WAX grew from OPSkins, a 2015 internet marketplace for video game skins. OPSkins has become one of the most popular third-party markets for trading Counter-Strike: Global Offensive in-game assets (CS:GO). The OPSkins team realized the need to develop a decentralized marketplace and support a more decentralized gaming environment while competing with centralized companies and hosting in-game assets from centralized games.

WAX was once an ERC-20 token whilst the team worked on developing the decentralized marketplace. At the end of 2017, WAX performed a public initial coin offering (ICO) on Ethereum, raising around $60 million. The token was used to purchase and sell video game things on OPSkins.

The WAX blockchain went live in June 2019 after more than a year in beta. Holders of WAX ERC-20 tokens might swap them for native WAX Protocol (WAXP) tokens. With the WAX blockchain and marketplace operational, OPSkins was finally shut down in 2020. WAX received an additional $10 million in investment from OKX in June 2022.

Wax technologies

WAX is based on the open-source Antelope blockchain technology, which is also used to power other public blockchains like EOS and Telos. WAX has constructed various services essential to its technical stack on top of the base-layer protocol, including a cloud-based wallet, an NFT creator and marketplace, an on-chain random number generator, and a block explorer. Several parts of WAX are intended to provide a more familiar Web2 experience.

Consensus

WAX is a blockchain-based Byzantine Fault Tolerance (BFT) that employs the popular Proof-of-Stake (PoS) version of Delegated PoS (DPoS). WAXP token holders in this system may delegate their tokens to validators ("WAX Guilds") who create and validate blocks.

Each round, the top 21 guilds based on delegated voting stake engage in consensus ("participating guilds"). Participating guilds create blocks at the same rate, regardless of the voting power. Geographic closeness determines the sequence in which guilds engage in consensus. Latency may be lowered by reducing the geographic distance between each guild from one block to the next.

After the top 21, the following 24 highest guilds are known as standby guilds. Standby guilds may step in if a participating guild becomes unavailable in any manner, whether it unregisters, suffers downtime, or otherwise. The standby guilds are picked depending on who has received the most votes.

Penalties and Rewards

In the form of block rewards, guilds get 40% of the network's 5% yearly inflation. 60% of this 40% is distributed equally to participating guilds, with the remaining 40% distributed equally to standby guilds.

Delegators additionally get 40% of the network's 5% yearly inflation based on their stake weight and voting engagement. Delegator awards are independent of whatever validator is delegated to. Delegators are encouraged to vote weekly (i.e., stake their tokens to guilds), the mechanisms of which will be covered in further detail in the tokenomics section.

There are no protocol-level sanctions for unruly or inactive guilds. A third-party Office of Inspector General (OIG) organization, on the other hand, provides monthly guild assessments. These ratings may assist users in convincing them to withdraw delegation from a misbehaving or inactive guild.

Smart Contract Programming Language for Computation

Smart contracts are created in C++, which is a popular programming language among Web2 developers.

Model of Resources

Several blockchains utilize a gas-based resource model, in which a user pays a gas token to cover the different expenses of a transaction, such as processing and storing data. The resources that are generally integrated into a single gas cost on WAX are divided into their components. Additionally, in most circumstances, WAXP tokens issued for WAX resources are not permanently spent but may be recouped by the user if the resource is no longer required.

WAX has three resource components:

WAX's TPS: WAX's TPS capacity is measured in bytes by NET, a space-denominated resource. CPU is a time-denominated resource that quantifies transaction processing time in microseconds. RAM measures WAX's data storage capacity in kilobytes.

Bandwidth: The NET and CPU work together to pay the network's bandwidth charges. These are both regenerable resources obtained by WAXP staking. The staking is done using the same smart contract as the consensus staking, enabling users to assign the same WAXP to both. Users have access to NET and CPU by their part of each resource's staking contracts and network activity. When the chain is more congested, the same proportionate stake will provide fewer bandwidth resources and vice versa. Each block has a global CPU limit of 0.20 seconds and a NET limit of 1,024 KB. When a user performs a transaction that needs NET or CPU, the resource is temporarily consumed and regenerated after 24 hours. After 72 hours, users may unstake their WAXP and obtain the tokens.
State Storage: Using RAM, users directly pay for the expenses of keeping data on their account, including any fungible tokens, NFTs, NFT listings, and more. RAM is a limited resource that may be purchased and sold in exchange for WAXP. The Bancor liquidity algorithm is used to price the RAM/WAXP market. A 0.5% charge is collected and burnt in the market. New accounts need 1611 bytes of memory to be created, which costs about $0.05 at the current pricing of 0.5 WAXP per KB of RAM. RAM, unlike traditional gas tokens, is not always permanently expended. For example, if a user allocates RAM to an NFT that they own, the RAM is returned to them if the NFT is burned.

