May 28, 2024 - Economy

🥋 Up only gaming

Illustration of question mark emerging from a video game block punched by a gloved fist.

Illustration: Lindsey Bailey/Axios

Last week we were on about the fight scheduled at Consensus between Nic Carter and David Hoffman — an influencer bout.

Between the lines: It wasn't just seeing two dudes from Crypto Twitter punch each other.

  • The business model of the fighting league they were playing under was also interesting.

How it works: Karate Combat is something of a competitor to the UFC. It's a league for one-on-one mixed martial arts fights. It has also innovated something they call "Up Only Gaming."

  • They have a token: KARATE. If you join their app, they will give you a little.
  • When there's a fight, you can post your KARATE as a bet on the outcome.

The friction point: Here's the thing ... you're not exactly taking a traditional bet — its white paper says it's not a bet — because, if you get the match right, you're not going to be liquidating the ones who got it wrong.

  • Instead, you'll receive a pro rata share of a pool of KARATE that the project released to pay the folks who got the match right. Those who get it wrong get nothing, but they also don't lose the KARATE they posted.
  • Each fight is putting more KARATE into the market, though, which puts downward pressure on price (which might be countered with more people getting interested in Karate Combat).
  • So consistent losers and those who lose interest in the app are going to be diluted over time, so they do lose — in dollar terms. But not in KARATE terms.

Between the lines: Because you don't lose your KARATE, they call it "no loss."

  • And, players who never buy it, but just earn it and grow it gradually, never lose anything.

The upshot: The founders argue that sports leagues with gaming have stronger engagement from fans.

  • Viewers with something on the line (even if it's mostly psychological) are more likely to want to watch live, comment, buy T-shirts, etc.

By the numbers: More than 100,000 wallets hold KARATE, according to the company's stats site.

The big picture: KARATE is also a governance token, offering fans input on how the network develops, though founders and investors have the lion's share of tokens here in the early days.

  • Using cryptocurrency to give fans input into a league is an idea that's been brewing for a while. Previously, a small indoor football league, Fan Controlled Football, ran two seasons that way.

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