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Konvoy Ventures is a thesis driven venture capital firm focused on the video gaming industry. We invest in infrastructure technology, tools, and platforms.

Gaming x Crypto Wars

The relationship between gaming and crypto, and why Microsoft and Discord are a great match

Gaming x Crypto: Not a Good Mix for Hardware Providers

GPUs are the most important type of commercial computing technology. They are mostly known for gaming, but they are integral in heavy data processing tasks like creative production, artificial intelligence, and deep learning. Another area, and one I’m going to focus on today, is how they’ve become a staple in the crypto space. This has been a bane on gamers as they are now competing with crypto miners to buy the latest GPUs.

Crypto mining is becoming extremely lucrative with Ethereum miners generating $800M a month (The Block). This is creating a two-fold problem: limited supply and rising costs. This has pushed at least one GPU manufacturer (NVIDIA)  to build a GPU exclusively for crypto, the Cryptocurrency Mining Processor (CMP). This is a smart move because Nvidia does not want to create issues with their largest consumer customer base.

Nvidia is building out software drivers for its traditional offerings that can detect specific attributes to Ethereum mining and decrease cryptocurrency mining efficiency by around 50%. This essentially makes the product not worth the cost anymore and should push consumers to the CMP. This is still clearly in its infancy, and many people are still figuring out how to override the software to give them full access to the power of the GTX 3060 when mining. If they pushed a software driver that decreased my efficiency by 50%, I would be furious. It is interesting to see Nvidia leaning into this and building out specific products for each consumer base.

Why Microsoft is the Perfect Match for Discord

Rumors have started that Discord is exploring exit opportunities at above a $10B valuation and Microsoft is at the center of these rumors. For those who don’t know, Discord is a social platform built for gamers and has become a hot commodity as of late. Just last December, Discord raised $100M at a $7B valuation (TechCrunch). The $10B acquisition price represents a 42% increase since their last raise (not a bad return in 4 months).

While the numbers are big and catching headlines, I don’t think enough people are talking about why this is the perfect target for Microsoft. Discord gives Microsoft the perfect in to the PC community as Microsoft seeks to expand Xbox’s reach beyond console through its Xbox Play Anywhere initiative. This acquisition (if it happens) may look like a steal really fast.

Few remember that Discord has a fully functional game distribution storefront (Discord). The issue is most game developers release their games through Steam, but what if a player like Microsoft who has access to over two thousand games, Xbox Game Pass, and EA Play move to be Discord exclusives? This could be the first real competition that Steam has seen from one of the majors. Almost all of Steams players already use Discord, therefore, if the games move to Discord, what would Steam’s value proposition be to their users?

Cross-communication from PC to Xbox is another benefit that would be derived from this acquisition. As of now, if you’re playing a cross-platform game you aren’t able to use Discord or the Xbox Live parties and instead have to use the game chat. Discord could become the medium for gamers to use across games, making them more enjoyable for friends that are not playing through the same access ecosystem.