To facilitate the onboarding process, wallet providers may charge an account creation fee, which is used to pay the initial RAM and stake some WAXP on users' behalf toward CPU and NET.

Application developers may additionally subsidize RAM or stake WAXP on behalf of their users. By staking WAXP for bandwidth, the wallet provider or developer keeps ownership of the WAXP staked, but the CPU and NET gained are distributed to beneficiaries.

Accounts Architecture

An admin key and an activation key are required for WAX accounts. The default permissions for the two roles are the same, with the exception that an active key cannot create or delete other active keys. Moreover, admin keys may configure active keys with specific permissions. For example, an active key may only do one activity, such as minting NFTs. Users may also generate several keys and demand multiple signatures to complete transactions.

As compared to standard accounts that are not smart contracts, this approach has comparable effects on account abstraction and provides a considerable improvement in UX and security. Account abstraction has been prominently included on Ethereum's roadmap for many years.

Cloud Wallet WAX

The WAX team created the WAX Cloud Wallet, which makes it simpler for Web2 users to get started. Users may establish an account using 2FA and Web2 credentials, such as an email and password, or with services such as Facebook, Google, WeChat, Steam, and others. Almost 91% of new WAX accounts have been created with the WAX Cloud Wallet since the beginning of 2021.

Apart from abstracting seed phrases, the WAX Cloud Wallet has additional UX benefits, such as letting users perform transactions without having to click to sign each one after they've registered and started a session. The UX advantages, however, come at the expense of trustlessness, since each user's Cloud Wallet admin key is a two-of-four multi-sig comprising of WAX's President, COO, CTO, and Blockchain Lead. The team is working on an upgrade to transfer admin key ownership to the user, which will be detailed in the roadmap section.

Starting in 2022, new Cloud Wallet users must pay a 5 WAXP account creation fee, which may be paid in WAXP through centralized exchanges or with a credit card via MoonPay. The modification was made to prevent bots and spam account creation. When users create a Cloud Wallet account, they are given 1611 RAM, and enough WAXP pledged toward bandwidth resources to transact an average of 12 times per day.

Current traction

Users and Developers

WAX had a tremendous increase in network activity in Q2'21, which persisted throughout the prior bull market. Even after the bull market ended, activity has remained essentially consistent. WAX now has over 20 million daily transactions and over 350,000 active addresses. These findings position WAX among the top blockchains in both measures.

These figures, however, are likely exaggerated by bot activity, as would be anticipated for a network dominated by gaming activity. As mentioned below, several of the first popular games on WAX enticed players to frequently click buttons, which are ideal for bot use. For example, despite the company discontinuing development and departing from the original investment, the once-popular high-click game Farmers World still has 60,000 daily active addresses. This essentially kills the initiative. Nevertheless, bot activity is common in many popular games and is not limited to WAX.

Although the number of daily active addresses has stayed consistent over the last year and a half, account growth has slowed. WAX has averaged little more than 4,000 new accounts per day so far in 2023, a considerable fall from 2022 (nearly 10,000 new addresses per day on average) and 2021. (over 31,000 new addresses per day on average).

From the end of January 2022 to the beginning of February 2022, address growth slowed dramatically. The drop was most likely caused by the new account creation price of 5 WAXP for WAX Cloud Wallets, which was applied on January 31 to discourage the establishment of bots and spam accounts.

WAX's market cap rank has fallen from 147th to 163rd from the beginning of April 2021, following the trend in account growth more closely than daily transactions or active addresses.

Delegators and Validators

There are presently 65 validators having voting authority over WAX. They own about 1.6 billion WAXP, or around 70% of the circulating supply. The top 21 validators have a highly evenly distributed voting power, with each participating validator having between 4.26 and 4.58% of the voting power. With 21 validators producing blocks at the same rate regardless of voting stake, the network will always have a Nakaomoto coefficient of 8, which is slightly higher than the median of chains gathered on nakaflow.io.

nakmoto coefficient

Source: Nakaflow.io

Proxies are used to delegate about two-thirds of the WAXP load. The OIG serves as the proxy for almost all WAXP delegations.

NFTs

Daily unique NFT purchasers on WAX peaked at around 16,000 in Q2'21. Nevertheless, daily NFT sales volume did not reach over $10 million until the second wave of the preceding bull market in Q4'21. Both statistics have dropped by more than 90% from their peaks and will continue to decrease through 2022. There have been an average of 1,400 unique purchasers and $75,000 in total daily transactions during the last month.

