Dubbz

Introduction

We believe Blockchain has massive potential to create new opportunities for growth in the gaming industry, but that potential has yet to materialize. Fully native Web3 games have largely been unsuccessful, with projects that gained the most traction in the last bull cycle (Axie Infinity, Stepn) becoming case studies for how unsustainable ‘Play to Earn’ (P2E) can be. This issue has been exacerbated since Web3 games are generally viewed as less fun than games on traditional platforms. The association with blockchains also creates friction for gamers not interested in extra steps like setting up wallets and buying in-game tokens.

According to CoinGecko, over 70% of major gaming companies have engaged in blockchain initiatives in some form, either through direct investments or hiring and in-house initiatives. Blockchains have been touted as having the potential to revolutionize in-game economies by empowering players through verifiable digital ownership, decentralized player-driven economies, and transparent transactions. This shift will supposedly create new monetization opportunities for incumbents and newcomers alike. Established players have hesitated to fully embrace the technology due to concerns about scalability, market receptivity, regulatory ambiguities, and prior security lapses in blockchain-based games. Due to these frictions, there has yet to be a “killer” blockchain gaming product from established or crypto-native gaming companies.

Unique Products & Positioning

In order to capitalize on the opportunity at the intersection of blockchain and gaming, a product will likely need to straddle both the traditional gaming and blockchain worlds. In our view, a potential winning product must use blockchain to introduce something novel to the gaming ecosystem without creating additional friction and while remaining compliant with current regulations – enter Dubbz.

Dubbz is creating a blockchain-driven platform for discovering games and skill-based betting in modern gaming. By smoothly incorporating betting into the gaming experience, Dubbz gives game creators fresh ways to make money and lets players win prizes through intense competition. Instead of unsustainable P2E rewards, Dubbz allows players to earn in a player vs. player (PVP) environment while creating new potential income streams for game developers. This PVP skill-based component is a crucial distinction Dubbz has from pure gambling sites, as many jurisdictions do not consider skill-based games gambling and, therefore, do not enforce related regulations.

Wagering & Tournaments

Dubbz is in alpha with a live working product that will serve as a proof of concept. The online platform and mobile app aim to be a social gaming hub offering betting options, competitive tournaments, running ladders for several popular AAA games, and discoverability for new blockchain-based games. Players interested in finding opponents log into the Dubbz platform and select which game they want to play. Dubbz functions as a matching engine, pairing gamers and handling wage disbursements based on each player’s balances on their Dubbz account. While this matching and disbursement process happens exclusively on the Dubbz platform now, the team envisions building in-game wagering functionality. This would allow players to bet natively in games without forcing players to run the wagering experience through the Dubbz website.

Wagers are denominated and processed in USDC through a crypto backend. Fund disbursements are currently processed exclusively on Polygon, though the team has plans to expand the product across any chain that supports USDC. Players can utilize fiat on ramps if they don’t want the hassle of setting up and managing crypto wallets. They also have the option to move funds using self-custody wallets by sending wagers to a smart contract that distributes funds to the winner’s wallet. 

It’s important to note that only the fund disbursement portion of the wagers runs on-chain. The Dubbz off-chain backend triggers payments to the winner through direct API calls for the game results. In cases where Dubbz does not have API access, participants report their scores, with disputes being resolved through game recordings.   

In addition to facilitating wagering, Dubbz aims to create a global gaming community offering social gameplay modes, group live streams, and team-based tournaments.

Dubbz Arcade

Arcade mode lets gamers play web-based games directly on their browser or mobile app. These games aim to recapture the nostalgia of classic arcade games like “Space Alien Invaders,” “Hyperspeed Ball” and others. Players can earn 100 sats ($0.03) daily while playing in practice mode, wager against a friend, or even against a random player on the platform through asynchronous matchmaking. In this mode, players can compete to see who achieves the highest score, with a 24-hour window to accept the challenge and play.

