What Is WAX Crypto? Simply the Best Guide for Beginners

What is WAX crypto
What’s WAX?

Wait, stop! Stop what you’re doing right now. I’ve got something important to tell you.

If you’re not into gaming, you might not be aware that every year, people engage in millions of transactions involving virtual items online. In-game currency, virtual weapons, and character skins are just a few examples of the types of digital items that gamers buy and sell for real-world currency.

People! This market is huuuuge.

We are talking about 2Bn gamers who perform a whopping $150Bn dollars worth of transactions each year.

Now, there exists a blockchain that has been steadily gaining momentum over many years to serve this demand. The Worldwide Asset Exchange (WAX) connects a global community of collectors, traders, buyers, sellers, creators, gamers, merchants, dapp developers and game developers all on one blockchain. WAX crypto currently processes more than 3 times the volume of OpenSea. Naturally, when I found out about all of this it made me want to delve deeper.

WAX daily transactions
WAX claims to process more transactions than any other blockchain

In this post I have condensed the most important things you should know about the WAX ecosystem. I will walk you through what WAX crypto is, how it works, who its founders are and why you should keep an eye on the WAXP token. I will also share some juicy things I discovered along the way that have stirred up some controversy.

Concepts you will learn in this article: WAX crypto, gaming industry, virtual item marketplaces

Recommended pre-reading: What is Ethereum?, How Cosmos works (to understand PoS blockchains), What is Ape Coin? (to understand Non-Fungible Tokens and their history).

I propose we start by taking a look at how people have ended paying so much money for pixels.

The Gaming Industry: Why Do We Pay for Things That Don’t Exist. What Is Wrong with Us?

Back in the 90s there was a video game called Ultima Online. The game was one of the first to create virtual items that you could buy to upgrade your character in order to make it easier to win.

At the time, Jonathan Yantis was one of those players. He had accumulated a bunch of virtual goods but realized there was no place to trade them. So what does he do? He scratches his own itch. He decides to invite a friend of his, William Quigley, to join him and together they creat the first marketplace in the world that allows people to buy Ultima Online items for fiat currency.

The business expanded to other games such as Everquest & World of Warcraft. It went on to become very successful processing billions of dollars worth of transaction volume. Eventually they exited and sold the company in 2009.

WAX Founders: William Quigley and Jonathan Yantis
WAX Founders: William E. Quigley (left) and Jonathan Yantis (right). They also founded Mastercoin which was an early attempt to make something like Ethereum on Bitcoin. William is one of the co-founders of Tether, the stablecoin, and an early investor in Paypal, Kraken, Coinbase and more. He has also worked on the licensing business arm of Disney. So the dude knows his stuff when it comes to both blockchains and NFTs. You can read up more about Quigley here.

Virtual Items vs. Skins: What’s the Difference?

In the late 90s most of the trade was in virtual items. Virtual items are objects such as attire, swords and shields that give you utility in the game. Owning a virtual item increases your chances of winning. By 2010 the market for virtual goods was $10-15Bn per year.

Now, at around that time games started selling skins. Skins allow you to change how you or items in the game look. But they are purely cosmetic. The have no utility. And it’s not just about the outfit that you wear. For example, on a game called Overwatch you have loot boxes you can win that contain different lines your character can speak, different dance moves and varying sprays.

Overwatch Skins
Overwatch Skins

Added to that is the concept of rarity. The moment you make something limited in numbers it becomes waaay more valuable.

You would expect that since skins offer no utility, gamers would find them less appealing compared to virtual goods that boost powers. However, the opposite happened and the market exploded. And if you think differently about it, it can make sense. People tend to buy a limited number of things for a particular purpose. How many ski boots do you need vs t-shirts or ties?

The secondary market for skins alone is now worth $50Bn globally. On top of that, the video game industry sells about $100Bn worth of skins directly to consumers before they go in and trade them.

The Emergence of OPSkins

Swapping skins and virtual goods is a core part of the experience of participating in a game. It is the glue that connects massive online video games. You might have 1Mn people upwards playing at any time and their communal activity is to swap out items. Sometimes they want to barter and sometimes they just want cash. So naturally there was an opportunity to create something like e-bay for virtual items. And that marketplace was OPSkins.

OPSkins.com was a massively popular marketplace for trading virtual goods. Jonathan Yantis and William Quigley, our 2 friends who we saw played their cards well earlier, spotted a new opportunity. They decided to use their fresh stack of cash to buy OPSkins. OPSkins was processing millions of transactions per day. The new buyers decided they wanted to take things into a different direction by moving the marketplace to the blockchain. Their vision was for virtual items to no longer be subject to the whims of game developers but for gamers to own those items for ever. Once you owned a virtual item no one would be able to take it away from you, even if the game shut down.

