I have come across another undervalued, revenue-share NFT I want to tell you about today.
NFTs are non-fungible tokens, one-off, one-of-a-kind cryptocurrencies that represent ownership of a digital asset. (Before investing in NFTs, I’d advise that you check out the two NFT reports I’ve prepared as part of Frontier Fortunes, if you haven’t already done so. These are: How to Invest in NFTs and The Frontier Fortunes Guide to NFT Wallets.)
The project I want to tell you about is called Oak Paradise—a collection of 5,555 NFTs tied to a successful online gambling site offering a sports book, a poker room, and a vast assortment of casino games.
Switzerland-based Oak has been around since early last year, when it began inauspiciously as a pre-launch “rug,” meaning the original founders of the project absconded before they even got to the “mint” phase when Oak Paradise was set to launch its NFTs onto the market for the first time.
Ultimately, the current team leader, a former investment banker known on Discord as Polyphemus, took control of the project last August and turned it into the successful gaming business it is today—a project with more than 30,000 registered players who have wagered a cumulative $11.2 million on various games of chance.
From a mint price of 0.66 Solana in August, the Oak Paradise floor price today is approaching 8.2 SOL. Moreover, profits that amounted to 409 SOL in Week 1 are now 2,400 SOL in Week 20, the most recent week of operations.
From those profits, Oak Paradise has distributed to NFT holders a combined 12,000 SOL, which amounts to 2.55 SOL per NFT, meaning those who bought the NFTs at launch have recouped in distributions alone nearly 4x their original cost in Solana terms…while the floor price is up more than 12x.
Not a bad showing at all, especially in the market Solana has suffered through since the Oak Paradise mint back in August. (Note: You need three Oak Paradise NFTs to participate in the revenue share, or if you own less you need to set your Oak Paradise NFT as your profile picture in Discord.)
It’s that consistent income stream that makes Oak Paradise NFTs so attractive, and which indicates why this is such an undervalued NFT. On average, each Oak Paradise NFT is collecting 0.1276 SOL per week, or the equivalent of 6.635 SOL per year…on an NFT that costs about 8.2 SOL at the moment.
That’s an annualized return from distributions of 80%. (Note: The distribution fluctuates from week to week, based on gambler activity.)
By comparison, Degen Fat Cats—the granddaddy of gaming projects, which runs a simple but hugely popular coin-flip game—currently trades at an annualized return from distributions of 53%, based on its last month of distributions. Historically, Degen Fat Cats’ annualized return has gyrated between 40% (when the project is expensive) to about 50% (when it’s relatively cheap) of the floor price of the NFT.
If Oak Paradise were to trade at Degen Fat Cats’ levels—and it has in the past—the floor right now would be more than 11 SOL, which would imply a roughly 35% gain from current levels.
Question is: Can Oak Paradise retrace to those previous highs in the 11 to 14 SOL range?
My bet is yes, which is why (disclosure) I’ve recently added Oak Paradise to my personal portfolio.
I talked to Polyphemus recently to get a feel for where Oak Paradise goes in 2023. And what the project is up to would seem to imply that bigger distributions are likely in coming weeks and months…
Gambling on Gamblers
Two of the upcoming expansions that stand out are a short-term loan platform, and a cross-chain effort that will see the Oak Paradise gaming site show up on other crypto networks besides Solana—namely, the Binance network and, potentially, Polygon.
The short-term loan platform will provide instant liquidity to gamblers who want a 24-hour loan to, well, gamble.
These are instant loans supplied by Oak Paradise at an interest rate of 1.5%. Borrowers need to put up an NFT as collateral to secure a loan. This can be an Oak Paradise NFT or one from another notable project.
Those who default will forsake their NFT to Oak Paradise, which will then sell it at the floor price to recoup the loan value, or as much of the loan value as it can.
Given that these are ultra-short-term loans of 24 hours at most, the risk that the NFT’s price will collapse is relatively limited, though not impossible. To offer some protection, the team will limit loans to 80% of an NFT’s value for most projects, though for some select, blue-chip projects it will go as high as 90%. That will create a decent buffer between loaned amount and the risk an NFT’s price begins moving lower.
The profits generated through interest accumulation as well as defaulted NFT sales will go into the pool of SOL that the team shares with Oak Paradise holders.
I would expect to see a relatively large number of defaults, which the team is expecting as well. Not sure what percentage exactly, but we’re talking about gamblers who are notorious for a “just one more bet and I’ll turn it around” mentality when they’re down…and that regularly leads to ruin.
I’d say the default rate ultimately exceeds 30%, which simply means additional income that pumps up the distributions of Oak Paradise holders.
As for going cross-chain, Oak Paradise will not be launching a new collection of NFTs, but rather porting various aspects of its gambling operations to other blockchains. That benefits existing holders because there’s no additional NFT collection to share in the income stream. Cross-chain profits will flow to Oak Paradise holders on Solana.
The first cross-chain effort—on the Binance blockchain network—should be up and running by the middle of February. Polygon, if that comes to pass, would arrive a few weeks to a month or so later.
These new sites will take a bit of time to gain traction, but I have to imagine they’ll begin contributing to increased, weekly income by the second quarter.
The short-term loan project could be generating additional income sooner, since we’re talking about a service that will immediately appeal to thousands of existing players. The project is going through some beta testing and should roll out in the next couple of weeks.
Of course, it’s impossible to gauge how both of these new projects will impact weekly distributions because there’s no way to know how quickly new players will gravitate to the Binance/Polygon gaming sites. And there’s no way to gauge yet how many gamblers will partake of the short-term loan facility, the default rate, or even the NFTs most commonly being put up as collateral.
All I can say is that I would expect to see the average weekly payout of 0.1276 SOL rise as the new projects gain traction.
To be clear, payouts are not set in stone.
They fluctuate based on how much money gamblers gamble and the price of SOL. Nevertheless, since its first payout in early September, Oak Paradise has consistently been distributing between 0.1 and 0.22 Solana per week—though there was one week where distributions were 0 because one lucky gambler pocketed $140,000 in winnings, wiping out profits that would have gone to NFT holders.
In response to that, the team has set up the Oak Fund, aimed at covering unexpected large losses and potential acquisitions. Twenty percent of weekly profits are dumped into the fund to build a cushion/war chest. So far, the fund has amassed 1,800 Solana. At current run rates, the team is pouring roughly 200 to 240 Solana per week into the fund.
In terms of acquisitions, the team has its sights set on some opportunities. In particular, it wants to add to its portfolio binary options or price-prediction games (think: wagering on presidential elections and such). That’s all still in the works, though.
The Project and Team
The knock you sometimes hear about Solana NFT projects, particularly in light of the experiences we’ve seen over the past year, is that there are “too many kids” trying to run real business for which they are not really prepared.
That’s not the case here.
Polyphemus comes out of the investment-banking world, where he served in venture capital and wealth management. So, he has history in the real world of finance.
Instead of the cost of building all the various games that populate the platform, the team has effectively rented all the games from accomplished gaming companies and, in turn, shares a portion of each game’s earnings with those builders. That makes for a quick and efficient means of rolling out product.
That also means there’s not a deep or wide moat to stop competition. But as an early mover in Web3 online gaming, Oak Paradise has a word-of-mouth advantage at the moment.
If you want to do your own research on Oak Paradise, here are the Discord and Twitter links. On Discord, pay particular attention to the “numbers” channel under the “Important Info” link. There you will see all the payouts and other data back to the project’s launch last August.
You can find Oak Paradise NFTs on Magic Eden here.
