NEONEXUS is a cautionary story for NFT-driven games
The great risk with an NFT-funded and driven game is that if the underlying assets decline in value, so too does the game’s profitability. Solana-based metaverse game, NeoNexus, ran into trouble when SOL prices declined, and now it’s winding up the business completely.
In a tweet, NEONEXUS founder, Jack Shi, apologised to fans and users. “It is with a heavy heart that we must inform you that we can no longer continue healthy development of the NEONEXUS project,” he wrote. “We would like to hand over the project to our community, or a community-selected party for takeover if that’s feasible/possible.”
It is, of course, unlikely that the community is going to be able to pick up a project of the scale of NEONEXUS without a central developer, so for all intents and purposes, this appears to be a white flag.
So, what happened?
NEONEXUS has an audience. It has over 13,000 members on its Discord channel, and was promising to mint many more NFTs and increase that userbase significantly further. Its exit, just a few months after launch, has been described as a “slow rug pull,” by the community, referring to a kind of scam that involves building up a project over months only to drop out and take the funds once it hits a planned plateau.
(This is in contrast to a standard rug pull, which involves getting a bit influx of cash quickly at the launch of a crypto asset and then almost immediately disappearing).
There is nothing to indicate that this game and project was any planned scam, of course. The simple reality is that this very legitimate project hit a wall when SOL prices, which had been as high as US$200, quickly dropped more than 50 per cent to $80 and then got stuck at that level. Suddenly the project, which had been worth $4.5 million or thereabouts, had less than half the assets and value to work with.
As Shi wrote on the Discord, the project needed to pay wages, finance the infrastructure, and pay business fees and taxes. Things it was no longer capable of doing: “It has been incredibly difficult trying to grow and continue our project in this ecosystem and market conditions where the price of SOL has dropped so much and the activity, volume, and interest in the entirety of the Solana NFT space has decreased.”
Gaming relies on stable business models
The fate of NEONEXUS is not likely to endear the broader community to crypto asset-based games. There was already a concern among the community that conventional online games would, eventually, become unplayable. If NFT-based games continue to be so volatile as to come and go within months, there will be real and lasting hesitancy among the majority of players in investing in these experiences.
It would seem that into the foreseeable future, and as long as crypto assets remain volatile in market value, the viable NFT projects will be those that use NFTs as a “value-add” over and above more conventional monetisation models.