Understanding Immutable: A Comprehensive Overview

Key Insights

• The Immutable Group, creator of Immutable X, recently launched Immutable zkEVM. Both platforms are designed to optimize for blockchain gaming ecosystems and NFT marketplaces, offering end users a zero-gas experience.
• Immutable is among the top Ethereum gaming ecosystems regarding daily active addresses, with Immutable zkEVM recording over 300,000 and Immutable X registering 19,000 daily active addresses.
• In Q1 2024, Immutable zkEVM added over 75 games in development, with some games like Hunters On-Chain averaging over 110,000 daily unique wallets.
• Immutable zkEVM enables developers to integrate smart contracts directly into their games, paving the way for the next generation of blockchain gaming.
• Immutable Platform, including Passport, Checkout, and Orderbook, offers unique value propositions to both users and developers by providing natively comprehensive tools for a seamless all-in-one gaming ecosystem.

Introduction

Blockchain gaming has long been touted as one of the biggest catalysts for the mass adoption of crypto. With value propositions such as full ownership of in-game assets, data security, and cross-game interoperability, GameFi has seen consistent growth in mindshare and investments. However, early attempts at bringing crypto to gaming ran into problems such as slow transactions, sky-high fees, and clunky user experiences.

Immutable is a blockchain gaming platform focusing on Layer-2 solutions for the Ethereum ecosystem launched with the goal of addressing these issues that were holding back GameFi. Immutable’s founders saw the potential for NFTs in gaming and began building Gods Unchained on the Ethereum L1 network. After quickly discovering Ethereum’s limitations at the time, e.g., Proof-of-Work consensus mechanism, low transactions per second (TPS), high gas fees, etc., the team developed the first Layer-2 and ZK-rollups for NFTs with Immutable X in 2021. Immutable X is the first Ethereum L2 optimized for blockchain gaming and NFT marketplaces, optimized for the end user experience with zero gas fees.

As crypto gaming grew on Immutable X, users began looking for new gaming experiences, and developers became increasingly interested in blockchain game development. To capitalize on these trends, Immutable announced the launch of Immutable zkEVM. Immutable zkEVM was developed to offer a comprehensive and robust onchain gaming experience to both users and developers, focusing on EVM compatibility, low cost, massive scalability, and Ethereum security.

Background

In June 2018, Fuel Games (now Immutable) was founded to address digital asset ownership in gaming. Its first project, Gods Unchained, quickly exposed Ethereum's limitations for high-volume gaming transactions. This challenge led to the development of Immutable X, a ZK-rollup solution created in partnership with StarkWare.

Launched in April 2021, Immutable X aimed to become efficient enough to process 200 million daily trades while using only 30% of Ethereum's capacity. Since its launch, Immutable X has processed approximately 300 million transactions, averaging ~254,000 transactions per day during that time. In early 2023, Immutable announced its next major project: Immutable zkEVM. Its mainnet is set to launch in phases, with the first one having occurred in Q1 2024. Immutable zkEVM represents the company's continued efforts to advance blockchain gaming infrastructure. Following Immutable zkEVM’s launch, Immutable now supports over 320 games in development and 25 live titles.

To date, Immutable has raised over $314 million, including an undisclosed amount in its latest strategic round, which was led by Framework Ventures.

From its origins in addressing a specific gaming problem to becoming a significant blockchain technology provider, Immutable is now one of the leading platforms in the blockchain gaming sector.

Infrastructure

The Immutable Group comprises two main components: Immutable X and Immutable zkEVM. Immutable has developed other products to its technological stack, including Immutable Nexus, Immutable Passport, Immutable Checkout, and Immutable Orderbook.

Immutable X Overview

Immutable X is a Layer-2 ZK-rollup built on the Ethereum network designed specifically for blockchain gaming and NFT marketplaces. Immutable X’s main value proposition is providing gamers with a scalable, zero-gas experience. So, Immutable X partnered with Starkware to build using its StarkEx-based scaling solution known as zk-STARK proofs. Immutable X leverages these zero-knowledge (ZK) proofs, specifically ZK-rollups, to achieve scalability while maintaining security. Doing so allows information to be transferred without revealing the underlying data.

