What is Merit Circle?

Merit Circle is a DAO that aims to revolutionize the Web3 gaming space, similar to a game guild. It was founded by Marco van den Heuvel in July 2021, stemming from the Axie 420 Scholarship Program. This program enabled users from low-income countries to participate in Axie Infinity by renting NFT assets and earning income while others utilized the rented assets for gameplay. As Merit Circle evolved, it expanded its focus beyond Axie Infinity to include other popular games, as well as the cryptocurrency and investment fields, in order to explore additional opportunities in the Web3 space.

Organizational Structure of Merit Circle

Merit Circle is a decentralized organization (DAO) where investors, gamers, and Web3 partner communities use their $MC tokens to vote on Merit Circle Improvement Proposals (MIPs) for DAO governance. Through multiple MIPs, the DAO has undergone significant restructuring and is now divided into four core verticals for development:

Investments

The Investments vertical is a hybrid of hedge funds and venture capital funds, playing a crucial role in managing the DAO treasury and assisting with DAO operations. This vertical also involves formulating short-term and long-term strategies for acquiring and disposing of the DAO’s investment portfolio. It encompasses not only token and NFT investments but also staking operations. The main functions include:

• Finding attractive investment opportunities for the DAO
• Acting as advisors in investment portfolio projects to ensure consistent performance
• Participating in staking to ensure ongoing rewards for idle cash positions
• Implementing multiple tasks that enable sustainable development of the DAO
• Allowing $MC holders to earn rewards from DAO earnings through the staking portal

This vertical has two main products: the DAO Treasury Dashboard for real-time treasury data insights, and monthly regular treasury data reports.

Merit Circle Investment Portfolio (Image Source: ROOTDATA, Date: October 18, 2023)

Gaming

In addition to investing in games, Merit Circle also participates in incubation. The purpose of this vertical is to leverage its expertise in sustainable gaming and a wide network of players to build a gaming platform that accommodates partner and incubated game projects, as well as showcase other Web3 games. The main functions include:

• Providing gaming opportunities for passionate gamers worldwide
• Serving as an aggregation platform for various blockchain games
• Increasing community involvement in game development - allowing players to participate in game Beta testing
• Attracting users to the NFT marketplace being built by Merit Circle

This vertical has two core products: the Gaming Platform and the Gaming Academy:
Game Platform

This is a website dedicated to games and players, where players can find various types of games and upcoming releases. On this website, players can not only browse games curated and categorized by Merit Circle but also find various types of tournaments and free-to-play games. The platform also provides players with informative panels about game teams, founding dates, gameplay, maps, and more, which is very useful for players. Additionally, players may also receive various rewards through game experiences.

Game Academy

The Game Academy is an educational tool by Merit Circle and is also a part of the game platform. The academy provides players with tools to understand various aspects such as owning cryptocurrency, participating in Web3, and playing games on the platform.

Studios

Studio is a place where Merit Circle combines its professional skills, knowledge, community, and funding in the gaming industry. In this open space, DAOs can launch their own products and help creative individuals realize their ideas, collaborating with partners to advance technological progress. This vertical field consists of three core products:
Merit Circle Grants

The DAO currently offers two types of grants to support community development:

• Research Grants - Up to $10,000 per applicant: These grants are intended to be paid to researchers for research proposals.
• Development Grants - Up to $25,000 per applicant: These grants are intended to compensate developers for expenses incurred during project work.

Edenhorde

Edenhorde is the media franchise of Merit Circle, existing in the form of 8,800 NFTs, driven by IP. By holding Edenhorde NFTs, you become one of the owners of Merit Circle’s media franchise. Edenhorde is not only the flagship NFT project of Merit Circle but also the gateway to the Merit Circle ecosystem.

Merit Circle Tactile

Merit Circle Tactile is a set of 650 product boxes designed specifically for communities, aiming to provide physical world products for digital communities.

Infrastructure

Merit Circle has established various infrastructures in the gaming industry to drive innovation, with the main products being the blockchain Beam and the NFT marketplace Sphere.

Beam

Beam is a community-driven blockchain network and ecosystem that allows game players and developers to come together to shape the future of the gaming industry. The chain runs as an Avalanche subnet, using PoA (Proof of Authority) as its consensus mechanism. Beam is not just an independent blockchain but also a part of the Avalanche network, benefiting from the scalability, speed, and security features of the Avalanche protocol.

Beam was officially deployed in August 2023, and as of October 18th, there have been 33K transactions on the network, with cross-chain bridges and DeFi infrastructure already deployed. Developers can also develop their own applications through Beam documentation and APIs.