So the two started experimenting with how to merge OPSkins with their new blockchain called WAX.

What Is WAX Crypto?

WAX stands for Worldwide Asset eXchange. It is a decentralized platform that enables anyone to operate a fully functioning virtual marketplace with zero investment in security, infrastructure, or payment processing. It is designed to serve the 400+ million online players who already collect, buy and sell in-game items globally.

The key word here is “marketplace”. WAX is a blockchain for marketplaces. Imagine you are a game developer and you want to make your in-game virtual items available on a blockchain. WAX is a superb option to build your game on because you can plug in a blockchain-compatible e-commerce store directly into your game. I want to walk you through the concept in a little more detail. Let’s take a look at the games first.

Games Available on WAX

Like with any new technology the established incumbents of the gaming industry are not on WAX. For example you are not going to find Counter Strike Go skins on WAX. However, you are going to find a bunch of pretty cool games that believe that blockchain is the future of gaming. To get the ball rolling WAX has partnered with a gaming Studio called Tyranno.

Tyranno studios
Tyranno studios (formerly WAX studios) are building games on WAX. Notice how the teeth of the dinosaur spell “Tyranno”.

Some of their most popular games are BlockChain Brawlers, Music Mogul, Alien Worlds And Splinterlands.

blockchain brawlers
BlockChain Brawlers is a game that was created by Richard Garfield. This guy is quite famous for creating Magic: The Gathering which is a popular card game.

But apart from games they also hook up to a bunch of marketplaces. The most ambitious of these is called vIRL

The vIRL Marketplace and How It’s Aiming for a $1.8 Trillion Market!!!

The team behind WAX have set up their own marketplace called vIRL which stands for virtual In Real Life. The reason they have used this acronym is that they plan to tokenize real world physical items.

Allow me explain with an example.

Let’s talk about sneakers. What about them?

Ever heard the term “Sneakerheads”? These are people who are so passionate about sneakers that they will go and buy limited edition sneakers just to keep them in their box and never wear them. Yeah you know who I am talking about. It’s those people who line up all night to be the first to get those limited edition Air Jordans. Now, many of these people never actually wear the sneakers. Or if they do want to wear them they buy two pairs. “One to rock and one to stock”. Those who “stock” go on to trade and sell these sneakers. The resale market for sneakers is worth about $6Bn annually. Who knew this was so massive right ?

secondary market sneaker
This shoe cost $170 to buy but sells on the secondary market anywhere between $200-$300

Anyhow, vIRL wants a piece of this pie and the way it does it is as follows: On vIRL you can buy an NFT representing the actual physical product. But vIRL stores the physical product on your behalf in a warehouse somewhere. Should you decide that you actually want to wear the shoes they will send them to you. However, most people don’t want to wear the shoes. They want to own them but they don’t want to posses them. Same goes for comic books, handbags, trading cards, you name it.

Bros! This idea is very powerful. It is catching on like fire. For many consumer products the physical asset is secondary to its non-physical characteristics. And because it is on a blockchain it negates the risk that it could be counterfeit. As a buyer you know instantly that the item is genuine because you receive an NFT.

The first item they put onto vIRL traded 224 times in 4 hours. The same number of trades would take about 3 years on eBay where physical possession of the item is required.

vIRL is building loads of partnerships in this space. Hasbro, LooneyTunes, HotWheels are just a few. They claim this market is worth about $1.8Trillion. I haven’t cross referenced this but I am pretty sure they are on to something big.

hotwheel car NFT on vIRL
When you buy a hotwheel NFT on vIRL you own the physical product and a digital representation of it.

Other WAX Marketplaces and Partnerships

Apart from vIRL there are many other marketplaces that are using the WAX platform to sell NFTs. Atomic Hub is the most popular followed by NeftyBlocks and NFTHive. You can hook up your wax wallet to any of these platforms and immediately start trading NFTs.

WAX marketplace
Top WAX marketplaces. Source: DappRadar

If you head on over to wdny.io you will see all the partnership that WAX have with brands for NFTs: Nascar, Spiderman, World Series of Poker, Power Ranger, Iron Maiden, The Princess bride movie, Topps Major League Baseball trading cards (You can find out here how to get Topps NFTs), William Shatner (US celebrity famous for acting in Star Trek) and many many more.