The system batches multiple transactions and generates cryptographic proofs to verify their validity without revealing specific details. This ZK-proof and compressed transaction data are submitted to Ethereum, where a smart contract verifies and updates the blockchain state. This process allows Immutable X to handle thousands of transactions offchain while only submitting a single proof to Ethereum. As a result, Immutable X can significantly reduce gas costs and increase throughput while maintaining Ethereum's security guarantees. As an added benefit, Immutable X minimizes its carbon footprint by over 99% through batching transactions. Immutable then offsets the remaining energy footprints caused by NFT minting/trading by purchasing an equivalent amount of carbon credits.

Immutable X’s REST APIs and software development kits (SDKs) provide tools that allow users to mint and trade NFTs and developers to build onchain games without having to interface with smart contracts. For users, these tools automatically translate simple actions like "create NFT'' or "transfer asset" into the necessary blockchain transactions, managing gas fees, transaction signings, and interactions with smart contracts. On the developer side, the SDKs offer pre-built components and functions that encapsulate blockchain logic. These allow developers to integrate features like NFT minting, trading, and ownership verification using familiar programming patterns.

Immutable zkEVM Overview

Immutable zkEVM is an EVM-compatible ZK-rollup explicitly designed to optimize the onchain gaming experience for users and developers. This solution combines several key technologies to address the challenges of blockchain gaming.

• EVM compatibility ensures that developers can use familiar Ethereum tools and languages, enabling an easy porting of existing Ethereum-based games and assets.
• The ZK-rollup architecture allows for high transaction throughput and lower fees by processing transactions offchain and submitting cryptographic proofs to the Ethereum mainnet.
• And lastly, by focusing on gaming optimization, Immutable zkEVM has introduced simplified onboarding processes and tools for managing in-game assets.

By combining these elements, Immutable zkEVM created an environment where blockchain games could operate with the speed and cost-efficiency of traditional games.

Execution

Immutable zkEVM operates as a Clique-based single sequencer. It runs on a customized Go-ethereum (Geth) client with 2-second block times and single-block finality via a Proof-of-Stake (PoS) Byzantine Fault-Tolerant (BFT) architecture. The cloned Geth client provides a framework for building and deploying customized blockchain networks. This framework allows Immutable to tailor its infrastructure to the specific needs of gaming applications, such as fast block times and low latency. To further optimize for the high-frequency, low-value transactions common in gaming, Immutable zkEVM operates in validium mode. This mode significantly reduces transaction fees by storing transaction data offchain while maintaining security. Previously, Immutable zkEVM underwent a regenesis during Testnet from its Polygon Edge framework to a Geth-based client. Key design decisions include:

• Building on Ethereum: Immutable zkEVM retains EVM equivalence by making minimal changes to the Go-ethereum RPC layer, benefiting from active upstream modifications and fixes from Ethereum.
• Single-block finality: Achieving finality every 2 seconds eliminates the risk of chain forks or reorganizations, which is crucial for maintaining game state consistency.
• Single sequencer: Initially, a single sequencer ensures stability and security, supported by resilient and redundant infrastructure. There are plans in place to enhance system resiliency while maintaining single-block finality.

RPC-Level Controls

Immutable zkEVM enhances its security and compliance through strategic RPC-level controls. These measures include a comprehensive transaction blocklist, which is maintained to adhere to international regulations around sanctioned addresses or contracts associated with malicious activities. This proactive approach helps safeguard the ecosystem and its users from potential legal and security risks.

Additionally, Immutable zkEVM implements a deployer allowlist system, which restricts the ability to deploy contracts to a select group of vetted entities. As of writing, the list is limited to Immutable itself, chosen game studios, and trusted ecosystem partners. However, the allowlist is designed with flexibility in mind. As the ecosystem matures, the allowlist should expand gradually in order to balance security concerns with the need for ecosystem expansion.

Consensus

Immutable plans to implement Byzantine Fault Tolerance into Immutable zkEVM, ensuring safety and liveness. BFT ensures that a system can continue to function correctly even if some nodes fail or act maliciously. Immutable needs this ability in order to maintain consistent game states and protect player assets. For consensus to be reached, all honest nodes must agree on one output. Thus, BFT guarantees both safety (all honest nodes agree on the same value) and liveness (the system continues to make progress), which are essential qualities for the fast-paced environment of blockchain gaming.

