The blockchain is witnessing strong and continuously growing Unique Active Wallet (UAW) metrics. With more games set to launch on the network, its potential for growth is even more significant.
Retail interest is gradually returning to the crypto space. Although Bitcoin's price is nearing its all-time high, a full retail market recovery does not yet appear to be in place. We believe there is a solid reason for this—mainstream media coverage and the subsequent attraction of retail investors takes time. This typically creates an empirical lag of approximately 2-3 months between Bitcoin's price peaks and a corresponding peak in cryptocurrency-related Google search volume, which we consider a proxy for retail interest.
We have a particular affinity for the gaming sector. We have been deeply considering which investment theses are suitable for the long term and are closely tied to retail engagement—gaming is our top choice (while meme coins have their place, that is a topic for another article).
Choosing the right strategy is crucial. While advocating for a Web3 gaming renaissance is relatively straightforward, historically, picking individual winners in a potential winner-takes-all market has been extremely challenging. One could theoretically consider selecting a basket of gaming tokens, but we believe infrastructure projects, being less susceptible to specific game risks and offering broad exposure to a large number of games, provide a superior risk-reward profile.
Our bullish conviction on RON is increasing, as it stands out significantly in several key areas:
- Ronin's network effects are best-in-class, with metrics that dwarf competing chains by 50x to 1000x. Despite this, RON is priced at a significant discount.
- The chain is witnessing robust and sustained growth in its UAW metrics, and its growth potential is immense as more games join the ecosystem.
- RON has several near-term catalysts that could drive a valuation re-rating, including 1) an enhanced launchpad and airdrop ecosystem, 2) changes to its tokenomics, 3) further centralized exchange (CEX) listings, and 4) the rollout of its ZK L2.
Core Investment Thesis
Superior Gaming Chain At A Reasonable Valuation
Gaming platforms are inherently a two-sided marketplace. New platforms often struggle to attract both players and developers simultaneously, as each side waits to see activity from the other before committing. Game developers crave immediate access to a large user base, while players expect access to high-quality games (and/or compelling incentives).
Ronin has already solved this by building powerful network effects. Built by Sky Mavis, the creators of Axie Infinity, Ronin cleverly bypassed this chicken-and-egg problem by bringing Axie's massive existing user base on-chain. This provided instant network effects at a scale previously unseen by other crypto platforms.
It boasts metrics that are 50x to 1000x greater than other gaming networks. Ronin has approximately 1000x more active wallets, 80x more transactions, and 50x more dapp volume than its direct peers. We believe this alone should command a significantly higher valuation for RON. However, when compared, BEAM enjoys a 60% market cap premium, and IMX trades at a staggering 260% premium.
User Base At All-Time Highs With Growth Expected To Continue
Ronin hosts some of the largest Web3 games. Although the Web3 gaming world is still in its early stages, a handful of games have managed to achieve over 10k daily active users (DAUs). Here are some notable games hosted on Ronin:
- Axie Infinity (AXS): Peaked at 2 million users in 2021 and currently boasts over 350k monthly active users across its Axie Classic and Axie Origins games.
- Pixels (PIXEL): Recently launched, achieving 260k DAUs even before its token generation event. This has since grown to roughly 700k, with further growth expected from its upcoming Chapter 2.
- Wild Forest (WF): This real-time strategy (RTS) game already had over 10k DAUs prior to its token launch.
- Apeiron (APRS): An upcoming RPG that recently completed a $3 million token sale, with over $75 million in RON committed to its allocation.
- Kaidro: Another highly anticipated game, whose initial NFT mint saw over 346,000 mints (with a limit of 1 NFT per wallet).
The symbiotic relationship between Pixels and Ronin will attract more game studios. Historically, Ronin's user base was heavily associated with Axie. The exponential DAU growth of Pixels after its migration to Ronin from Polygon demonstrates that non-Axie games can also find tremendous success on the chain. In fact, it shows that Ronin can not only benefit from a game's existing user base but also significantly catalyze the growth of that user base, creating a mutually beneficial relationship.
The Ronin flywheel effect is in motion. We believe other game developers have taken note of this "Ronin effect" (user growth post-migration) and will be incentivized to migrate their games to the platform to tap into this growth potential. We expect this to trigger a powerful flywheel effect:
Quality games migrate to Ronin → User base grows → "Ronin effect" is validated → Attracts more quality games
With a strong pipeline of upcoming titles, it would not be surprising to see top-tier AAA games joining Ronin to revitalize their user engagement. The upcoming roster includes: The Machine’s Arena, Axie Champions, Tribesters World, CyberKongz, and PlayFightLeague, among others.
