Introduction

Metablox Games is a Web3 gaming studio leveraging Roblox to become a collaborative gaming venture synonymous with groundbreaking gaming experiences. Metablox is adopting a four-point strategy of (1) game development, (2) game acquisition, (3) strategic investments, and (4) empowerment and education to become a cornerstone of the Roblox ecosystem.

For those unfamiliar with Roblox, it is an online platform and game creation system that allows users to design and play games. Players and developers can create their own virtual worlds using Roblox Studio, a tool provided by the platform, and they can monetize their creations through a virtual currency called Robux. Roblox is one of the most popular gaming platforms in the world, boasting over 70 million daily active users and 16 billion hours engaged.

Metablox launched on October 30^th and has already deployed four different games, with over 9 million unique play sessions, displaying impressive traction in a short period of time. All of Metablox’s games are built and hosted on the Roblox platform, allowing users to purchase in-game items and game passes with Robux. 1000 Robux are equivalent to 3.5 USD and users can purchase Robux through the Roblox website via credit card or other traditional payment methods.

Metablox’s business model is interesting in that it can increase its revenue streams with each additional game deployed, and in that it does not rely entirely on the Web3 gaming community, which is admittedly much smaller than the traditional gaming market. Roblox is a well-established platform with over 70 million daily active users, and players will be interacting with Metablox without knowing the difference, removing a significant barrier to entry that plagues many crypto gaming projects.

Tokenomics

Metablox’s token MBX is live on Ethereum and initially had a total token supply of 50m tokens, 80% of which went to the liquidity pool (locked), 5% to marketing and development, and 15% were burnt. The 15% burnt tokens included the team’s allocation and extra tokens in the development wallet. They had no intention of ever selling and wanted to make a gesture towards transparency, trust, and decentralization, so they decided to burn them all. After accounting for the 7.5 million burnt tokens, Metablox has a total supply of 42.5 million tokens (all circulating) and trades at a price of $0.0476, giving it a fully diluted valuation of $2.0 million. Additionally, Metablox had no private investors and is fully funded via the MBX trading taxes and game revenues.

MBX is a tax token like Unibot, one of our other Liquid Ventures recommendations. There is a 5% tax on buys and sells. 2% of the tax goes to operations, 1.5% to a marketing fund, and 1.5% to game development and expansion. MBX holders are entitled to 80% of all game revenue, and the other 20% goes to game development. To qualify for revenue share, a user must hold 100k MBX. This is set to change once Metablox’s staking platform goes live, after which all users will be eligible for revenue share in proportion to the amount of MBX staked.

The MBX supply is not overly concentrated in a few large wallets. There are currently 1,721 holders, with only one wallet holding more than 2% of the total supply. It is possible that some entities have multiple wallets, but it is an encouraging sign, nonetheless.

Current Traction

Metablox’s traction and growth in the eight weeks since launching have been impressive. They have launched four games, with a fifth set to be released very shortly. Metablox just released its new analytics dashboard giving clear insights into the popularity and profitability of its games. They have been averaging over 500 daily concurrent users and accumulating over 13 million weekly impressions, and impressions have been steadily rising over the last three weeks.

From a revenue perspective, over the last week, Metablox games have generated $2,936 or $419 per day.

While $419 per day is small in the grand scheme of things, we think it is more important to consider Metablox’s potential growth and ability to scale its business model. As mentioned, they have launched four games, with a fifth coming, in about a month and a half. If Metablox continues deploying new games, they can quickly grow their revenue streams, and feed profits back to MBX holders. Annualizing Metablox’s current gaming revenues would equate to $153k, and MBX has been averaging $228k in daily trading volume, equating to $4.1 million in annualized tax revenue.

In a no-growth scenario, Metablox would have an estimated annual revenue of $4.3 million, therefore trading at a P/S of 0.47, which is extremely low compared to other crypto gaming projects. Metablox may be trading at such a low multiple due to reduced utility of the MBX token. In its current state, its only utility is revenue share, with no governance/voting rights. Therefore, token holders have no say in the direction of the project, which is fully up to the discretion of the team.

