Episode 3

Is Crypto More Than Gambling?

NFT projects pride themselves on community. But what does that mean, and is it just a precursor for profit?

By Zack Guzman

November 14, 2022


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If you've ever been to a casino, maybe you've noticed where all the noise comes from.

Most of the time, it's at the craps table or roulette wheel — both games where the whole gang can beat the house together. Very easily, one can feel like they are part of a community.

When it comes to crypto, a world often compared almost daily to gambling at the casino, it might be easy to overlook the sense of community that many in the space claim is part of why they stick around. Bitcoin, after all, has experienced more than a few 80% collapses, and yet it has still managed to grow its fan club.

In this week's episode of Coinage, we take a look a closer look at what community in crypto is all about by inserting ourselves into an event put on by one of crypto's early NFT projects and one of the first to offer its holders real utility. The NFT game, Zed Run, lets users buy and breed digital horses to race at the digital track. It exploded in popularity in 2021 and even garnered a profile in the New York Times.

But before we get into why Zed Run is a perfect example to explore community in crypto, it's worth reflecting on the NFT projects that walked so Zed could Run.

Zed Run is a digital horse racing and collecting game that features futuristic, digital horses built by parent company Virtually Human Studios, or VHS. (Source: Zed Run)
Zed Run is a digital horse racing and collecting game that features futuristic, digital horses built by parent company Virtually Human Studios, or VHS. (Source: Zed Run)

First, there were CryptoKitties. Launched back in 2017, the collectible cats on the Ethereum blockchain capitalized on the 90's nostalgia for Neopets and showed the world what digital collectibles could be before anyone even used the term "NFT." The cats all had unique traits, which varied in rarity, and allowed users to create different types by breeding them together. At one point, CryptoKitties got so popular it tested the throughput of the Ethereum blockchain. Pretty quickly, though, enthusiasm waned as people realized there wasn't really an end to the game if there were an unlimited amount of cats people could breed.

Enter the rise of CryptoPunks. Despite also debuting in 2017, CryptoPunks have not only survived, but they have grown to become one of crypto's most valued NFT collections. When they launched, only 10,000 CryptoPunk avatars were created (and will ever be created. The project pioneered what's known as "digital scarcity" in the NFT space. The fact that there was a cap on the supply of CryptoPunks meant that price skyrocketed with demand. If you're wondering why "demand" in that equation might skyrocket — we've arrived at the purpose of this week's episode: To value "community."

In the case of CryptoPunks and almost all of the so-called "blue chip NFT projects," using the NFT as a profile picture on social media has helped owners signal that they were early, or in-the-know on all things crypto. Much like a Hermes Birkin bag might signal you're a fashionista (or rich) a CryptoPunk might signal you're an NFT God (or rich.) But then again, the price for any NFT in a collection is only worth as much as the least committed holder is willing to sell it for — what's known as a collection's "floor price."

As our episode airs, one of the most recent CryptoPunks just sold for 111 ETH, or more than $130,000, on OpenSea. But like CryptoKitties, each avatar boasts traits with varying levels of rarity, which makes pricing an individual NFTs a trickier task. The same can be said for Zed Run, which features digital horses of varying breed types, colors, genotypes, and bloodlines. All a novice really needs to know is that the oldest NFT horses, tend to be the best ones.

That's usually a common problem most NFT games run into: How can a game attract new users when its first users usually always have the upper hand? For Zed Run, the game opts to protect for that by restricting some races to horses of a certain ranking (think minor leagues and the MLB.) As Zed Run co-creator Chris Ebeling tells Coinage, making the game worthwhile for everyone is something most NFT games seem to forget.

Coinage host Zack Guzman drinks a mint julep at the Zed Run community event in New York City. It was BYO-mint.
Coinage host Zack Guzman drinks a mint julep at the Zed Run community event in New York City. It was BYO-mint.

"It's all about inclusivity," he says. "We really want to democratize horse racing ownership. So no matter where you're from, whatever your budget is, as long as you have a computer and you know how to get into the game, you can then access [it.]"

That said, the best Zed horses have sold for the dollar equivalent of more than $200,000. So are people here to win, or are people here to have fun in the Zed community?

"If it's fun, you know, people will come and they will want to have a go and then think about the earnings secondary," Ebeling says. "If you really, really enjoy it and you start to strategize, then you have that earning function and then you can layer in an ability to really reap the rewards of getting into it."

At the Zed race event this summer, we certainly saw a little of both. The horse I bought for roughly $90 lost in extraordinary fashion. The horse I had paid slightly more to breed managed to eke out a victory in a race that was seemingly loaded by the Zed organizers with truly terrible horses. (Ebeling tells us each race outcome is algorithmically selected against a plethora of various outcomes that incorporate the statistical strengths of all the horses in a given race.)

"It's provably fair. It's gone through the ringer," he says. "You really know when you're in a position to to win versus when you're just throwing a horse in a race and just throwing a Hail Mary per se."

Zed Run co-creator and VHS co-founder Chris Ebeling stops by Coinage to discuss the play-to-earn space and what NFT communities are all about.
Zed Run co-creator and VHS co-founder Chris Ebeling stops by Coinage to discuss the play-to-earn space and what NFT communities are all about.

For the so-called "Zed heads" or racing fans at the community event, there was a clear appreciation for learning and tracking the statistics of the digital horses. One stable owner with more than 9,000 races under his belt, Rob Joseph, walked me through how to use sites like KnowYourHorses.com which allows users to track various metrics like win-rate percentage or certain track lengths a given horse might be best at running. When I asked him whether Zed Run should be looked at as a game or a business, his answer was simple.

"It's both. That's the beauty of it."

Ebeling, for his part, isn't shy that a lot of those experienced stable-owners tend to win more given their expertise and perhaps better horses.

"Usually, the people who play more are the ones who are in a position to win more," he says.

As my newly minted digital horse claimed victory in the last race of the day at the Zed Run event, I couldn't help but feel a little rush of community as everyone celebrated with me. That said, the value of my original horse has fallen considerably from the highs of the more active days of 2021. But it also doesn't mean those days can't return. So long as Ethereum sticks around, I'll own my digital horse forever (more than I can say for the Dave & Buster's horse racing game I used to play as a kid.) As Ebeling points out, it might be easy to overlook that piece of any NFT game that brings people together in the metaverse or at real life events.

"Our horses live forever, they don't get hurt," he says. "These relationships form, I think that's something that's really, really beautiful about what these games can do and what these experiences can do for the communities," Ebeling says.

Coinage is a community-owned show answering crypto's biggest questions. You can apply to co-own the show with us, and weigh in on what we're building at Coinage.Media/join.