GameStop and ImmutableX - unrequited love and puffed-up success

ImmutableX is now in a good position to become a major player in the tokenization of game assets, with an impressive pace of onboarding new games - essentially bringing web3 into the gaming world. This is a very large market with huge potential.

Crucial to this was leveraging its own Layer 2 on Ethereum, via the ZK-rollup solution developed by Starkware. This allows for extremely cheap and near instantaneous minting and transfers of large numbers of NFTs on a side-chain, while at the same time benefiting from the security and integrity of the Ethereum main chain.

ImmutableX and GameStop partnership

In their efforts to establish this position of relevance, ImmutableX secured earlier this year a partnership with GameStop (GS). I guess the idea was that ImmutableX would benefit from the gravitas of being associated with GS and the sizable pool of players that would become potential clients, and GS would easily furnish its budding NFT marketplace with a large number of upcoming quality games, by just integrating in its marketplace the existing ImmutableX shared orderbook. And of course - collect trading fees.

Sounds like a win-win. But the deal was asymmetric, actually having ImmutableX pay GS in IMX tokens, part of which GameStop promptly dumped, causing a significant drop in the IMX price about 9 months ago. You can read more about this for example here or in this Leo Finance article.

Around this time there was also some additional drama involving Loopring, which you can read about here. Loopring seemed to be the initial and preferred partner, although the scope of the partnerships was somewhat different and Loopring didn’t have a growing catalog of games building utility for NFTs, as ImmutableX had from the beginning.

IMX staking

Then in July, while the GS marketplace integration was still being worked on, ImmutableX released its first iteration of IMX staking, followed by an upgrade in September. You can read more about this in this Hive post I recently published.

The initial staking distribution after 1 month was quite underwhelming, simply because the volume is not here yet, as most games are still under development. So as a response ImmutableX announced they would guarantee “5% APY with 30% of eligible supply staked during this bootstrapping phase”.

Trading Rewards comes with a lot of wash trading

Around the same time they released a program to distribute more IMX tokens as rewards for traders. After this initial iteration was showered with complaints of trader's abuse and wash trading, they restricted the rules a bit, but the essential remained the same, and called it ‘Trading Rewards’.
This is still ongoing and is having huge impact on the trading volume, but I suppose it is working as intended, as it has allowed ImmutableX to boast incredible numbers, even surpassing some of the most well-known competitors

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This Reddit post lays out quite nicely how this scheme works, including the costs. Note that ImmutableX is spending a lot of tokens on this, but ultimately they were created for free, so…

and this of course also had a clear consequence on the token price:

GameStop doesn't seem to care much about ImmutableX

This bit above was just for context. But back to GameStop. It always seemed that ImmutableX was much more enthusiastic about the partnership than the other way around. Case in point: in September, just before Gods Unchained (which is a digital TCG owned by ImmutableX) released the Light’s Verdict limited expansion set, they launched a campaign for GameStop Pro subscribers (see for example here and here).

The subscribers would be able to redeem free Gods Unchained expansion packs via a code sent by email. What happened? GS ran out of codes, many people didn’t actually receive any email, people were phoning in to GS support and left waiting for 20-40 minutes to get the codes… There are many, many Reddit posts from that time documenting how poorly GS performed its part in this promotion.

This was supposed to be a great opportunity for Gods Unchained to pick up momentum, tapping on the large pool of GS Pro subscribers ahead of an important financial event. But it turned out to be a huge flop, apparently with no fault on the Gods Unchained side. The game probably picked up about 2000 new players from this promotion, from a pool of more than 5M subscribers.

GameStop integrates IMX orderbook into its NFT marketplace

Finally in early November, GameStop debuted its NFT marketplace integration with ImmutableX orderbook. ImmutableX quickly releases a note saying that for 2 weeks all Trading Rewards would be considered only for trades fulfilled within the GS marketplace. This together with promotional lower fees, drove a lot of traders to try out this new marketplace. Notice that at this time several other sophisticated marketplaces already existed for many months, all very nimble, quickly introducing improvements based on user feedback, suggestions and the specificities of the NFTs for each game.

GameStop on the other hand releases a very basic interface that is practically unusable, that does not support the entire catalog (no Blocklords, for example), and in the case of Gods Unchained makes it very hard to find specific cards, to the point that users are sharing workarounds

• Oftentimes doesn’t show all available card rarities.
• Only displays one card for the search query, so the trader is left wondering if the only card being presented to them is the cheapest one.
• Users can only buy one card at a time.
• Shows on the front page cards that are extremely overpriced or not available for sale.
• Price range filters do not work.

I am amazed how it was possible for someone in a leadership position, which should have a good grasp of the requirements of the product and the competition, to give the green light to go live with such a bad and buggy product.

And while everyone is witnessing this shitshow and complaining everywhere they can, ImmutableX puts out a tweet claiming great success linked to the GS release, but neither the marketplace is at all usable - let alone warrant any increase in volume, nor most of the accumulated volume is real!

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Consequences?

On the other hand, all of this fake volume generates attractive staking fees (currently around 2% / month), but I wish they would opt for a more legitimate way of boosting staking earnings, attracting good games and building a reputation as a major player in web3 gaming and NFTs. They are also making an effort to keep tokens due to be released locked for another year, minimizing the impact in the short term on the token price and the dilution of staking rewards.

I still think the project has a solid foundation in the tech provided by Starkware, has a comfortable financial situation and looks very promising in the next 1-2 years. I will keep holding my bag and supporting them. I just wish they would choose strategies that would boost confidence, instead of shortcuts to make them look bigger ahead of time.

But this decision to take an aggressive stance of flexing success based on fake trading volume to compete with other platforms is deceitful in a way which I think ends up hurting their reputation and undermines the trust in their commitment to keep a truthful record going forward.

I question whether self-aggrandizing with fake volume is not detrimental to attract games and investment when they clearly have a lot momentum on both right now; and if that will actually end up hurting, by eroding confidence if astute observers stay out, given this scenario. I mean, if they do this out in the open when things are going well, what would they do to hide problems in the future?