Bridge

Immutable zkEVM's current bridge to Ethereum consists of two main parts: 1) an application layer that handles specific asset transfers and interactions, and 2) a general message-passing component that allows for broader network communication. By leveraging Axelar's permissionless PoS network, Immutable zkEVM benefits from a secure and decentralized bridging solution that's already established in the blockchain ecosystem.

However, Immutable has plans to develop a native bridge with Polygon Zero. This development aims to create a more tailored and efficient bridging solution, offering improved speed, security, and cost-effectiveness specific to Immutable zkEVM's needs. A native bridge could also provide enhanced features for game-specific assets and interactions, further solidifying Immutable zkEVM's position as a gaming-focused Layer-2 solution.

In Q2 2024, Immutable announced a partnership with LayerSwap to dramatically improve deposits on Immutable zkEVM from all major centralized exchanges and L1s, as well as Immutable X. With LayerSwap’s added functionalities in Fast Multichain Bridge and CEX Deposit, users can bridge ETH to Immutable zkEVM with approximately 10% of the cost and time of previous methods. Soon after, Immutable announced its integration with Squid Router to allow users to bridge to Immutable zkEVM directly from any EVM or Cosmos chain.

Prover

Immutable zkEVM uses a cryptographic prover system to ensure the integrity of transactions and state transitions on the network. This system generates cryptographic proofs that verify the correctness of all computations and state changes, providing an additional layer of security beyond the consensus mechanism. By implementing such a prover, Immutable zkEVM can maintain security even in extreme scenarios where a supermajority of validators might be compromised.

The team is evaluating two potential prover solutions from the Polygon ecosystem: Zero (Type 1) and Hermez (Type 2/3). The choice between these options will be based on their compatibility with Immutable zkEVM's specific requirements and their cost efficiency, as the team seeks to balance strong security with practical operational considerations. Note that the Immutable team plans to post a deep dive with more detailed insights into the architecture of Immutable zkEVM.

Immutable Nexus

Immutable Nexus is Immutable's solution to the varying needs of game developers across the spectrum, from indie studios to AAA publishers. This system comprises the public Immutable zkEVM chain and multiple dedicated zkEVM chains, each leveraging the same core technology stack.

The primary value proposition of Immutable Nexus lies in its ability to offer game-specific chains while maintaining ecosystem cohesion. Immutable Nexus features a cross-chain liquidity service, implemented via a set of APIs. This service facilitates seamless fund movement between chains within the Nexus, aiming to create a unified user experience with aggregated balances and rapid inter-chain transfers.

Immutable Nexus addresses several key considerations for game developers:

• Scalability: Having dedicated chains offers uncontested blockspace for high transaction volumes.
• Customization: Developers being able to tailor chain parameters such as validator sets and block sizes.
• Monetization: Having custom ERC-20 tokens for gas and staking present potential revenue streams.

Despite these offerings, Immutable recommends that most developers start on the shared Immutable zkEVM and only migrate to a dedicated zkEVM for increased scale or customization. This approach allows teams to focus initially on game quality and user experience. As of Q2 2024, Immutable has not disclosed specific adoption metrics or performance data for Immutable Nexus.

Developer Tools

Immutable’s full-stack platform offers users and developers a unique experience in blockchain gaming.

Immutable Checkout

Immutable Checkout is the all-in-one payment and transaction infrastructure. It is designed to optimize the user experience and improve monetization for game developers on Immutable zkEVM. Immutable Checkout is a comprehensive solution for connecting users to third-party onramp/offramp services, facilitating NFT minting, and enabling primary and secondary sales transactions.

The system comprises two main components: widgets and an SDK. Widgets are specialized UI components tailored for quick integration with Immutable zkEVM into web-based games and marketplaces. These include essential tools like the Connect widget for wallet linking, the On-ramp widget for fiat-to-crypto purchases, and the Swap widget for token exchanges. The SDK provides client-side helper libraries, including gas fee estimations and wallet connections, that power these widgets and enable advanced UI customization, reducing development effort for partners.