AtomicMarket and NeftyBlocks are two popular NFT markets. Since 2021, AtomicMarket has averaged around 15,000 daily unique addresses and supports the majority of secondary sales traffic. Since 2021, NeftyBlocks has averaged 2,700 unique daily addresses and supports the majority of the main sales volume.

atomic hub

Source: Atmoichub

Farmers World is WAX's all-time best-selling NFT collection, with more than $205 million in sales. Farmers World is a farm mining game with a lot of clicks. But, in late 2021, the crew sold the whole treasury and ceased all work and connection. Farmers World, despite this, has averaged over 90,000 daily unique addresses since 2022 and continues to enjoy some sales activity.

Among the most popular games and compilations of all time are:

Alien Worlds: Alien Worlds is a high-click outer space mining game that has lately added a PVP warfare mode. Since its introduction in early 2021, it has sold over $40 million in NFTs. Alien Worlds has led WAX dapps in daily unique addresses with an average of over 200,000 since 2021.
Farming Tales: Farming Tales is a farm-building game with a lot of clicks. Since its introduction in mid-2021, it has sold about $38 million in NFTs.
MLB Topps: Topps is a renowned maker of licensed MLB trading cards. Since its release in mid-2021, it has generated over $21 million in sales.
Blockchain Brawlers: Blockchain Brawlers is a PVP card game created by the WAX team in which people compete against their digital wrestlers. Since its introduction at the end of 2021, it has sold about $15 million in NFTs. Since its inception, BC Brawlers has received an average of 1,500 daily unique addresses. Nonetheless, this value has been in the low double digits since mid-Q3'22.

Since they were all popular during the previous bull market, these collections are WAX's all-time sales volume leaders. Since then, not only have absolute sales volumes declined, as predicted in a bear market, but each collection has also lost the majority of its market share contrasted to its peak.

Funko collections have emerged as WAX's #1 NFT collection by sales volume since early 2022, with over $40 million in sales since its introduction. Funko is a toy manufacturer that specializes in selling licensed pop culture items. It collaborated with WAX in 2021 to offer digital collectibles, some of which are redeemable for tangible toys. Thus far, it has released 30 collections with trademarks including DC, TMNT, Scooby Doo, Nickelodeon Cartoons, and others. The drops include digital trading card packs that can be purchased using credit cards, Apple Pay, and Google Pay. Each drop has sold out, raking in between $250,000 and $2 million depending on collection size. These sales quantities, however, are not included in the above statistics since they were made off-chain.

Although many of WAX's earlier games are simply high-clickers, many current and future titles have more complicated gameplay and visuals, such as:

Forge Arena: an upcoming tactical shooter game from the creators of OPSkins that will be available on the Epic Games Store.
Avalon: a WAX, Ethereum, Polygon, and BNB Chain open-world fantasy MMORPG.
Immersys: an MMORPG that spans many universes.

DeFi

wax tvl

Source: Defillamas

WAX's DeFi ecosystem is immature in comparison to other blockchains, with a concentration on gaming and NFTs. WAX ranks 125th among all ecosystems, with a TVL of $570,000. Alcor Exchange, a decentralized exchange with automated market-making and order book functionality, is the primary DeFi protocol on WAX. In the last week, Alcor Exchange has processed around $170,000 in volume. Alcor has had an average of 2,500 daily unique addresses since 2021.

Another sign of WAX's limited DeFi ecosystem is the lack of domestically created stablecoins. The WAX team has brought over numerous Ethereum native stablecoins, including USDC, USDT, and DAI, over a two-of-four multi-sig bridge (with the same signers as the Cloud Wallet). Their use on WAX, however, has been limited, with just around 25,000 tokens flowing outside the bridge.

On Ethereum: In 2020, the WAX team announced a new DeFi solution that will debut on Ethereum and become operational in early 2021. The WAX team recognized Ethereum as a preferable ecosystem for DeFi while optimizing for gaming and NFTs.

The team created a token bridge between Ethereum and WAX. The bridge employs a mint and burn process, with WAXP holders getting WAXE tokens on Ethereum at a 1:1,000 ratio. The Cloud Wallet and stablecoin bridges employ the same two-of-four multi-signature for security. Bridges that rely on multi-signature authentication for security have been the target of numerous significant attacks to date. To protect against loss in the event of a possible compromise, the bridge restricts the amount of data a user may transmit per hour and day, as well as having a worldwide daily transfer limit.

WAXE holders may provide liquidity to a WAXE-ETH pool after bridging to Ethereum and get a WAXE-ETH liquidity token in exchange. Liquidity providers may earn WAXE incentives by staking their liquidity tokens in the Distribution Pool.

