The wind of "drawing cards" has finally blown to ETH, but why can it rise more fiercely than TCG projects?

Written by: Cookie, Rhythm

Last month, we detailed the narrative of on-chain TCG cards, where "drawing cards" is nearly the current second-largest crypto-native "money printer" after Hyperliquid and pump.fun:

"CARDS increased 5 times in 2 months, is on-chain TCG cards another significant narrative after HYPE?"

And last week, the wind of "drawing cards" finally blew to the ETH mainnet. A new protocol named Fake World Assets, which has been live for just over a week, has already generated approximately $1.3 million in revenue, ranking 15th on the list of crypto application revenues over the past 7 days:

At the same time, the protocol token $FWA went from an initial market cap of about $47,550 to a peak market cap of about $38.8 million, an 800-fold increase. Meanwhile, Collector Cards, while still maintaining a strong revenue momentum, has seen its token $CARDS drop from a high point of nearly $90 million market cap a month ago to just about $28.87 million now.

Why?

The Play of FWA

The team behind FWA, TokenWorks, should not be unfamiliar to everyone. Their previous popular project was "PunkStrategy," which peaked at a market cap of $300 million within a month.

However, TokenWorks doesn't always produce popular projects. The last project TTT (Ten Thousand Tokens) was launched around the mid-to-late phase of the Uniswap v4 hook craze, and the gameplay was basically a launchpad where you could only issue tokens if you held NFTs. The total number of NFTs was 10,000, corresponding to which only 10,000 tokens could be issued, with fees distributed among the token issuer, all NFT holders, and the protocol.

Because it didn't produce a popular target, the NFTs plummeted shortly after launch.

This time, I initially missed FWA, thinking it was just a simple "NFT drawing cards" play. However, it designed a token flywheel, allowing $FWA to grow exponentially.

The $FWA token cannot be directly purchased externally. To obtain this token, one must "draw cards."

The NFTs in this pool are voluntarily deposited by players. When depositing NFTs, players must also deposit ETH as bilateral liquidity. This means that each player depositing assets is essentially opening their own pool.

The more ETH deposited, the smaller the probability of drawing the corresponding NFT. For example, for this CryptoPunk, there is 276 ETH paired with it, leading to a drawing probability of only 0.0000061%, meaning that it would take over 10 million draws to be drawn. Since the protocol began operating on July 3, there have only been a total of 73,884 draws, averaging over 3,000 per day.

It can also be seen that the depositor of this CryptoPunk has already earned 12.7213 ETH in just over a day. This income comes from:

- Each time someone draws, a fixed fee of 1% is deducted

- If someone draws a satisfactory NFT and chooses to keep the NFT, 1% of the income generated from the depositor of that NFT is deducted

- Most players draw general NFTs and will immediately sell this NFT back to the corresponding depositor at an 85% discount; this price difference forms the income

As for how much each player depositing NFTs and ETH into the protocol can earn, it does not depend on the size of the assets deposited, but rather on how long the deposited NFTs can last in the pool. If the deposited NFTs are not drawn, they can continue to share profits. If they are drawn, the dividends cease, and new NFTs must be deposited.

To ensure that their NFTs last longer in the pool, players need to deposit more ETH, which incentivizes the pool to become increasingly thick.

At this point, we can give a clear summary: this is very much like an NFT AMM with an added drawing card mechanism.

The Flywheel of FWA

The most interesting aspect of the protocol token $FWA is that it cannot be directly bought from external markets. To obtain this token, one must earnestly play this NFT gacha machine.

50% of the total amount of the token is used to add initial liquidity, 30% is allocated for the first half-month of emissions (1% every day to asset depositors and drawing players), and 20% is early snapshot airdrops.

The most common way to acquire $FWA is by drawing cards, and as we mentioned earlier, when players draw NFTs they don’t want, they can sell them back to the NFT depositors at an 85% discount. At this time, they can choose to either take back ETH or receive $FWA (the protocol automatically converts the returned ETH into $FWA).

Most players choose to receive $FWA after selling back undesired NFTs. Data shows that in the past 7 days, up to 82.3% of operations chose to sell back immediately to obtain $FWA after drawing, especially in the early days when the token price hadn't started. However, in recent days, as the price of $FWA has risen to a high and entered correction, the choice of immediately selling back for ETH is gradually increasing, yet the option to obtain $FWA still accounts for over 60% in a single day.

If we directly convert the cost of acquiring $FWA, we find that each draw is actually of negative expectation, and the actual cost of obtaining $FWA through drawing is higher than the $FWA price for the day, which constitutes a premium purchase.

However, if one holds onto $FWA after obtaining it instead of selling it directly, during the period from July 20 to 23, every draw to exchange for $FWA was essentially a printing of money. This is similar to the past experiences where users participated in Blur airdrops despite price fluctuations; they were betting that the tokens would take off subsequently, using time to gamble on space. But there is a notable difference because this game has a much shorter gaming cycle and is ultimately a competition for attention – if this mechanism can quickly gain attention, as long as there is incremental participation to draw cards, there will be substantial buying pressure for $FWA. Subsequent participants will continuously push up the holdings of those who already held $FWA.

This is also why FWA was able to surpass the market value of Collector Cards in a very short time. Both have card-drawing as their core gameplay, and the core revenue comes from immediate repurchase discount prices. Even the drawing content of Collector Cards (Pokemon cards) has a broader appeal than NFTs, and the profit performance is better. However, the utility of Collector Cards’ tokens is widely criticized by the community. Aside from the project team's buybacks (which have been delayed due to the Clarity Act not passing), the utility of Collector Cards’ tokens is almost zero.

Even the previously large daily buybacks from pump.fun were not well-recognized by the market, let alone the buyback intensity of Collector Cards, which is much weaker.

Conclusion

The flywheel of FWA is likely to be difficult to sustain in the long term. When the token price rises, everyone will rush to draw cards and praise this great innovation that saves NFTs. But once the token price falls, the losses from drawing cards cannot be covered or generate excess returns by the continuous rise of $FWA, and this protocol will gradually be forgotten, leading to a sudden halt in the "great revival" of NFTs.

However, the more valuable lesson we can glean from this is that profitability is a narrative that can easily be forgotten in the cryptocurrency market. If we understand the relationship between attention and buying pressure conversion, we might be able to avoid a lot of situations where people get trapped at the peak.