With every new cryptocurrency I cover, I first evaluate its utility. Enjin (CCC:ENJ-USD) is no different. I’ll get to that shortly.
In the meantime, it occurred to me that cryptocurrencies could be lining up to become the 21st-century example of defunct auto manufacturers. A quick look through Wikipedia points out close to 100 under the letter “A” alone. Under the letter “E”, as in Edsel, there aren’t quite as many. My guess is about 72.
There will be plenty of crypto casualties along the way.
Is Enjin the Edsel or Tesla (NASDAQ:TSLA) of cryptocurrencies?
I’ll consider both sides of the argument.
Enjin Is the Tesla of Crypto
Before discussing Enjin’s utility, I first want to understand how it works. According to Kraken, a U.S.-based cryptocurrency exchange, here is a brief synopsis from its website:
“Enjin’s main use case is to enable users to manage and store virtual goods for games. These can range from in-game currencies to tokens representing unique game items like swords or accessories for characters.”
It goes on to state the following about ENJ-USD:
In order to mint virtual goods, developers have to lock ENJ into a smart contract, thus assigning a value to the item. When a player acquires these items, they can either use them in games, trade them to others or sell them for ENJ, in accordance with the original minting cost.
Lastly, it points out that only one billion ENJ-USD will ever be created, so its supply is limited like Bitcoin (CCC:BTC-USD).
So, from a utility standpoint, Kraken’s arguing that game developers will buy ENJ-USD to create in-game items to make the gaming experience more exciting while also profiting from the in-game items.
A February 2018 blog post from Enjin explains how it works in five steps. As far as I can tell, the most crucial part is step five and the melting of Enjin coins.
‘Melting’ is a term used to describe turning ENJ-backed virtual items back into Enjin Coin. The process is the exact reverse of minting, with one key difference — the percentage of ENJ that can be acquired by melting an item. The percentage depends solely on the choices made by the game developer that minted the item — and it can never be less than 50%.
In March 2018, Enjin provided a blog post explaining why game developers should use the Enjin platform.
For me, it all comes down to monetization. Enjin’s platform provides four monetization models: Trading fees, subscriptions, microtransactions, and the tokenizing of games. Developers can use one or more. That’s up to them.
Ultimately, Enjin is providing open-source tools to build blockchain-powered games. As a result, the monetization potential is theoretically unlimited.
So, it does seem to possess utility. That’s a good thing.
It’s Got Edsel Written All Over It
What scares me is that I can find very few negative comments about Enjin. Not from my InvestorPlace colleagues. And not anywhere online. Everything’s hunky-dory.
InvestorPlace’s Shrey Dua discussed ENJ-USD price predictions in November. At the time, Enjin coins were trading for $3.73. It’s down 30% over the past three weeks. CoinQuora believes it could hit $15 in 2022 and $30 by 2023. That’s easily the most optimistic of predictions.
Like I’ve said in the past, cryptos remind me of lottery tickets. A few will pay off. Many won’t.
If the $30 price prediction comes true by the end of 2023, a $10,000 investment today would be worth $115,385 in 24 months. That’s a dreamy return, indeed.
Benching Enjin For Now
At this point, I don’t know enough about the inner workings of Enjin to consider a more in-depth negative spin on its utility. As I learn more, I’m sure I’ll provide a more balanced assessment. In the meantime, I can assure you that Enjin will not be the coin I buy to dip my toe in cryptocurrencies.
So, for now, I remain on the sideline.
I may never get in the game. My loss, I guess.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.