WAX NFT partnerships
Some of the WAX NFT partnerships

Ok so enough about the partnerships. Let’s dive into how the whole thing works.

How Does the WAX Platform Work?

There are 2 components to the WAX platform. The protocol Blockchain and the Microservice Layer.

Before we dive into each of these know that WAX originally launched on the Ethereum blockchain. However, they soon found that Ethereum did not serve their needs due to the high gas fees. WAX mostly sees low cost high volume NFTs being traded on its platform. They are not selling Bored Ape Yacht Club art costing hundreds of thousands of dollars. They are selling trading cards or virtual in-game items costing a few bucks. This means transaction fees need to be low and they need to be fast because people often need the item in a game. You should also be aware that WAX has a close relationship with the team behind EOSIO and the team behind StrongBlock.

1. The WAX Protocol Blockchain

The WAX protocol uses the same foundational technology as EOSIO. This means it is a delegated Proof-of-Stake blockchain that is Byzantine Fault Tolerant. Now I know that was a mouthful. I usually avoid too many technical terms. But, hey, if you are learning about crypto, you need to have a vague sense of what these are about. If you don’t understand any of what I have just written then I suggest you read my article explaining Cosmos crypto where I delve into this type of consensus mechanism in more detail.

The validators of the WAX blockchain are called guilds. This is taken from gaming terminology where people will group together to play in teams called guilds. Similarly to other PoS blockchains you can stake you WAX tokens with any number of WAX guilds to earn staking rewards.

One layer above the consensus mechanism sits WAX’s system for smart contracts. This is pretty similar to any other blockchain. The only thing that the WAX team brag about is that their smart contracts can generate random numbers. This is important when creating a digital collectible or NFT and a big headache for anyone building a dapp. The fact that WAX has an inbuilt random number generator is a great bonus for any dapp that wants to focus on NFTs.

2. The Microservice Layer

WAX recognized early on that dapps and blockchains suffer from a poor user experience. Hooking up a traditional crypto wallet and getting an NFT takes around 34 steps. WAX wants to improve the experience for users who are not crypto native. To do this, they have developed a bunch of tools and services to reduce friction.

Here are the core services in what they call the Microservice Layer:

  • WAX All Access: A service that allows you to sign into you wallet using existing mainstream accounts like Facebook, Gmail etc.
  • WAX Cloud Wallet: A much improved wallet experience where you just sign up with an email and can purchase WAX tokens with a credit card. More about this later
  • WAX NFT Creator: A tool that allows anyone to create NFTs on WAX
  • WAX ExpressTrade: A free, instant peer-to-peer trading service.
  • WAX Explorer: Unlike Etherscan which is just a bunch of strings showing transactions, on WAX explorer you can see a 3D image of the actual item that was traded. You can see who else owned it and how long they held it. So you have its provenance and history in one simple interface.
  • WAX Marketplace: a bunch of protocols that allow you to build a WAX Marketplace

Let me tell you a few words about the WAX wallet because it is different to other crypto wallets

The WAX Crypto Wallet

When you sign up for a WAX Cloud Wallet the first thing you do is enter your email. This is very different to using Trust Wallet or MetaMask. On MetaMask you download a browser extension and then take some unfamiliar steps to set up an account. In contrast setting up a WAX cloud wallet is very familiar.

Wax wallet sign up page
The wax cloud wallet at all-access.wax.io

You just verify your email and then you can use a credit card to fund your purchase of WAX tokens. You need WAX crypto tokens in order to purchase NFTs on the various marketplaces.

Note how there are no steps for you to generate private keys. This is because the crypto wallet and private keys are managed by WAX. Hence, this is a wallet where you can host your WAX tokens, delegate them to be staked and earn a return or use them to purchase stuff in games or NFT marketplaces. However, it is not the wallet to store your life savings in.

Having said that, WAX is compatible with both software crypto wallets like MetaMask and hardware wallets like Ledger.

OK enough with the dry stuff. Let me tell you the juicy stuff

The Major Controversy that Caused OPSkins to Shut Down

A large part of this section is from TDM_Heyzeus’s video titled How OPSkins Self-Destructed. The video is 18 minutes though so I have distilled its essence below.