As previously stated, a network charge of 2% of the volume of NFT secondary sales is collected. 80% of the 2% gets bridged over to Ethereum, with the other half going to the Distribution Pool. Tokens are issued every four weeks, and to get rewards, a user must stake for the whole four-week period.

In addition, the WAX team established a new WAX Governance token (WAXG). Distribution Pool stakers get WAXG in addition to their WAXE payouts if the price of WAXE does not fall throughout the four-week staking period. WAXG token holders may burn their tokens to get WAXE from the PiggyBank Pool. The PiggyBank Pool holds the other half of the 80% of network fees received. When a WAXG holder burns their tokens, they get WAXE in proportion to their part of the circulating supply. The first 10 million WAXG tokens were issued. Half of them are set aside in a treasury for future use, with the other half awarded to Distribution Pool incentives.

The TVL in the WAXE-ETH Uniswap V2 pool presently exceeds $6 million. Nonetheless, the team intends to return the system to WAX by the end of 2023.

Technological Enhancements

Antelope: In Q3'22, the Antelope Coalition was founded by the teams of EOSIO-based networks WAX, EOS, Telos, and UX Network. The Antelope Coalition will finance and speed the development of the Antelope protocol, which will replace EOSIO. Antelope published a blue paper outlining its aims to increase scalability in a variety of areas, including:

State Storage: When more Antelope blockchain wallets are produced, block creators will demand more costly hardware to store the state. The blue paper recommends reducing the amount of state Memory that block makers must physically store.

TPS and Finality: Antelope blockchains can now handle roughly 8,000 transactions per second (TPS), with finality taking three minutes. The Antelope team is attempting to improve on these statistics by building a near-immediate BFT finality mechanism based on the HotStuff technique and parallel transaction execution.

IBC: The group intends to build a light-client inter-blockchain communication (IBC) protocol similar to Cosmos' IBC to horizontally grow Antelope blockchains. It will enable popular dapps to develop their Antelope sidechain while remaining connected to the ecosystem, in addition to facilitating safe interoperability across Antelope chains.

The Antelope project also seeks to stimulate developer participation by improving documentation and tools.

WAX intends to upgrade to Antelope 3.1 in Q1'23. The Coalition will continue to improve Antelope to execute the issues listed above and more.

Tokenomics: In Q1 or Q2 2023, the WAX team plans to update WAXP tokenomics and staking mechanisms. The quantity of incentives distributed to network members like block producers, delegators, WAX Laboratories, and others will stay approximately constant. Nevertheless, network fees will be collected from activities other than NFT secondary sales and the RAM/WAXP market. If these fees cover the prizes, no further WAXP will be issued (and any fees left over will be burned). If there is insufficient activity to cover the incentives, inflationary WAXP will be coined to make up for the shortfall. Inflation will not surpass 4% under the suggested scheme.

WAX Cloud Wallet: In Q1'23, the WAX team plans to completely revamp the Cloud Wallet. This contains a new onboarding mechanism that allows users to establish a Cloud Wallet account without first creating a WAX blockchain account. As noted in the accounts section above, the team intends to change the wallet's permission mechanism. Instead of the WAX team's multi-sig, users will become the account's admin key. The team's multi-signature will be retained as a signer on the account by default. A user may delete this key to regain full control of their account. Yet, there will be a UX cost since users would have to personally sign each transaction.

Strategy for Growth

Bs on technological advancements, the WAX team intends to expand the ecosystem by developing alliances and awarding developer incentives. WAX has been used by several well-known Web2 brands. Besides Funko, WAX has collaborated with Spiderman, Hot Wheels, Street Fighter, Deadmau5, and others to develop NFT collections. The WAX team, in collaboration with the OIG, will continue to distribute awards from the WPS. Based on current tokenomics, the WPS now possesses 245,000 WAX and gets around 23 million WAXP ($1.5 million as of January 31, 2023) every year.

Conclusion

One of the first adopters in the blockchain gaming and non-fungible token (NFT) field was WAX. The chain has been the home for several well-known play-to-earn games as well as a huge number of NFT collections originating from major Web2 businesses. NFT sales volume and the number of unique buyers have both decreased by 90% from their peaks in 2021. Throughout this time period, WAX has not only slipped farther behind some established competitors but also about these measures. Yet, if the WAX team can effectively execute its technological roadmap and convince Web2-caliber games to develop on WAX, the network has a good chance of reclaiming its position as a top gaming and NFT L1 platform.

Disclaimer:
This article is intended for and only to be used for reference purposes. No such information provided constitutes advice or a recommendation that any investment or trading strategy is suitable for any specific name.

WAX: A layer 1 specialized for gaming