The onchain gacha machine

The Japanese term “gachapon” is an onomatopoeia: gacha for a crank turning on the front of a toy-vending machine, and pon for the toy capsule dropping into the collection tray.

(I can’t really hear it, but I guess lots of onomatopoeias — beep, sizzle, gurgle — are not so exact, either.) 

Gachapon — the name for both the machine and the toy — is a distinctly Japanese phenomenon: charming, inexpensive, pop-culture collectibles dispensed from ubiquitous self-serve machines. 

But it’s actually an import from the US — an evolution of the vending machines that got their start dispensing bubble gum and postcards in 1880’s New York City. 

They didn’t make it to Japan until the 1960s, when they started out by dispensing American-style things: cheap plastic trinkets, like the prizes you used to get in a cereal box, aimed at kids.

Japan turned this junk into art. 

In the 1970s, the toy company Bandai had a surprise hit with a series of collectible rubber-eraser gachapon based on “Kinnikuman,” a popular wrestling manga. In the ‘80s, the inclusion of anime characters like Gundam, Ultraman, and Dragon Ball turned gachapon into a national craze. In the ‘90s, the offerings became more diverse, increasingly detailed, and higher quality. By the 2000s, the best gachapon could be described as tiny sculptures, or miniature feats of industrial design.

It wasn't just Japanese craftsmanship that made gachapon such a phenomenon, though. It was also the “gacha mechanics” that emerged: randomized rewards, limited editions, rarity tiers, and the irresistible urge to complete a set.

Each turn of the crank — gacha — delivered not just a tiny toy, but a tiny hit of dopamine, too.

Dopamine is universally popular, of course. So it’s perhaps no surprise that the addictive elements of gachapon have been catching on beyond Japan. Mostly via video games, “gacha” has become the term for a genre of online gaming: pay a small amount, pull a virtual lever, maybe get a rare character.

Now, crypto is taking this to another level.

Collector Crypt is an onchain “gacha”: put USDC into the virtual gachapon, turn the virtual crank, receive a randomized collectible — a Pokémon card, in most cases.

Its popularity has created the kind of up-and-to-the-right usage charts you don’t often see in crypto anymore: 

In hopes of winning something epic, users spent $21 million opening gacha “packs” on Collector Crypt last week. One lucky user scored a rare Mario Pikachu card this morning.

Gachapon was about tiny hits of dopamine: the toys have little, if any, resale value.

Onchain gacha is about big hits of dopamine: the Mario Pikachu card has an estimated value of $9,000.

Crypto financializes everything, gachapon included. 

Bigger prizes mean bigger entry fees, of course. Whereas turning a gachapon crank typically costs just ¥100 ($0.63), the player who won the Mario Pikachu paid 1,000 USDC to open the winning gacha pack.

Recently, Collector Crypt has been averaging about 400 daily users, which is modest — it’s mostly crypto people at this point, I think.

But they’re big spenders: the average player spends between $4,000 and $8,000 per day opening packs.

By design, much of that money is recycled. Collector Crypt automatically offers to buy back whatever card you pull for at least 85% of its estimated value. For the most expensive packs, they pay 93%.

The result is a highly effective mashup of Japanese collectible psychology, American trading-card mania, and crypto speculation.

In the name of science, I tried it.

Halfway through writing this newsletter, I connected a Phantom wallet to Collector Crypt and signed a transaction handing over 1,000 USDC in return for the privilege of ripping open a “grail pack” containing one Pokémon card (a weird kind of “pack,” that).

The machine of course knew immediately what card I was getting, but it built suspense by revealing the details one by one. First the year: 1999, which is old — that’s good! Then its condition: PSA 7 — not bad for a card of that age. And then the all-important rarity: common.

Damn.

I got a 1999 Poliwrath-Holo 1st Edition, which Collector Crypt values at $738:

The machine immediately offered to buy it back from me for $686. This is how Collector Crypt 1) makes money and 2) gets people to keep playing. 

If I sell it back to them, it will only cost me an additional $314 to take another shot at getting something epic, like the Mario Pikachu. The difference between the card’s value ($738) and the buyback price ($686) is their gross profit margin, so they want you to do that often.

“Higher recycling rates allow Collector Crypt to earn spread multiple times on the same asset,” Blockworks research analyst Kunal Doshi explains — and business is booming. “Current average buybacks per card stand at 20.5x.”

20.5 times! That means they make $20.50 of revenue for every $100 of assets on their balance sheet. I’m not even sure what to compare that to — used car dealers? Investment banks? Vegas casinos? — but it seems extraordinarily high.

(On the other hand, having your entire balance sheet invested in Pokémon cards might not be the best business model, I don’t know.) 

There’s even a “YOLO mode” that will continually buy and sell back as many as 20 packs for you until you hit a card of the rarity you want.

That is not for me. But I am sorely tempted to sell my Poliwrath and try again, because it really is exciting — what if the next one is a Mario Pikachu??

Unfortunately, my wife occasionally reads this newsletter, so I will have to exercise some restraint in the name of joint-account financial harmony. 

But I think I will keep my Poliwrath.

Unlike, say, slot machines, where the result is all-or-nothing, gacha games leave you with something of value.

In the case of Pokémon packs, it’s an appreciating asset. Collectible Pokémon cards have appreciated roughly 140% over the past two years: 

Mathematically, then, I should be break-even on my Poliwrath in 9.25 months (not financial advice).

There are lower-priced options on Collector Crypt, as well: you can buy a Pokémon pack for $25, for example, but the upside is much smaller.

After opening a $1,000 pack, paying $25 for a chance to win a card worth just $50 or $100 isn’t enough of a dopamine hit for me.

And that is how the gachas getcha: these are not gachapons selling a quirky toy. Today’s gachas sell anticipation, possibility, and emotional volatility.

It’s ridiculous, of course. I could have just paid for a collectible Pokémon card if I really wanted one. But the original gachapon are ridiculous, too (by design). And emotional volatility is fun. 

Possibly too fun.

Japan has done this to us before. They imported our national pastime, baseball, and then sent us back the first perfect baseball player, Shohei Ohtani.

Now, Japan has imported American vending machines, perfected the experience, and sent it back to us in the form of Pokémon gachas — with all the addictive mechanics of gachapon, but financialized. 

It’s good for crypto. Today’s gacha was the first onchain transaction I’ve made in months and Collector Crypt is a rare success story among onchain businesses.

But it’s bad for my bank account.

Really, I’d rather have taken a shot at an Ohtani gachapon for ¥100.

Shooting for rare Pokémon is expensive — and dangerously addictive.

(Someone please forward this to my wife so I don’t do it again.)

— Byron Gilliam

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