To simulate a Web2 experience and lower entry barriers, Immutable partnered with Transak, embedding it within Immutable Checkout as the primary payment solution provider. This integration allows Immutable to support fiat payments, over 170 cryptocurrencies, and local payment methods across more than 160 countries. Crucially, Transak enables Light KYC integration, allowing users to execute certain transactions without repeatedly going through full KYC processes. This feature is particularly valuable in blockchain gaming, where transactions are typically smaller and more frequent.

Immutable Checkout also supports integration with Immutable Passport, extending its functionality across all Checkout widgets for Passport users. This connection between Passport and Checkout further streamlines the user experience within the Immutable ecosystem.

The widgets are designed for fast time-to-market, simplifying Web3 complexities while offering customizable UI components. They can be styled to match different themes, ensuring a cohesive look across various games and marketplaces. Furthermore, Checkout widgets are compatible with various wallets and providers through Web3Provider integration, expanding options beyond the default supported wallets.

Immutable Passport

Immutable Passport is Immutable's native non-custodial wallet and authentication solution. It is designed to optimize user experience and reduce acquisition costs for developers within the Immutable ecosystem. It addresses two critical challenges in the Web3 gaming space: complex onboarding processes and security concerns.

Passport implements a single sign-on system that allows users to authenticate simply by using familiar social logins or email and password combinations. The system utilizes the Magic SDK by Magic Labs to generate the user's associated private key, which is then stored in an Amazon Web Services Hardware Security Module (AWS HSM). Doing so ensures robust security without compromising user control.

For developers, Passport offers various advantages. It acts as an Open ID provider, using the Open ID Connect protocol for authentication and authorization. This allows third-party applications, such as games or marketplaces, to integrate Passport into their platforms for user authentication and wallet access. Immutable provides SDKs for Unity and Unreal, facilitating straightforward integration into game experiences. As of writing, Immutable Passport has onboarded over 1.9 million users.

Once created, a single Passport grants users access to all games and marketplaces within the Immutable ecosystem. This cross-game compatibility promotes user retention and simplifies asset management across multiple games. Also, Passport users exclusively benefit from potential gas fee sponsorship by the games and marketplaces they interact with. This feature significantly lowers the barriers to entry for new players, addressing one of the major obstacles in blockchain gaming adoption.

Immutable Orderbook

Immutable's Global Orderbook is designed to facilitate the listing and exchange of digital assets across marketplaces, prevent liquidity fragmentation, and enhance secondary monetization for developers. This system caters to various stakeholders in the blockchain gaming space, including content creators (game studios), asset buyers and sellers (players and investors), and marketplaces.

The Orderbook's primary function is to enable efficient and secure transactions while enforcing protection for content originators through royalty fee accrual. This is achieved through smart contract implementation that adheres to the ERC-2981 standard for NFT royalty specification.

Key features of the Immutable Orderbook include:

1. Order Management: Users can retrieve listings from collections or specific listing details. Sellers can create fixed-price listings for NFTs, while buyers can place bids, indicating their intent to purchase at a maximum price.
2. Transaction Execution: The system supports buying NFTs at listed prices, including checks for ERC-20 allowances and royalty enforcement.
3. Enhanced liquidity: Orders are shared among all supported marketplaces, leading to more than 50% of orders being fulfilled on non-origin marketplaces.

The Orderbook enforces a fee structure that includes royalties, maker/taker marketplace fees, and protocol fees. Notably, the buyer always pays the transaction fees, which are deducted from the execution price. This ensures sellers receive their base asking price, while creators and the ecosystem benefit from each transaction.

Royalty enforcement is the cornerstone of the Immutable Orderbook. By leveraging smart contracts and the ERC-2981 interface, the system automatically calculates and distributes royalty fees to creators or rights holders upon each resale. This mechanism incentivizes the creation of high-quality content by ensuring creators continue to benefit from the value generated by their work over time.

Tokenomics

IMX helps facilitate the broader Immutable ecosystem. IMX is the native utility and governance token of the Immutable protocols. The IMX token is issued by the Digital Worlds Foundation. As of writing, IMX has a total token supply of 2 billion, a circulating supply of 1.48 billion, and a fully diluted market cap of $3.69 billion at a token price of $1.85. Of note, IMX is subject to burning due to gas payments.

