IGO valuation – What blockchain industry should know?
In this article, we shall walk through initial game offering, IGO valuation, GameFi and how does an IGO work.
Initial Game Offering, or IGO, is a brand-new business strategy that mixes crowdsourcing and the video game industry. In an IGO, people get early access to new game projects while developers receive additional funding. Gaming is now making its way into the blockchain industry, and it’s important to be aware of IGOs. In this article, we shall walk through initial game offering, IGO valuation, GameFi, how does an IGO work, ICO vs IGO, how does IGO work with NFTs & its various concepts that help deepen an understanding of IGO.
Initial game offering (IGO)
An Initial Game Offering (IGO) is based on the idea that you are investing in a project without knowing exactly what the final product will be. For instance, you might purchase tokens from a firm that creates games but hasn’t yet launched its first title; if the game is successful upon release, the investor might possibly profit greatly from their investment. Investing in these businesses carries the risk that they may never produce profits for investors. However, there is no reason why a business can’t persuade a specific number of individuals to invest in their initiatives with effective marketing and information about how your money will be used.
What is the Initial Game offering?
An Initial Game Offering (IGO) is a fundraising activity, typically done through a crowd sale, for projects and entrepreneurs in the gaming industry. By pre-registering before the game launches, members can gain access to exclusive features as well as project tokens, discounts on the game’s debut, and other incentives.
Initial Game Offerings might be considered an alternative source of funding for new gaming ventures and projects. Pre-sales have occasionally been used as a synonym for IGO. However, this is not always accurate because “pre-sales” can also apply to other private sales or crowdfunding initiatives. Initial Game Offering sales are another name for them. They often include investors purchasing tokens that grant access to a service or platform and that, if necessary, can be sold on cryptocurrency exchanges.
As a result, investors are eligible for a variety of advantages, including the chance to use those tokens once the project is up and running and discounts, freebies, early access to content, free passes, and more. According to the actual digital tokens involved, each one is often distinct and connected to the project in question. This is because they may need to consult them to offer a service or use a specific platform.
GameFi is one of the most talked-about Web3 industries. It refers to both the initiatives and the play-to-earn (P2E) games that make up the ecosystem of cryptocurrency gaming. By completing specific goals in blockchain-based games, users of GameFi projects can gain in-game tokens. This model provides frameworks for player-as-owner rather than the more typical player-as-consumer.
GameFi combines blockchain technology, non-fungible tokens (NFTs), and game dynamics to create a virtual world. Until recently, video games were on centralized servers, allowing creators and publishers full control. Players have no ownership or control over digital things amassed during hours or years of play. Few of these objects had worth beyond the game, including weapons, clothing, avatars, and virtual territories. Therefore, there was no way for players to be rewarded for their online time or distribute in-game assets without the assistance of experts.
Understanding the IGO business model
IGOs are used by blockchain game development teams as a means of crowdsourcing funding for their games in their early stages of production. Those who pledge early have a better chance of snagging discounted in-game currency and other tokens before they go on sale to the wider public.
Initial Gaming Offerings (IGOs) are distinct from initial coin offerings (ICOs) due to their focus on the gaming industry. ICOs facilitate developers going straight to users in search of financial backing for their video game concepts. Interest in this sort of platform has led to a rapid expansion of the blockchain gaming industry.
GameFi projects are different. Completing objectives and leveling up earns players in-game prizes. These prizes have worth beyond the gaming environment, unlike traditional in-game currency and objects.
How does IGO work?
In exchange for investing in the Initial Game Offering, members gain early access to game assets and other in-game incentives. The game’s tokens may also be given to participants before they are made available to the general public.
Characters, skins, weapons, accessories, and mystery boxes are just a few of the items that can be purchased during an Initial Game Offering. These assets frequently exist as NFTs on the blockchain. To access or participate in the game, you may need to use some of the IGOs’ resources.
- Forum and words of mouth – Press releases, forums, and online chats/podcasts are typically the first steps a developer takes when developing a new video game concept to connect with potential players. Even while it rarely results in significant finance, this does give the emerging company the opportunity to evaluate the viability of the product they are considering.