Multiple Upcoming Catalysts For Growth
Ronin is in an intrinsically stronger position than its competition, and we foresee continued organic growth. Furthermore, we identify four key catalysts that could act as significant drivers for its token valuation:
- Ronin Launchpad: Staking to earn = demand for RON + airdrops for stakers. Ronin has partnered with Impossible Finance to host future on-chain game launches. To qualify for allocations of new game tokens, users will need to stake RON, naturally creating buying pressure for the token. Pixels set a precedent by airdropping to RON stakers, which resulted in returns valued between 10% to 3700% based on RON and PIXEL prices at the time. Given the long list of anticipated game launches, we expect continued buying pressure as users seek exposure.
- Value Accrual / Tokenomics Changes: Currently, Ronin generates revenue from several dapps, including the Katana DEX (0.05% fee on volume), Mavis Marketplace (0.5% fee on NFT volume), and the Ronin Name Service (30% fee). These fees are currently collected in RON and sent to the Ronin Treasury. While RON holders do not yet directly benefit from this value accumulation, co-founder Jiho has hinted that value sharing via staking rewards and/or buybacks is a possibility, which we believe could be a major catalyst for a token re-rating.
- Centralized Exchange Listings: Ronin recently listed on Binance and has also been listed on Coinbase. We anticipate that the Coinbase listing will significantly expand Ronin's reach and accessibility in Western markets (its current exposure has been more Asia-centric). We also see potential for listings on major South Korean exchanges—both AXS and IMX are listed on Upbit, while RON is not yet.
- More Than a Chain, An Ecosystem: Ronin's Chief Research Officer, Phuc Thai, has hinted at a Layer-2 ZK implementation, known as R2. This will not only enhance the chain's performance and capacity but also allow it to onboard more games that prefer blockchain customization, similar to how Maplestory operates on an Avalanche subnet.
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Valuation And Conclusion
Base Case Target: Considering its superior metrics, we foresee RON's market capitalization reaching at least parity with BEAM/IMX levels. This implies a significant 60% / 260% upside, translating to price targets of approximately $6.0 / $13.5, respectively.
Bull Case Target: If all catalysts are realized, Ronin has the potential to become the default platform fueling Web3 gaming adoption, competing with major game publishers and distributors like Valve and Epic Games. Given that Web3 games can potentially monetize users at a significantly higher rate than traditional games, we could see RON's valuation eventually surpass these companies (Valve is privately valued at $7.7 billion, and Epic Games was last valued at $22.5 billion, per Bloomberg estimates).
We conclude this analysis by highlighting the key takeaways:
- Ronin demonstrably outperforms its peers on fundamental metrics yet trades at a substantial valuation discount.
- The flywheel effect of attracting quality games, which in turn attracts users, is only just beginning.
- While fundamentally undervalued, multiple near-term catalysts could drive a valuation re-rate, including launchpad activity, tokenomics changes, CEX listings, and its ZK L2 release.
- We believe the Ronin ecosystem has initiated a powerful flywheel for attracting both players and game developers, positioning itself as the platform from which the next industry-disrupting Web3 games will emerge.
Frequently Asked Questions
What is the Ronin blockchain?
Ronin is an Ethereum Virtual Machine (EVM)-compatible sidechain specifically engineered for gaming and NFTs. It was developed by Sky Mavis to address the scalability and high-cost limitations of mainnet Ethereum, providing an optimized environment for high-throughput, low-cost transactions essential for a seamless gaming experience. Its flagship application is Axie Infinity.
Is Ronin secure after the 2022 bridge exploit?
Yes. Although a security breach in 2022 led to a $600 million exploit from the Ronin bridge, a portion of the funds were recovered, and Sky Mavis used its own balance sheet to fully reimburse all affected users. Furthermore, Ronin has since transitioned to a Delegated Proof-of-Stake (DPoS) model with 22 reputable validators, significantly enhancing its security and decentralization. Sky Mavis itself controls only one of these validator seats.
How does the Ronin wallet enhance user adoption?
The Ronin wallet is a critical component for mass adoption. Its seamless integration into mobile devices, especially its user-friendly design, lowers the barrier to entry for users in emerging markets where mobile penetration is high. This provides a convenient and familiar onboarding experience crucial for attracting non-crypto native gamers.
What is causing the growth in Ronin's user activity?
The growth is driven by a combination of factors: the sustained performance of Axie Infinity, the massively successful migration and growth of Pixels on Ronin, and the anticipation surrounding a strong pipeline of high-quality upcoming games. This creates a network effect where more users attract more developers, which in turn brings more users.
How does staking RON work?
Users can stake their RON tokens to help secure the network. In return, they earn a portion of the block rewards paid in RON. Additionally, staking RON is becoming a prerequisite to participating in airdrops and token allocations for new games launching on the Ronin platform via its launchpad, creating an additional incentive for holding and staking the token.
What is the inflation rate of the RON token?
The emission schedule for RON is designed for the long term. Approximately 500 million RON is set to be distributed over a 7-year period, which is a longer and potentially more gradual schedule compared to many other projects that often complete their emissions in under 4 years. This controlled release is intended to support ecosystem growth while managing inflation.