in existing Enjin business; competing business priorities could mean slower development time for Enjin Coin
Short token vesting period (as stated in White Paper): 6 months is low compared to other projects; we would have liked to see a longer period to ensure incentive is aligned with project long-term success; however, given its an existing business the, chance of the team “running away with your money” is lowered
Witek’s responses to our concerns are in the main section of the article, some of them are long so we didn’t include them here
#Conclusion:#
Enjin wants to revolutionize the Virtual Good Creation and Management process through a new smart token — Enjin Coin. We think the project has good potential for both short term and long term because Enjin Coin 1) brings interesting differentiating features and value propositions beyond what competitors currently offer, 2) has a capable team to execute on the vision, 3) has a sizable community that is ready to adopt its technology, and 4) raise reasonable amount of capital compared to similar projects and current economic activities on its platform. If execution goes well in the coming months, we can see it becoming a widely-used currency in the gaming community
Catalyst for price movement likely to come in the next 6 months when core product features alpha / beta are released and we start to see the coins being adopted by communities. The first alpha will be released in January 2018, with support for Minecraft.

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