- Graphic showcase – Developers can also give investors a sneak peek of a planned video game project by publishing publicly accessible online visual showcases. These will frequently appear as teasers, inactive demos, or even just what is essentially moving art.
- Project and artwork notes – Frequently, developers show prospective investors video game artwork and details on how they expect for their game to function. However, if the majority of a project consists of sketches and notes rather than anything more substantial, this may indicate that it is still in its development and may be subject to change in the future.
- Interactive model – Some developers offer their investors the option to try out a beta version of their forthcoming video game, which is perhaps the most well-liked method of funding an IGO. This can occasionally be a sizable chunk of an unfinished game or a little portion of a finished game (like a playable demo). In either case, a potential investor has the chance to interact with a suggested system, thanks to each option.
How does IGO valuation work?
IGO valuation requires the valuation of gaming assets. While it is different from regular business valuation, there are four traditional valuation methods that can be used for IGO valuation:
- Discounted cash flow – Due to the fact that the majority of cryptocurrencies (especially payment tokens) won’t provide explicit cash flow, the discounted cash flow (DCF) model is not appropriate for them. However, asset tokens (i.e., Binance Coin and Huobi Token) produce cash flows due to the token burn mechanism, making them quantifiable using the DCF model.
- Market Approach – The market valuation method assumes that identical assets would trade hands for similar prices, hence it examines the enterprise value of comparable firms. The market-based method presupposes, among other things- (1) a correlation between cash flow and profits, (2) a flat growth curve; and (3) the company’s indefinite survival. To use the market value method properly, the valuer must first learn about the firm in question, then research similar businesses in the industry, then decide what multiple or sustainable basis to use, and then make any necessary revisions.
- Relative value analysis & Implicit value analysis – The value of comparable assets is taken into consideration when calculating an asset’s relative value. In contrast, the absolute value just considers an asset’s intrinsic value and does not consider other assets. The enterprise value (EV) ratio and price-to-earnings (PE) ratio are two calculations that are used to determine the relative value of stocks.
The Implicit Value Analysis approaches in a manner that, If a digital asset is categorized as a utility token, the product or service that is accessed when it is redeemed determines how valuable the asset is. Consider incentive travel schemes like Asia Miles or Avios, where you can purchase airline tickets with loyalty points.
Are you interested in learning more about the valuation of gaming attributes? Contact Eqvista to get help from the experts.
IGO vs ICO
An ICO and an IGO will operate in slightly different ways in the following areas:
- The Funding Stage – When a video game tries to raise money through an IGO, it’s more typical for it to be in its last phases of production. However, this is not the case with ICOs. Instead, cryptocurrency businesses frequently release their product early on to assess their feasibility and the general public’s interest and opinion.
- Return on Investment – In addition, while IGOs are sometimes used to promote certain in-game products, it’s much more typical for ICOs to provide investors with little to nothing in the way of early rewards.
- The product difference – Essentially, the main distinction between the two is the nature of the goods they offer. IGOs sell digital goods and accessories that can be used in the realm of video games, as opposed to ICOs, which often promote products with relatively limited usability (although this is admittedly still rather limited).
How does IGO work with NFTs?
Like any other video game, players can earn in-game tokens, gain abilities, and unlock unique items. The tokens earned in blockchain games can be traded for fiat currency on an exchange.
The use of NFTs makes it simpler to keep track of in-game assets. NFTs are used to store digital items like skins and weapons, and the blockchain records all relevant data about them permanently. GameFi NFT users are the legal owners of their virtual goods. The blockchain keeps track of every single object that is ever acquired, sold, or created within a game as a non-fungible token (NFT).
The GameFi project’s NFTs and in-game tokens are both compatible with decentralized exchanges (DEXs). After that, players can trade their virtual goods and currency for Bitcoin (BTC) and Ethereum (ETH).
Get your IGO valuation with Eqvista today!
The uniqueness of Initial Game Offering or IGO makes their valuation challenging. Consult a professional if you want to discover the worth of your gaming assets. The value of your digital possessions may be calculated using business valuation, a technique for ascertaining an asset’s monetary value. The skilled professionals at Eqvista can advise you on the value of your NFTs and tokens. If you are interested in our valuation services, please get in touch with us.