When OPSkins originally launched, the majority of its volume was reliant on a game called CounterStrikeGlobal Offensive (CS: GO). This game had a massive amount of trade going on for in-game items.

screenshot from Counter-Strike: Global Offensive
Counter-Strike: Global Offensive is multiplayer shooter game

Initially, when Valve, the developer behind CS:GO, added skins to their game, they tried to create an economy. But, while you could buy skins from the game, it was a big hassle if you wanted to trade with other people. You needed to agree on a price and then go and do that trade on Paypal. However, it’s easy to get scammed on Paypal because anyone can always do a charge-back.

The Birth of OPSkins

Recognizing this limitation, two guys sitting in Montreal saw an opportunity to create a secondary marketplace. Using CS:GO’s trading function and bot accounts they created a site called OPSkins that allowed people to safely sell their skins for real cash.

With CS:GO blowing up this led to OPSkins becoming enormously successful. OPSkins literally dominated the scene making an immense amount of profit by providing a lot of value to the community: Within their first year they had over 900K users and had sold more than 2.8Mn skins. Many of the guns were selling at around $15 with the most expensive item to trade on OPSkins going for $8K.

screenshot of OPSkins website
This is what the OPSkins website used to look like before it shut down

However, in the background some problems starting to stir. At the time, a legally dubious industry started to emerge that allowed gambling sites to use skins as currency. Here is how this worked.

Gamblers would buy skins off OPSkins. Then they would go and use that skin as currency on a gambling site. As expected, most of the time they would usually lose. That’s just how gambling works. Next, the gambling site would take the skins that users lost and sell them to the next fool who came along on OPSkins. As a result OPSkins started making incredible amounts of money.

But with skins playing a pivotal role in an unregulated industry openly used by minors, Valve ordered its partners to cease and desist. After all it was their product and they had a say in how it was being used.

WAX Crypto Enters the Scene

Now, in mid 2017, our friends Jonathan Yantis and William Quigley enter the scene. They acquire OPSkins and start tweaking it. At around the same time they also raise about $40M through an ICO for their WAX token. But soon after, some of their investors sue them. Part of the allegation was the investors had been duped in raising money in order to fund gambling operations. Let’s explore this a little further.

To counteract the gambling issue, in March 2018, Valve introduced a 7-day cool down on any traded item. This made it much harder for the gambling industry causing heaps of sites to shut down. One of OPSkins’s competitors claim they saw a massive 75% drop in turnover. This suggests that Valve’s cool down restriction must have also hit OPSkins revenues hard.

WAX ExpressTrade

At around the time OPSkins launched WAX ExpressTrade which allowed people to trade skins on their platform and even had an API that gambling sites could use for their own purposes. Valve saw this as OPSkins trying to circumvent their systems. They viewed it as a direct violation of their terms of service. In this Reddit post one of OPSkins competitors calls them out. Eventually, Valve disabled the OPSkins trade bots in June 2018.

Valve blocks OPSkins
Valve blocks OPSkins

This must have been a major blow to business for OPSkins. In what is thought to have been a desperate move to counteract the impact WAX deployed VGO, a cryptocurrency based skins system. You could buy an NFT skin for CS:GO but you could not use it in CS:GO. This solution was also used by gambling sites.

Gambling sites using VGO
Gambling sites using VGO at the time

Later, in September 2019, OPSkins launched a peer-to-peer marketplace. However, by then, they had lost all credibility in the market and the business didn’t really take off.

Finally, in January 2020 OPSkins was shut down for good. Once the most dominant CS:GO marketplace was now no longer available. If you try to visit their site it leads to a 404 error.

OPSkins shuts down
OPSkins shuts down

In their whitepaper, the WAX team describe the debacle as a clash of mindsets between a closed-system way of thinking and the new era of permissionless systems that WAX is spearheading. They said they had to choose between being beholden to Valve’s platform or to launch into “our own blockchain future”. Today WAX ExpressTrade is just part of the WAX Blockchain mainnet.

I leave you to draw your own conclusions.

Right, next let’s talk about the WAX token and do a price prediction and we will wrap up.

The WAX Crypto Token

Looking at the WAX coin in detail will completely do your head in. It is so convoluted and complicated that it took me a day to figure it all out. Not to worry though. I have distilled it all below

The native token on WAX is the WAX procol token: WAXP. There’s 3 things you can do with WAXP:

  1. Buy stuff. WAXP is the primary token for value exchange on WAX. You use it to execute e-commerce transactions within WAX-blockchain-based games and to buy NFTs on the various marketplaces. Also, WAXP coins have up to 18 decimals so they are well placed to handle micro-transactions in the future. (As an aside, a good example of a crypto project that uses micro-transactions is CLM coin).
  2. Stake it to earn a return. When you stake your WAXP you earn rewards dependent on how active you are with voting. If you vote weekly then your rewards are maximized.
  3. Vote on governance proposals. The more WAXP you hold the more voting power you have and thus the more you can influence decisions. You can check out some of the current proposals on WAX Labs’s website.