Product Roadmap

While the current wagering and arcade platform is interesting, we believe this does not create a 10x opportunity alone. The Dubbz team believes their most significant opportunity will be offering wagering infrastructure as a service. This would allow game developers to easily integrate wagering into their platforms without dealing with the legal or technology issues that would arise if they attempted to build something similar in-house.

Developer Support

The primary offering won’t be centered around betting on AAA titles but rather on furnishing the betting infrastructure for many skill-based games globally. The forthcoming software development kits (SDKs) are the cornerstone of their offerings. Like Stripe, these SDKs are meant to provide an easy-to-integrate B2B tool, so wagering becomes plug-and-play through Dubbz. They extend the betting infrastructure, encompassing payment solutions (traditional and decentralized finance), legal compliance, coverage, and heightened visibility through the Dubbz platform for game developers.

This model transforms the monetization paradigm for games, especially Web 3-based ones. The core clientele isn’t just gamers but game developers themselves. Growth in the player user base could be a magnet for more developers, fueling increased betting activities across all games leveraging the Dubbz infrastructure.

Developer support will be centered on two main products: the Partner API and the Developer Hub. The API will allow developers to seamlessly automate in-game wagering to their game so they can focus solely on development and let Dubbz handle the workflows related to wagering. The developer hub will feature SDKs that are used to integrate wagering widgets natively onto gaming platforms, starting with the SDKs for Unity and Unreal engines.

The Dubbz team has ambitions of capturing a market outside of crypto natives. By leading with a user-friendly product, they can leverage blockchain’s benefits by running crypto-based settlements in the background without forcing it on the user. The team hopes to scale up to thousands of games directly on the platform or integrate Dubbz developer tools.

Tokenomics

Utility

1. Platform Revenue Sharing

• Current revenue sources: 1% of all wagering fees (primary source), 4% sell tax, tournaments (% of prize pool)
  • Note: Dubbz team has stated they have done $1 million in revenue from the sell tax. The team plans to phase out the sell tax and continue reducing it as Dubbz transitions to sustain itself primarily from platform revenue, having already lowered the sell tax from 7% and removed the original 7% buy tax completely.
• The only distribution requirement is to hold Dubbz in a Polygon-compatible wallet; no staking, time-locks, or claiming is required.
• Distributions are automatically distributed in USDC proportionate to the supply held. While wagers and player transfers are moved with Polygon USDC, the revenue distributions happen on the ETH mainnet, where the Dubbz token trades.
• Potential future revenue sources: Co-branding with gamer-centric brands when platform users grow (esports, web3 gaming, sponsored tournaments, revenue share for future gaming portal), NFT Avatar sales.

2. Governance

• The Dubbz token will play a minimal role in steering the platform’s direction. The team has been transparent that they will retain ownership of the platform and its technology, with no plans to decentralize this through the token. Proposals concerning the platform’s growth and future development may or may not be shared on Snapshot by the Dubbz team. While token holders will be able to vote on features, they will not be able to create proposals for the platform.
• We acknowledge this does pose an additional risk for the token becoming irrelevant to the platform, and creating potentially misaligned incentives between equity and tokenholders. However, we think that there will be a strong crossover between platform users and tokenholders and therefore the team will be incentivized to keep token holders happy.

3. Dubbz Pro Membership

• The DUBBZ token will provide users with access to VIP membership benefits that include reduced match fees, exclusive tournaments and events, early access to game/platform feature launches, exclusive asset drops, and a community Trello board for feature requests.
• The required amount of DUBBZ tokens to join the pro membership has been lowered from 2,000 tokens to 200, making it more accessible. The team plans to continue to adjust the threshold as the token price fluctuates.

Supply Allocation

The total token supply is 10 million, with 100% of the supply already circulating. As of writing, the Market Cap was $36 million, with each token trading for $3.63.

There were no private sale allocations, VC rounds, or seed allocations before the token’s launch. Supply was split, with 60% going to the liquidity pool, 15% to the development team, 20% for exchange listings, and 5% for marketing. Supply is fully distributed except for the marketing and exchange allocations.

