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Issue #6: The protocol bringing NFT blockchain gaming to the masses

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Summary

SymbolIMXCirculating Supply (estimated)235,284,001
Rank (MCAP)#153Total Supply2,000,000,000
(max 2,000,000,000) 
Price (07/15/22)US$0.87Market CapitalizationUS$205,235,576

Complete historical IMX/USD price chart. Source: CoinGecko

In this report, we’ll answer:

What is IMX?

Immutable X (IMX) is an NFT minting and trading platform on Ethereum (ETH). It’s a layer-2 (L2) scaling solution using cutting-edge technology targeting the gaming industry.

Its developers focus on ease of use for mainstream gamers and third-party companies. Features include no gas fees and fast, 100% carbon-neutral transactions.

Over 100 projects use IMX. They include TikTok, GameStop, ESL Gaming, GET Protocol and other large companies. Many games, including Gods Unchained and Guild of Guardians use IMX. 

These games have drawn a large audience. Gods Unchained had over 80,000 active weekly players in January 2022. Guild of Guardians has over 240,000 players on its waitlist as of July 20th, 2022.

The IMX token serves several purposes. These include paying protocol fees and staking for rewards. Voters use the token in governance proposals to influence protocol changes.

IMX has significant room for growth. The US$300 billion gaming industry is growing. It’s larger than the movies, sports, and music industries combined. 

Gamers spent over US$100 billion on in-game assets in the last four years. These assets would be more valuable if represented by tradeable NFTs. 

NFTs are also useful for other markets. They offer advantages for digital content like videos and songs. Physical commodities such as gold and diamonds can also use NFTs.

IMX’s protocol facilitates creating and trading these NFTs. Alongside Immutable X, Immutable Studios builds Web3 games with NFT technology. This synergy helps the Immutable companies capitalize on blockchain gaming’s growth.

Who’s behind IMX?

Immutable, based in Sydney, Australia, created Immutable X.

A seed round in 2018 and a $15 million Series A in September 2019 funded the project. Investors include Naspers, Galaxy Digital, Coinbase, Apex Capital Partners, Nirvana Capital, and Huobi.

Its leaders include James Ferguson, co-founder and CEO. He is a “Forbes 30 Under 30” entrepreneur who led a software development team at a large eCommerce company.

Robbie Ferguson, co-founder and President, is also a “Forbes 30 Under 30” entrepreneur. He built a tax reconciliation platform for Australia’s largest crypto exchange.

Co-founder and CTO Alex Connolly made “batched minting” popular in early 2019. At the time, this was the most scalable system to make ERC721-compliant NFTs. He also created a blockchain-agnostic smart contract virtual machine programming language.

Immutable’s LinkedIn shows 293 employees. They have backgrounds in fintech, finance, FAANG, blockchain, and management consulting companies. Its team grew 70% in the last six months. 

Immutable employee insights showing rapid growth. Source: Immutable: Overview | LinkedIn

The Immutable team has created a working product with significant partnerships. This shows that it can deliver. 

Its rapid recent growth also shows that it expects growth to continue. This growth contrasts with many other crypto companies. Many are shrinking as they lay off workers during the bear market. 

The team’s strength and growth suggest a bright future for IMX.

How does IMX distribute and release its tokens?

Initial distribution and unlocks

IMX launched its token on Nov 5th, 2021. Its private sale distributed 287 million IMX tokens to its investors for US$0.10 per token. These tokens start unlocking every 28 days on Nov 5th, 2022.

Table showing IMX token unlock timelines. Source: IMX Tokenomics Portal | Supply Schedule

It’s already unlocked its public sale tokens. The public sale sold IMX tokens for $0.10 with a six-month linear release and $0.15 with a three-month linear release. 

Graph of IMX token unlocks as of June 1st, 2022. Source: IMX Tokenomics Portal | Supply Schedule

As IMX’s partner, GameStop also receives tokens at specific milestones. GameStop’s wallet shows it has already received and sold tokens from completed milestones.

Token split

On October 22nd, 2021, IMX tokens underwent a 1:100 split. A holder with one IMX token now had 100 IMX tokens. Holders’ IMX USD value remained the same since the total supply increased.

This split shows the team’s dedication to its mission of usability for mainstream gamers. The split removed the need for users to grasp tiny decimal numbers for prices, such as 0.045 IMX.

Current distribution

IMX has undergone some tokenomics changes in the past. You can stay updated with the latest changes at IMX’s tokenomics portal.

