Metaversal is a Bankless newsletter for weekly level-ups on NFTs, virtual worlds, & collectibles

Dear Bankless Nation,

With teeming DeFi and NFT scenes, Arbitrum is currently the leading Ethereum L2 scaling solution.

That said, at the top of Arbitrum’s NFT ecosystem right now is Treasure DAO, a collective that’s building a “decentralized Nintendo” and the tools needed to make that vision a reality. 

The newest of Treasure’s NFT tools? MagicSwap v2. 

This optimized MagicSwap has the potential to revolutionize the game economies of web3 games, so let’s run through what you can expect from this unprecedented NFT exchange for today’s post!

-WMP

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MagicSwap 2.0: Gamechanger for Web3 Games?

The 101 🆕

Treasure just announced its plans to launch its MagicSwap v2 NFT automated market maker (AMM) in Q2 2023. Treasure has designed the new and improved exchange to be the “first AMM in crypto to support pools for ERC-20s and NFTs through a single router.”

MagicSwap @MagicSwap_

Announcing the new MagicSwap by @Treasure_DAO. MagicSwap v2 will be the first AMM in crypto with universal token compatibility, supporting pools for both ERC-20s + NFTs through a single router and enabling trading of all items within game economies. treasuredao.substack.com/p/magicswap-th… 👇

treasuredao.substack.comMagicSwap: the First AMM with Universal Token CompatibilityThe first AMM in crypto to support pools for both ERC-20s and NFTs through a single router, and enable trading of all items within game…

8:53 PM ∙ Jan 25, 2023

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Why it matters 🧠

Previously, there hasn’t been shared decentralized exchange infra for fungible tokens and non-fungible tokens. 

For example, you can currently go to Uniswap and trade ERC-20s like MATIC or you can sweep NFTs like Lil Pudgys. Yet the underlying infra is separate right now: the ERC-20s trade on Uniswap’s traditional DEX protocol, while the NFTs trade on a marketplace aggregator evolved from Genie. 

Of course, Uniswap has said it plans to create “more interoperable experiences” between NFTs and ERC-20s, so it’s no stretch to assume the DEX giant plans to introduce universal token compatibility in some capacity in the near future. 

What makes MagicSwap v2 notable, then, is that it’s the first confirmed universal DEX that we know of and that it’s been custom-tailored for web3 gaming, which is Treasure’s speciality. 

The details 💯

“Treasure is building a ‘decentralized Nintendo,’ a collection of on-chain games that are interconnected via the interoperability of in-game assets and MAGIC, Treasure’s native token, as a shared currency. The most popular of these games include Bridgeworld, a strategy game, RPG games like The Beacon and Smolverse, and Realm, a resource management and strategy game.” — Ben Giove, Arbitrum Is Mooning

Treasure is working to foster a decentralized gaming ecosystem where many different games, each with their own unique worlds and economies, can develop and grow alongside each other. 

Toward that end, the new MagicSwap has been designed to be a flexible and open game economy resource that many projects can tap into. 

Beyond the universal token compatibility infra that we’ve already discussed, MagicSwap will also notably offer NFT-to-NFT pools via ERC-1155s, NFT-based liquidity provider rewards, dynamic price adjustments, automated royalties, and “sweeping” batch buys.  

On the gaming side of things, MagicSwap will provide a range of new possibilities, including:

• ⛲ Pool permissioning — game creators will have the option to permission how tokens can be traded out of pools, thus allowing for more tightly controlled game economies + mitigating hyper-speculative trading

• 🏪 Location-based markets — spatial and geography-based trading constraints will be possible so games can use MagicSwap to have in-game location-specific marketplaces 

• 💱 Non-financial trading — MagicSwap’s pool customization options will allow game creators to facilitate players trading a “web of different tokens” without an easy off-ramp, thus offering the ability to fine-tune which parts of a game will and won’t be financialized

The big picture 💡

At Metaversal, I’ve written at length about how web3 games that make their in-game assets too easily tradable routinely lack economic levers and thus struggle with economic outflows and overspeculation.

These problems can be game killers! As such, one of the reasons why MagicSwap v2 is so compelling is because it’ll give web3 game developers an open resource for capably and flexibly managing their game economies as needed. 

✨ John Patten @jpatten__

Magicswap enables the inverse of GameFi. Financialization exists only for specific kinds of game items, namely valuable NFTs that are sold peer-to-peer. Game currencies are used for gameplay and for minting/upgrading NFTs that *do* have financial value.

9:06 PM ∙ Jan 25, 2023

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Earlier this year, I also wrote about how one of my wishes for NFT gaming in 2023 was to see more “no-token games,” in which only NFTs, and not ERC-20s, were centrally employed. The ability to launch NFT-to-NFT pools with MagicSwap is certainly an interesting step in that direction, I think. As the Treasure team noted in their latest announcement:

“For example, a game can allow players to swap various resources but not convert into USD. The game could still include a degree of financialization if players can craft ways to upgrade their character or produce rare items. These rare items could be sold peer-to-peer on the Trove marketplace, thereby introducing friction to the collectible trading experience but not to trivial items like a cheap in-game resource.“

What to watch 👀

With MagicSwap v2 on the way and Treasure’s ecosystem continuing to rise, here are three things to watch in this area over the next few months:

1⃣️ Treasure’s $MAGIC — $MAGIC is the governance and fee token of Treasure and MagicSwap, and it’s also currently one of the most-traded tokens on Arbitrum, so keep an eye on it this year as a sort of proxy for the early Arbitrum gaming sector!

2⃣️ The 1st MagicSwap game experiments — NFT-to-NFT pools and the other customization options MagicSwap will pave the way to more sophisticated and skill-based web3 game economies and hence richer gameplay, so track the projects that break ground here early!

Treasure @Treasure_DAO

Introducing Treasure’s new Game Builders Program (GBP) supported by @arbitrum! ✨ The GBP aims to support and incentivize aligned, high potential games building in the Treasure ecosystem. Find out how you can benefit from building with Treasure and apply for the GBP 👇

10:10 PM ∙ Jan 20, 2023

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3⃣️ Which chains? — Treasure has said it plans to deploy MagicSwap to Arbitrum One and Arbitrum Nova first with other chain deployments to follow; I’d be interested to see this infra on Ethereum too, for instance, so watch where MagicSwap launches going forward because it can be useful anywhere NFTs are traded!

Action steps

• Follow Treasure for MagicSwap updates: track The Compass newsletter by Treasure to learn when exactly the new NFT AMM drops 🪙

• Check out my previous write-up if you missed it: Minting on Manifold 101 🎆

Author Bio

William M. Peaster is a professional writer and creator of Metaversal—a Bankless newsletter focused on the emergence of NFTs in the cryptoeconomy. He’s also recently been contributing content to Bankless, JPG, and beyond!

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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

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