The development team initially funded liquidity pools across Polygon and Ethereum with $50,000, which launched concurrently with the Dubbz platform at the start of the year. Liquidity has since been consolidated to Ethereum, with the main Uniswap Pool having a total value of $1.72 million at writing.

The Dubbz team stated their intention in distributing tokens strictly through liquidity pools was to ensure a level playing field for all investors. Additionally, development was entirely self-funded, with founders claiming to have spent seven figures developing the platform. The team is currently in the process of raising a target of $3 million by selling equity in the development company, although it is unclear if they would sell a portion of their tokens as part of the deal. They plan to scale operations by investing in their sales funnel for game developers, user acquisition, and hiring additional developers to launch the partner API and SDKs in early 2024. The team also intends to invest in legal and compliance coverage in Europe and Latin America.

Risks

Liquidity

The DUBBZ token is extremely illiquid at the time of writing, with volume in the past 24 hours barely reaching 1% of its total market cap. The token has had strong moves in both directions, with up to 60% drawdowns. Given that Dubbz is making new all-time highs at writing, more attractive long-term entries likely present themselves in times of market stress.

Legal / Regulatory

While the team has prioritized hiring legal counsel who can navigate uncertainties related to skill-based gaming, we still consider this a significant risk. Most gamers are under 18, and Dubbz will likely need to implement some form of KYC to prevent these users from getting on the site, limiting the addressable market. The team has invested in ensuring they are compliant in the U.S and plan to put resources into being compliant internationally.

There is also the risk of DUBBZ being labeled a security by regulators due to its revenue-sharing dividend and centralized development team. An argument can be made that the developer platform will lead to a distributed network of games, each contributing to the success of the platform and thus incentivized to hold the token. In this case, any profit expectations would no longer be derived solely from the centralized product team but rather from the network as a whole. There is also the utility function of the pro membership that creates a gray area. While there was no sale from the team to the public that could be called an investment contract besides the LP provisioning, U.S regulations are unclear and will likely remain so in the immediate future.

Traction / Product Market Fit

While there is a clear opportunity in the marketplace to bridge Web2 and Web3 games, it is unclear whether there is a demand for it. Dubbz is early in its product cycle and has yet to prove product market fit. There is a risk that even if the team delivers on its product roadmap, it may not be adopted by gaming developers or the border gaming market.

The current platform is far from what the team envisions for its final product. There is a potential execution risk that the team may not deliver this product in a form that can find a market fit or that delayed timelines lead to shifting market preferences for other solutions.

There are also platform risks from companies that run gaming marketplaces like Google (Android Store), Microsoft (Xbox),  and Apple (App Store). Dubbz could get legal clearance and still be removed from these platforms simply because they do not want to support wagering. 

Equity / Token Incentives

While the team is fully doxxed and engaged with the community, they don’t have a legal obligation to the tokenholders. This is because, unlike an equity investment that entails fiduciary responsibility, buying tokens requires the belief that developers will continue to build the platform in good faith, which thus far they have. The founders have poured their funds into development resources, claiming to have been in development for over two years before launch. That said, they are currently raising equity for the development company, which is separate from token holders. This could serve as a potential risk or catalyst. On the risk spectrum, it could dilute the token holder’s claims on earnings and deprioritize them in the capital structure. If they are able to close the round successfully, it could also be seen as legitimizing and providing the team with resources needed for growth, which could be perceived as bullish.

The team has shown conviction by building this platform before launching a token, something rarely seen in low-cap projects. They have also publicly revealed their identity and, thus far, are acting in good faith to drive value to token holders as key stakeholders.

Bottom Line

Gaming is one of the largest opportunities in the market, but Web3 teams have struggled to gain traction. Dubbz aims to bridge Web2 gamers and provide a blockchain backend that enables developers to enhance their gaming experiences through wagering. The last bull market saw pre-product gaming companies reach dizzying valuations, only to come crashing down once the market turned. It remains to be seen if this will be the cycle where gaming takes off with real substance and products instead of just hype. While the Dubbz vision is grand and likely difficult to achieve, we believe that at its current valuation, the risk-reward should the team accomplish it makes DUBBZ a strong candidate to outperform.