Valuation

Given that Metablox has been able to release multiple games in a month and a half, we believe it would be better to forecast more games into Metablox’s portfolio. Since all these games are extremely new, we also think it is appropriate to forecast growth in average game revenue to account for increases in awareness, popularity, and game features.

For this illustrative example, we will hold trading taxes constant despite the likelihood that trading volume increases as Metablox gains recognition. The Metablox team has stated that they hope to launch a new game every 3-4 weeks, which at first glance sounds lofty, but given the rapid development pace displayed thus far, it seems feasible. Forecasting one additional game per month and using a 10% MoM growth rate in average daily revenue per game, we have projected Metablox’s year-one gaming revenues to equal approximately $859k, with constant tax revenue of $4.1 million.

Taking a quick look at some of the other gaming companies across crypto, they trade on extremely high multiples due to the high growth potential of the sector. Since we applied a 10% MoM growth rate to Metablox’s revenue, we applied the same growth to competitors to come up with an adjusted annualized fees metric. In our opinion, Metablox’s growth potential is higher than that of the competitor set due to the early nature of the project, but we chose to apply the same rate for simplicity. Comparing Metablox to competitors shows that they are already competing with some of the larger names in the sector from a revenue perspective.

For our base case scenario, we ignored any tax fees, as none of the other tokens in the comparison have a tax feature. To remain even more conservative, we chose to apply the lowest adjusted P/Fwd Sales of the group, 28.3x. If Metablox were to trade at an equivalent price-to-sales ratio, this would imply a valuation of $24.3 million, representing an 11x ROI.

To provide more bullish scenarios, the below table displays implied valuations if the average competitor multiple was applied, or if Metablox’s tax revenues were considered in the calculations.

Roadmap & Expansion Plans

The illustrative valuation above forecasts a lot of growth, particularly in the number of new games the team will be putting out. The revenue projections will be predicated on the ability of the team to execute its ambitious roadmap. They have quickly accomplished the majority of the Phase 1 roadmap, except for the new staking platform, which should be complete within the next few weeks. Some of the next milestones will be new collaborations with gaming studios, achieving 12 active games, and expanding the team. Although the project is in its infancy, there has been no reason to doubt the team’s ability to execute thus far. The release of the new analytics dashboard will give real-time clarity into the adoption of Metablox’s games and will make it easy to determine if our thesis needs to be reevaluated.

Risks

Although we are optimistic about the potential of Metablox, we would also like to stress that there are increased risks with small-cap projects and new projects. Metablox has a market cap of $2.0 million with under $250k of liquidity. Such a small project is subject to volatile moves, and buying and selling large amounts could result in significant slippage. Additionally, MBX is a tax token, meaning both buys and sells are subject to a 5% tax. Therefore, we don’t recommend frequently trading in and out of a position.

An important thing to mention is that the MBX contract has not been renounced, meaning the team can make changes to the smart contract. To clarify, this is not uncommon across the space, but given the early nature of the project, it would be imprudent not to acknowledge it. The team has iterated that they have not renounced ownership to retain the ability to modify the tax function as the project grows. All deployer, operations, marketing, and development wallet addresses have been made public.

Metablox has an increased risk of being deemed a security by the SEC due to MBX holders receiving revenue from any of the developed Roblox games. In the current state, Metablox is likely too small to be targeted by the SEC, but if the project grows significantly, the risk will rise.

Although we have outlined multiple risks, it is also important to caveat that all of Metablox’s games are built and hosted on Roblox’s platform, removing almost all of the smart contract risk that is inherent in fully on-chain games.

Conclusion

Metablox is a Web3 Roblox gaming studio tapping into an active player base of over 70 million users. They have seen impressive traction in a short period, with their premier game collecting over 9 million visits. They have deployed four games thus far, with a fifth set to be released this month. The team expects to release new games every 3-4 weeks, growing its revenue streams. Forecasting additional games into Metablox’s portfolio, we project total gaming revenues to reach about $859k in the next twelve months. Applying a conservative competitor group multiple of 28.3 P/Fwd. Sales implies a $24.3 million valuation, representing an 1100% return on investment. We remain highly optimistic about the future of Metablox but would advise investors to remain aware of the increased risks associated with new small-cap projects.