The full distribution breakdown is as follows:

• Ecosystem Development (51.7%): Rewards for users and developers contributing to the ecosystem. Users earn IMX tokens through protocol interaction, while developers may receive grants. Allocation for the Immutable zkEVM ecosystem is yet to be specified.
• Project Development (25%): For core infrastructure development (Immutable Passport, mainnet, testnet, etc.). One-year cliff, monthly unlock over four years.
• Private Sale (13.8%): For institutional and individual investors. Unlock complete.
• Public Sale (5.4%): ICO crowd sale. Unlock complete.
• Foundation (4%): Allocated to support the ecosystem development.

The IMX token serves four key functions within the Immutable ecosystem:

• Fees: Regardless of the currency used to make a transaction, 20% of the protocol’s transaction fees are converted to IMX on the open market. The remaining 80% can be paid in ETH or any other currency supported by Immutable’s ecosystem.
• Gas: IMX is the main currency for gas for Immutable zkEVM. Games and marketplaces can abstract these gas fees away from the end user, as they would cost the teams approximately $500-$1000 per 100,000 users every month. Immutable plans to sponsor all gas fees until the end of 2024, after which developers will be encouraged to sponsor the gas fees for their users.
• Staking: Tokenholders can stake IMX on the Immutable X network to earn part of the transaction fees pro rata, with staking rewards being paid out in IMX. (Note: Immutable X stakers will eventually migrate to Immutable zkEVM)
• Governance: All tokenholders can vote on governance proposals, and those who own a certain threshold amount can submit a proposal for voting. Potential proposal topics include approval of developer grants, adjustments to daily reward distributions, and potential changes to token supply.

Voting power is proportional to token holdings, with balances considered across both Layer-1 and Layer-2. Notably, a minimum token threshold is required for submission, although it should be noted that Immutable has not yet determined the minimum token threshold). The Immutable Foundation serves as a facilitator in the governance process, curating proposals and suggesting items for consideration. This structure allows for a balance between community-driven initiatives and strategic guidance from the core team. Governance activities occur on Ethereum Layer-1, and once a proposal is passed, it will be implemented subject to technical and commercial feasibility.

Although Immutable X users are not directly charged any gas fees for using the network, Immutable X charges a 2% fee on primary asset sales and a 2% fee on secondary sales. Immutable zkEVM will optimize the end user experience similarly, as users who use Immutable Passport will pay zero gas fees for using the platform. Games, marketplaces, and other applications built on Immutable zkEVM will instead sponsor gas fees for users to ensure stakers are still rewarded for securing the network.

Network Activity

With Immutable’s continued focus on developing the Immutable zkEVM, users and developers are following en masse. As a result, Immutable X’s daily active addresses have seen no significant change, keeping an average of 19,000 daily active addresses since Q4 2023. Meanwhile, since the launch of the Immutable zkEVM testnet in Q4 2023, Immutable zkEVM’s daily active addresses have quickly grown to 229,000 as of writing. While Immutable X has only seen significant spikes driven by various game-related events, including events related to popular games such as Illuvium. Immutable zkEVM has seen stable growth since the launch of its testnet.

Security and Decentralization

IMX stakers on Immutable X seem to be holding firm. Over 80% of the total amount staked has remained from approximately $227 million to $186 million since Q4 2024, despite an almost 40% decrease in IMX price from $2.27 to $1.47 during that same timeline. During this time, some of Immutable X’s most popular games migrated to Immutable zkEVM, reflecting Immutable’s primary focus of attracting more users and developers to the Immutable zkEVM ecosystem.

Ecosystem

NFTs and Gaming

From Q4 2021 to Q2 2022, Immutable X experienced a few notable spikes in NFT average daily trading volume following significant announcements. Immutable X saw its first large spike in average daily trading volume due to the launch of its first pfp NFT collection, Moody Krows. Daily average trading volume then peaked in Q4 2022 at almost $4.5 million after the release of Book Games. At the beginning of Q2 2022, Immutable X announced its partnership with OKX and MetaX NFT Marketplace, leading to a significant spike in daily average trading volume. Following a downward trend that started in Q3 2022, the average daily NFT trading volume on Immutable X fell over 80% from approximately $1.57 million to $300,000 as of writing. During x month, there has been an average daily trading volume of around $333,000.