Sphere

Sphere is the marketplace created by Merit Circle for in-game assets. In addition to allowing the trading of NFT assets from partnered games, Sphere will also utilize NFT technology to convert more in-game assets into tradable digital forms.

Who Supports Merit Circle?

After its official establishment, Merit Circle quickly developed as a DAO and introduced more talents, including co-founders Marco van den Heuvel from CMMC Start and Tommy Quite, who serves as an MP at Flow Ventures. Many other outstanding talents have also joined the team. According to LinkedIn data, Merit Circle currently has 34 employees. However, many entities and DAO contributors are not included in this count.

According to ROOTDATA, Merit Circle has had two rounds of public financing: a seed round with a valuation of $32 million and an IDO round in November 2021 with a scale of $105 million. Some investors and partners were major contributors in its early DAO, including CitizenX, Flow Ventures LP, Maven11, Orange Pill, OPCrypto, Sad Cat Capital, and many well-known Web3 personalities such as Nansen CEO Alex Svanevik and The Daily Ape founder Darren Lau.

Merit Circle now has a wide network of collaborators and an ecosystem centered around the DAO.

Extensive Partner Network

Merit Circle not only has a wide range of partners in the gaming industry, it has also showcased nearly a hundred collaborative games on its own gaming platform. Additionally, it maintains close connections with venture capital firms, exchanges, and infrastructure service providers.

Showcase part of the partners (source: https://meritcircle.io/about)

Investment Portfolio Network

As mentioned earlier, Merit Circle DAO also includes an investment division. As of October 15th, based on ROOTDATA, Merit Circle DAO has made 40 investments. Its portfolio encompasses diverse fields, including gaming studios and gaming infrastructure, with a primary emphasis on the gaming industry, particularly the application layer.

Tokenomics

MC is the token issued by Merit Circle DAO and serves as the core of DAO governance. MC currently has four main utilities:

1. Governance
   Holding MC allows participation in the governance of the Merit Circle DAO, where token holders can initiate proposals or vote in favor or against proposals on the forum.

2. Decentralized Gaming Index (DGI)
   The Decentralized Gaming Index (DGI) tracks the performance of decentralized gaming projects and assets. By holding MC, one can participate in Merit Circle’s partner network and portfolio of dozens of gaming and NFT projects. In a sense, Merit Circle functions as a decentralized gaming index.

3. Gas Token
   In the newly launched blockchain Beam by Merit Circle, MC serves as the native token of the network. Users of the network need to pay a certain amount of MC as Gas Fee (network transaction fee) when conducting transactions and calling contracts.

4. Staking (temporarily not operational)
   Merit Circle initially set up the MC and MC-ETH liquidity pool staking option, also known as Staking V1. Later, new incentive models and cross-chain deployments were introduced, upgrading to V2. Subsequently, V3 was launched. However, after the acceptance of the MIP-26 proposal by the community, staking rewards for both V2 and V3 were canceled, and all locked V2 stakers were unlocked.

Token Allocation

The initial distribution plan for MC was a total supply of 1 billion, which would be allocated proportionally to various stakeholders and unlocked over time. The distribution is as follows:

1. Community Incentives: Rewarding contributions made by the community to the success of the DAO in various ways - 29.4%
2. Contributors: Rewarding core contributors and advisors for their full-time efforts towards the success of the DAO - 20%
3. DAO Treasury: The positions in the entire DAO treasury will be composed of MC tokens - 15%
4. Early Contributors: Contributors who participated in the seed round - 14.1%
5. Liquidity Rewards: Incentives for providing liquidity on decentralized exchanges - 10%
6. Public Allocation: Tokens reserved for public rounds - 7.5%
7. Retrospective Rewards: Rewards for the earliest supporters during the Axie420 period - 4%

According to Token Unlocks data, currently, 77% of MC has been released. The specific release status is shown in the following graph:

Source：https://token.unlocks.app/merit-circle

Burn Policy and DAO Treasury

The proposal MIP-7 in the DAO suggested deploying the realized investment returns from various investments made by the DAO in a structured manner. This included replenishing the treasury with a portion in USDC, buying back MC tokens for the treasury, and burning the remaining buyback MC tokens. After the adoption of MIP-7, another proposal MIP-20 was introduced to discuss the idea of burning 200,000,000 MC tokens from the community incentive allocation. As a large portion of MC tokens in the community incentive wallet remained unused, they continued to impact the total supply of Merit Circle and were factored into the calculation for the upcoming token unlock. The proposal highlighted that the destruction of these MC tokens could significantly reduce the total supply, further narrowing the gap between the circulating market capitalization and the fully diluted valuation (FDV), and potentially increase the value of each remaining MC token. This proposal was eventually adopted.