Other WAX Crypto Token Types

There are some other tokens that are connected to WAXP. The first is WAXE which stands for WAX Economic Activity token. Remember that WAX launched its ICO on Ethereum. Users were able to exchange those tokens for WAXP for a period of time. WAXE tokens have nothing to do with the original tokens on Ethereum. However, should anyone want to move their WAX tokens and use them in DeFi applications on Ethereum they can burn their WAXP tokens and convert it to WAXE. Confused ? Me too.

To make matters even more complicated there is even a WAXG token. This is a governance token for Ethereum-based WAX DeFi projects. Sorry that’s all I could dig up on it.

Finally, you may come across the term Genesis WAX Protocol tokens. Or GBM (Genesis Block Member) tokens. These were tokens that were part of a program that ran between July 2019 and July 2022 to reward the guilds and stakers. Today all GMB tokens have been converted to WAXP tokens so no need for further confusion.

The WAXP token has a maximum supply of 3.9Bn and a circulating supply of 2.3Bn. It’s annual inflation is at 5% which is used to reward stakers and guilds.

WAX inflation
WAX annual inflation is 5%

WAX Price Prediction

WAXP is currently trading at $0.07 with a total market cap of $168Mn . It reached an all time high on the date of its launch in December 2017 peaking at $4.6. But this was exactly at the point where the ICO craze peaked and the crypto market started to turn bearish. The WAXP price has been way below its all time high ever since. In November it made a small come back climbing back to $0.90.

WAXP price
The best place to check out the live WAX price today is on coinmarketcap.

So if you disregard all technical analysis there is a massive upside to be gained even if WAXP climbs to a portion of its previous all time highs. Let’s looks at some of the fundamentals.

We have:

  1. A strong team. These guys have been successful before. They understand the gaming and blockchain space well.
  2. A size-able volume of transactions. Whatever your opinion on the OPSkins controversy the WAX team seems to be on to something what with vIRL virtualizing physical goods, big name partnerships and the high traffic quality games built by Tyranno.
  3. A pretty cool wallet that is designed for normal non-crypto savvy users

I hate making price predictions. The only thing that is certain is that they are wrong. However, when you compare the market cap of WAX to other gaming blockchains such as Axie Infinity, Decentraland and The Sandbox then WAX seems to be grossly undervalued. For example, Axie Infinity is valued at $800K currently. If WAX’s market cap were to reach half of that then its token price would have to go up by 2.4 times.

As always don’t take my writing for investment advice. Please do your own research when it comes to managing your financial well being and don’t get all hyped up with just one article you read.

Conclusion

William Quigley says that NFTs will permeate all of humanity. Just like software is important to everyone so too will NFTs play a big role in our lives. A lot of people think of NFTs as images or sound or video files. But an NFT is way more than that. An NFT is a computer that you can send to somebody else that will execute a program and do something. The only limit here is your imagination.

For a taste of what is to come consider AMC Theaters who airdropped NFTs to its shareholders. Imagine getting an NT that is a membership card for information and voting but also that bestows certain privileges such as getting access to premiers and so on. Or imagine a social media influencer who prints limited edition stickers to her fans. She could embed an exclusive video or logic that the 50th person to trade it gets a prize. And those ideas are going to sound common and uninteresting in a few years.

WAX wants to be at the forefront of this revolution. Most blockchains are general purpose blockchains. In contrast, WAX was purpose built for NFTs. It’s been created for millions of users and is scaling rapidly. With its sharp focus on improving the user experience, I think WAX has set itself up for success and I am excited to see how it evolves next.

Useful resources

WAX Crypto FAQs

Is WAX an Ethereum?

WAX was originally issued on Ethereum but they changed their minds and moved to their own blockchain which is similar to EOSIO.

Is WAX a coin or token?

Technically WAXP is a coin in the sense that it is the native token of the WAX blockchain. However, these terms are use interchangeable and people just refer to WAXP as the WAX token or WAX protocol token.

Is WAX a metaverse crypto?

No it's better to think of it as an NFT marketplace crypto. WAXP is used on a bunch of marketplaces that sell NFTs. These NFTs could be gaming related and maybe in the future they will be used in some metaverses but currently I wouldn't describe as a metaverse crypto.