Ecosystem development comprises 51.74% of the supply. This category includes things like daily rewards to users for trading or minting. Two-thirds of these tokens have six-month linear unlocks.

Ecosystem development also includes grants to developers. These grants help companies develop new projects that bring value to Immutable X. 

Project development received another 25% of tokens. Another 19.26% of the supply went to public (5%) and private (14.26%) sales.

The foundation keeps 4% for other uses such as liquidity provision. These tokens have a one-year cliff, then unlock each month for four years.

Why could IMX be valuable in the future?

IMX is an early mover

By starting early, IMX has a significant advantage over future competitors in the NFT blockchain gaming sector. It’s already built a massive ecosystem with notable projects and partners.

This advantage might help IMX become the default NFT blockchain. Becoming the go-to platform will help the token’s price increase.

IMX harnesses ETH’s advantages while avoiding its problems

ETH’s problems make it difficult for some users. These problems include low scalability, poor user experience and illiquidity. It’s also slow to build on for many developers.

Yet, ETH also has significant benefits. Most blockchain and NFT innovations happen on ETH. Regulators understand how to work with ETH. It also offers built-in security.

Recreating ETH’s advantages would be difficult. Other approaches, like alternate layer-1 protocols or sidechains, come with disadvantages. They require building more tools, cutting corners, or compromising users’ experience.

Meanwhile, the NFT marketplace and blockchain gaming is booming. IMX chose to build a solution that eliminates ETH’s problems while using its benefits. The strategy helps it innovate fast and avoid compromises as it capitalizes on the sector’s growth.

IMX’s design decisions are working. In May 2022, its transaction volume topped other protocols.

Rankings of transactions on IMX and similar protocols as of May 2022. Source: IMX Tokenomics Portal | Protocol Metrics

IMX rides the scalability narrative while solving different needs

Two major narratives are developing. The first is the growing NFTs and blockchain gaming sector.

The second narrative is scalability. On ETH, the most viable solution to scaling and marketplace narrative are zk-rollups.

Vitalik Buterin, ETH’s co-founder, stated that “the Ethereum ecosystem is likely to be all-in on rollups.” He also said, “… in the medium to long-term, zk-rollups will win out in all use cases.”

Zk-rollups offer significant benefits relative to transactions on an L1. They increase performance and reduce fees.  

Yet, there is a downside to zk-rollups. They add a small cost for each transaction. Since IMX has many transactions, these small fees can add up.

To solve this problem, IMX also offers Validium, another scaling solution. It has higher data availability requirements than zk-rollups but eliminates the fee.

Different use cases might prefer either zk-rollups or Validium. IMX’s “Volition” lets users choose which scaling technology they want to use. 

By implementing Volition, IMX caters to more projects and users with different needs. This flexibility increases the project’s potential for growth.

IMX is user-friendly

A core part of IMX’s mission is bringing NFTs and blockchain gaming to a mainstream audience. To accomplish this mission, IMX focuses on being simple to use.

IMX offers inexpensive, fast transactions

One significant benefit of IMX is that it has no gas fees, unlike ETH.

Another benefit is IMX’s instant transactions. On ETH, transactions can take a long time – up to hours – to succeed. Because they take longer to execute, these transactions are vulnerable to frontrunning. IMX eliminates this problem.

Better liquidity

On other networks, it can be challenging to get the best NFT price. They spread NFTs across many marketplaces. Users must search many marketplaces to find their desired NFTs and compare prices.

IMX solves these problems in two ways. First, it hosts a global order book. Other marketplaces can hook into this order book. An NFT listed on one IMX-linked marketplace is available in every linked marketplace.

Marketplaces using IMX’s order book can charge custom fees. These fees fund their innovation toward the best user experience.

Second, IMX allows buying and selling all NFTs with specific metadata. For example, buyers can buy all NFTs with “golden dragon” metadata. This feature eliminates the need to search through the entire global order book.

These features increase user satisfaction, attracting more users. It also helps price discovery happen, so NFTs have a fairer valuation. Since trading is easier, there’s more liquidity on the market.

More users on IMX bring more projects to the platform, making it more valuable. A more valuable platform helps the token’s price to rise.

Better NFT wallets and payments

Many NFT wallets are confusing for mainstream users. They also lack the information needed for informed buying decisions.

Every ETH wallet works on IMX without requiring users to switch networks. This feature allows IMX to support third-party marketplaces without security risks. It also offers an NFT wallet.

In addition, IMX’s credit card payment integration makes the platform easier to use for mainstream gamers.