Immutable hosts a shared order book, allowing many NFT marketplaces to support the Immutable ecosystem, led mainly by TokenTrove, Rarible, OKX, Sphere, and AtomicHub. Notably, GameStop recently shut down its NFT marketplace built on Immutable X in Q1 2024, two years after its partnership announcement with Immutable X in Q1 2022. Immediately following the Immutable X and GameStop partnership announcement via a $100 million grant in Q2 2022, GameStop sold $47 million worth of IMX, resulting in IMX plunging 23% within 24 hours.

Gods Unchained is Immutable X’s first-ever game, with an all-time leading NFT trading volume of over $398 million. Gods Unchained is a digital trading card game that has its own native token, GODS. The token is used to primarily incentivize its play-to-earn rewards for players. Since peaking at an all-time high of approximately $252 million market cap, GODS has dropped nearly 80%, sitting at about $53 million market cap. However, Gods Unchained averaged approximately 8,500 unique buyers and a monthly average trading volume of just above $11 million in Q2 2024, placing it among the top Web3 games this year.

Continuing in stride, Immutable zkEVM is onboarding a record number of developer teams and games to build out its ecosystem, with over 100 games in development being added in Q1 2024 alone. Some top games include:

• Hunters On-Chain: a play-to-earn action RPG developed by BoomLand Games. It recently migrated to Immutable zkEVM from Polygon mainnet in Q1 2024. Now, Hunters On-Chain averages over 110,000 daily unique wallets.
• Guild of Guardians: a co-op dungeon crawler mobile game. Since migrating from Immutable X to Immutable zkEVM in Q1 2024, Guild of Guardians has done over $2.3 million in NFT sales.

There are many upcoming games that aim to take full advantage of the Immutable zkEVM infrastructure, including:

• The Red One: an extraction third-person shooter being developed by Overtake using Unreal Engine 5.
• Pixelmon: a monster collecting IP being built by MON Protocol.
• Treeverse: a free-to-play open-world MMORPG developed by blockchain gaming studio Endless Clouds.

Many new gaming platforms are also similarly being onboarded onto Immutable zkEVM to give its users and developers a holistic blockchain gaming experience, including:

• MARBLEX: the dedicated blockchain gaming platform of Netmarble, a South Korean gaming platform, and its suite of existing blockchain games such as Ni no Kuni and Meta World.
• Ubisoft Strategic Innovation Lab: the dedicated analytical research arm of Ubisoft that works with emerging technological, business, and social trends via studying, testing, and prototyping.

Beyond game development teams and gaming platforms, Immutable now partners with 80 dApps and service providers as of writing.

Roadmap

Growth Strategy

Beyond technical improvements, the Immutable ecosystem is focusing on fostering ecosystem growth for both developers and players. Immutable has partnered with Digital Worlds Foundation to launch The Main Quest, a rewards program valued up to $50 million in IMX for users who play games, collect NFTs, or explore quests on the Immutable zkEVM ecosystem. A pilot group of 10 games is leading The Main Quest, with more games coming soon.

To attract more developers to the blockchain gaming ecosystem, Immutable announced in Q2 2024 that it will join King River Capital and Polygon Labs to form the $100 million Inevitable Games Fund (IGF). The three parties will work together to find promising game studios and blockchain infrastructure projects that will contribute to GameFi’s continued development.

Phase one of the Immutable zkEVM mainnet release began in Q1 2024 with early access, with plans to continually unlock phases over time.

Closing Summary

Immutable developed the first Layer-2 scaling solution for gaming NFTs and marketplaces with Immutable X. The platform has been home to some of the most popular play-to-earn games and NFT collections. Immutable now focuses on creating a more robust EVM-compatible platform to allow developers to incorporate smart contracts into their games with Immutable zkEVM. Following their recent developments, Immutable is continuing to build towards the future of blockchain gaming platforms.