Source：https://treasury.meritcircle.io/ Date: October 15, 2023

Under the influence of multiple proposals such as MIP-7 and MIP-20, the MC token is not only subject to buybacks by the DAO but also has a burning mechanism. Currently, the total supply has decreased from 1 billion to 631.29 million, with 368.7 million tokens burned, accounting for approximately 36.9%, and 4.96 million MC tokens bought back with DAO revenue, accounting for approximately 0.05%. This demonstrates a strong DAO governance structure and improving tokenomics for Merit Circle.

Additionally, from the graph above, it can be seen that the DAO treasury holds approximately $94 million in assets, with 40% in cash and 48% in tokens and equities, indicating a sufficient level of funds. This further proves the ongoing revenue-generating capacity and survival ability of Merit Circle DAO even in bear markets.

Competitive Analysis

Similar projects to Merit Circle include Yield Guild Game (YGG), GuildFi, and ParagonsDAO, which focus on building the Web3 gaming ecosystem. We compare them based on several key metrics:

Supplement (Brief Information about Competitors):

YGG: A gaming guild that focuses on playing-to-earn blockchain games and serves as a community that invests in NFTs and connects blockchain gamers worldwide.

GuildFi: A one-stop service platform that connects different games, NFTs, and communities.

ParagonsDAO: A community composed of investors, gamers, collectors, and cryptocurrency enthusiasts.

Self-made table. Data sources: Coingeck, DeepDAO, ROOTDATA, and respective project websites/media, as of October 18th

From the table above, it can be observed that even though Merit Circle was established slightly later, it has a large community and financing scale, placing it at the forefront. Token MC also holds the top rank in terms of FDV (Fully Diluted Valuation). In terms of business scale and service areas, its main competitor is YGG. The key difference between Merit Circle and YGG is that the former adopts a comprehensive DAO system with four vertical fields, while the latter opts for the SubDAO model, establishing sub-organizations for each region or game. This allows for a more targeted focus on specific player groups and games.

Another difference lies in the financial and business levels. According to ARKHAM’s data as of October 18th, YGG’s DAO treasury has assets worth $173M, with $164.12M belonging to YGG specifically. On the other hand, according to the Merit Circle treasury dashboard, although Merit Circle only has $94M, 40% of it is in stablecoins like USDC. Overall, MC demonstrates balanced development in terms of finance and business, while YGG possesses strong business capabilities but lacks financial strength.

In terms of the number of DAO proposals and participants, Merit Circle is in a leading position. This is especially true with the aforementioned MIP-7 and MIP-20, which have made significant changes to Tokenomics. Merit Circle has already undergone many major changes through the collective efforts of the community.

Outlook and Industry Impact

During the early days of the gaming guild industry, Play-to-Earn (P2E) games gained popularity despite their poor graphics and simple gameplay. These games achieved unimaginable success thanks to market enthusiasm and capital pursuit, leading to the development of numerous gaming guilds.

However, as more Web2 game teams and professional game talents enter the scene, Web3 users now have higher expectations for game quality. Consequently, many well-made games with excellent graphics are starting to emerge in the Web3 space. The improved game quality not only affects game players but also necessitates changes in game promotion methods. As a result, this will have a significant impact on Merit Circle’s next investment strategy and partner network.

Another point to consider is that as the number of Web3 users and game players continues to grow, the benefits of YGG’s subDAO become evident. This enables better development and engagement of players and users in various regions. It is important to note that Merit Circle currently does not have any operations in this particular area.

The emergence of infrastructure such as Beam and Sphere reveals the strategic direction of Merit Circle. The company aims to become a complete game ecosystem by integrating game infrastructure services, game investment incubation, and game promotion. However, when looking at Beam as an example, there are currently no well-known decentralized applications (dApps) and protocol deployments on the mainnet. This indicates the need for further development.

However, it is foreseeable that Merit Circle is creating a competitive advantage through a vast network of collaborations, investments, and a diverse product ecosystem. The development of its infrastructure will also drive advancements in the industry, particularly in DAO management, setting a good example for other competing projects.

Conclusion

Through $MC Token, Merit Circle has established an inclusive community governance structure that allows community members to directly participate in the organization’s decision-making. Merit Circle is not only committed to investment and development in the gaming sector but also demonstrates a long-term strategic vision in infrastructure and capital operations. Despite facing challenges from competitors such as YGG, Merit Circle occupies a favorable position in the market through its comprehensive DAO system and diversified business areas. Through continuous innovation and collaboration, Merit Circle is expected to drive the gaming guild industry toward a more sustainable and diversified direction, contributing to the construction of a more open, fair, and fun gaming world.