Transaction history

NFTs’ value comes from their scarcity, so proving their legitimacy is crucial. Yet, following transaction history can be difficult.

IMX shows an NFT’s entire transaction history. This feature helps users to verify an NFT’s transactions and historical state.

NFT Royalties

IMX incentivizes creators to offer their best content on its platform through royalties.

Creators can receive a fixed percentage of an NFT’s sale price for the life of the NFT. If a creator charges a 1% royalty, and their creation sells for US$100, they receive US$1. If the NFT is later sold again for US$100,000, the creator receives a US$1,000 royalty.

These royalties encourage creators to make high-value assets that keep increasing in price. These assets make IMX more valuable.

Security

Other scaling solutions often need to cut corners – for example, sacrificing security.

IMX sidesteps this issue with its design structure. It allows users to create their assets in the L2 while inheriting ETH’s L1 security.

Data availability

Data availability is a significant risk. If a network shuts down, users can lose their stored assets.

IMX ensures that users will always have access to their assets. It publishes its data on IPFS (the InterPlanetary File System). IPFS is a distributed system for storing data.

Also, IMX’s “Data Availability Committee” helps ensure users can access their data. It consists of large companies like Consensys, StarkWare, and Immutable.

IMX attracts developers

For IMX to become the dominant NFT network for mainstream gamers, it needs many projects built on it.

Developers that work on ETH waste time on less productive tasks, like blockchain components. Other blockchain solutions often compromise security or reduce centralization.

Building on IMX offers developers many advantages vs. building on other networks, like ETH. These advantages help IMX’s ecosystem grow.

The IMX feedback loop increases the ecosystem’s value. Source: IMX Tokenomics Portal | IMX Core Thesis

IMX helps developers build faster

Projects need many functions. Pricing and choosing these tools can be time-consuming and expensive on other blockchains.

IMX solves this problem by providing necessary tools through REST APIs. It also provides SDKs (software development kits) in many programming languages. These features help projects start building faster.

IMX has also added support for StarkNet. This support allows projects requiring EVM (Ethereum Virtual Machine) compatibility to join the IMX ecosystem.

IMX solves complex regulatory issues

Legal issues complicate the building process for many developers. These include complications like copyright protection and AML/KYC legislation.

IMX is legally compliant, which extends to partners using its platform.

IMX funds new projects on its platform

IMX offers a US$500 million development fund. This fund helps new Web3 projects and games build on IMX.

It also co-funds projects with leading venture firms, giving developers more investment opportunities. These firms include BITKFRAFT, Animoca, Airstream, and GameStop.

Also, IMX incentivizes developers with grants from the ecosystem development fund.

More projects on IMX give users more assets to trade. More assets, projects and users increase revenue and help the token become more valuable.

IMX’s flexible fees help the ecosystem grow

IMX’s fee structure incentivizes building valuable, frequently exchanged products. Its income comes from 2% of primary sale fees.

This flat cut lets games choose whatever design they want. As a result, the fee structure helps both the game and IMX make more money. 

This win-win situation attracts more projects to IMX. Meanwhile, it helps the IMX token become more valuable.

The IMX token has real-world uses

Some protocol token designs cause their token’s price to drop forever. In contrast, the IMX token has several uses that help it become more valuable.

Fees

IMX tokens pay 20% of every transaction fee. The protocol automatically buys these tokens if a user doesn’t already hold IMX. This system creates buy pressure on the token and helps its price to appreciate.

Staking

Staking provides another use for the token. Stakers must hold IMX and have voted on a governance proposal in the last 30 days. They also must keep an NFT on IMX or complete an NFT trade during the previous 30 days. 

In return, they receive a part of the collected fees. This system incentivizes users to hold IMX and continue using the network. More buy pressure and more users help the token’s price to appreciate.

Governance

Users can also vote in governance with IMX tokens. This voting helps them make the platform more valuable for themselves. They can vote on proposals such as developer grants, activating daily rewards, and token supply changes.

This governance encourages holding IMX tokens, especially by larger players. Voting also opens the door to adding more utility to the token in the future, which could increase its value.

IMX has major partnerships and working projects

IMX has secured significant partnerships. These include:

Another 100+ partners include ESL Gaming, VeVe, and many blockchain games. 

IMX plans to add more partners and projects. For example, the popular NFT marketplace OpenSea announced plans to integrate with IMX.

More partners and more projects add legitimacy to IMX. If IMX can dominate its niche, its token may become more valuable.

IMX embraces the environmental narrative

Headlines have featured the negative environmental impact of blockchain. This narrative has led to anti-crypto rhetoric. It’s even resulted in government bans of some blockchain facilities.

IMX sidesteps these issues by ensuring its NFTs, marketplaces, and games are 100% carbon neutral. Its network design allows it to use less gas, reducing carbon emissions. It offsets remaining carbon emissions by buying carbon credits.

Embracing the environmental narrative isn’t just good for the planet. It also helps IMX stay on the positive side of the public, media and regulators. This positioning can help boost its longevity.

What’s next for IMX?

Fee changes could make the project more valuable

IMX plans to explore more options for fees. These could increase revenue and encourage more projects to build on its protocol. The changes might include sliding scale percentage fees or fee caps.

Better documentation to boost growth

Attracting projects to IMX is essential for success. Yet, it can be confusing for new projects to get started. 

IMX has begun releasing documentation upgrades to give developers a better experience.

More partners and projects

IMX is currently in its growth phase. It’s securing new partners as games and marketplaces build on its platform. 

These ecosystem additions grow its network and help attract the mainstream gamer audience. A more extensive network and more users help boost the token’s price.

The community helps decide the roadmap

Governance gives users a choice in what changes come next. The community submits proposals for new, unknown changes.

Voters have an incentive to suggest and support changes that add value to their tokens.

What is the market saying about IMX?

The community has stayed interested during the bear market

IMX has a sizeable community of:

While there are some differences, Flow and Polygon have similarities to IMX.

Flow’s community is smaller. It has 173,400 Twitter followers, 46,391 Discord members, and 17,167 Telegram subscribers.

Polygon’s community is more extensive, with 1.5 million Twitter followers and 25,170 Telegram subscribers.

These comparisons show that IMX has gained significant traction. Still, it has room to grow.

IMX’s social volume has decreased since the end of 2021’s bull market. This decrease is reasonable since the market is currently in “crypto winter.” Other projects have also lost social volume while the market waits for the next bull cycle.

Total social volume for IMX. Source: IMX | Santiment

Yet, the social volume has remained consistent since Q2 2022. This consistency shows continued marketplace interest that may grow after the bear market.

What are the risks for IMX?

Existing or new competitors could take the lead

The crypto industry evolves fast. IMX offers unique advantages over its current competitors, but more could emerge.

Its current competitors are L1s, such as SOL, ADA, BSC, MATIC, and FLOW. They may make changes that help them secure the lead over IMX.

Yet, IMX’s design gives it significant advantages in its specific niche. It may be impossible for these L1s to surpass IMX since they have inherent disadvantages.

IMX’s early-mover advantage builds a moat around its product. It has significant partnerships, working products, and a global order book. Plus, it aligns with coming narratives and a network effect. These advantages are hard for competitors to replicate.

Partners and unlocks could decrease the token’s value in the short-term

IMX private sale tokens begin unlocking on Nov 5, 2022. For four years, this could add approximately 8.9 million tokens to circulation each month. These unlocked tokens make it harder for the price to climb.

Another risk could come from partners selling their tokens. For example, IMX gave tokens to GameStop as part of a partnership deal. GameStop sold these tokens over a short time and pushed the price downward. Similar arrangements could add short-term selling pressure if partners sell their tokens fast.

Yet, the timing is essential to consider. Many investors saw the bear market coming. This threat encouraged them to reduce risk by selling their tokens.

Market conditions will become more bullish, and IMX has positioned itself for growth. These changes may encourage partners and unlocked token holders to keep holding tokens.

Less selling helps the price increase. Dips that do occur could present excellent buying opportunities.

Focus on growth could suppress the token’s short-term price

At the moment, IMX has had a strong focus on growing its ecosystem. In the short term, it hasn’t prioritized a high token price.

In the long run, this growth makes the project much more valuable. Once IMX reaches its objectives, it may work to reward holders with increased token value.

Unexpected hacks or problems could threaten the project’s value

With any technology, there is always the risk of bugs or exploits. Investors should always prepare for unexpected problems.

Still, IMX helps mitigate these threats by inheriting its security from ETH. For example, a 51% attack is unfeasible since IMX isn’t a centralized side chain.

Bottom line

IMX’s world-class team moved early in the fast-growing blockchain gaming sector. 

Its working products, significant partnerships and functional games add to its legitimacy. Benefits from its design, scalability, and mission focus are likely to attract mainstream gamers.

IMX has positioned itself to become the dominant NFT blockchain in the coming years.

What can I do from here?

Who should I follow?

Sources

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