Special thanks to @AvgJoesCrypto for his fact-check and comments prior to release.

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The timeline is aflame. Everyone’s coins are down horrendous. Yet, the lads/ladettes in the trenches persist.

But, do you know what isn’t down 80% against BTC? The vibes over in Sanko. So, frens, it’s time to do some digging into just what is going right over there, while everything else seems to be going wrong everywhere else.

The Quick Lore

What sprouted from the womb as a Milady fighting game has grown into an entire ecosystem for memes, games, and social experimentation, held together by the glue of community©. The atmosphere of the community is like if you left Miladys in charge of repopulating a small island nation - it’s a chaotic hivemind of crude humor and low-res memes (and they wouldn’t have it any other way).

Today, Sanko’s tendrils extend throughout its offerings (more on these later):

• Dream Machine
• SankoTV
• Sanko Pets

Plus, they’ve just launched their own chain, an Arbitrum Orbit Layer 3, where their own token ($DMT) is used as gas, money, and for trading pairs among their burgeoning ecosystem of memecoins and NFTs. But, “what’s an Orbit L3?” you may ask.

Arbitrum Orbit L3s

As the name suggests, Orbit Layer 3s are built atop the Arbitrum L2 by default (you can also launch Orbit L2s that settle directly to Ethereum mainnet or have L3s that settle to another L2). These chains are meant to be application-specific, which is why you might sometimes hear them referred to as “rollapps.” Having your own chain gives app developers the power to tweak every little parameter exactly to their liking.

• Leverage the existing tech stack that Arbitrum has developed and proved out.
• Designate your own token (or tokens) as gas.
• Determine the blocktime of your L3 sequencer.
• Designate which virtual machines to support (EVM, SVM, altVMs).
• Designate an alternative data availability layer, such as Celestia or EigenDA.
• Specify how you want your chain to be governed.
• And much more.

Even though L2 tokens like ARB and OP have been down-only against ETH this year, fundamentals of these scaling solutions have never been better. With blobs cutting transaction fees by an order of magnitude, activity on Ethereum rollups has not looked back, hitting new all-time highs in terms of transactions per second.

And with major L2s like Arbitrum, Base, Optimism, and Blast conquering the leaderboard, you may miss a new category just peeking its head out from its shell - Layer 3s.

You’ll notice a few things about the above list:

• Arbitrum Orbit dominates the tech stack and most L3s settle to Arbitrum L2.
• Gaming, NFT, and Social apps make many appearances. After all, these types of apps may not have the strict security requirements of financial applications (which may prefer to stick to mainnet or major L2s).
• These are the early days. None of the chains have even come close to $50m in TVL, even when accounting for their own native tokens.

Sanko is an Arbitrum Orbit Layer 3 blockchain for gaming, eventually supporting both EVM and WebAssembly (WASM) virtual machines, allowing devs to write smart contracts in multiple languages and enabling in-game economies and interoperable gaming experiences (sources).

They’ve quickly risen to number two on the leaderboard of this new category. Solana had its time in the sun, perhaps it is time for Ethereum's own meme-loving chain to shine while attention drifts to L3s…

The Sanko Ecosystem

Their docs say they want “to bring the internet of value to the golden days of gaming,” and it rings true. While their methods seem haphazard, there are few corners of crypto where the inhabitants seem to be having more fun than within Sanko.

As mentioned, the chain has been on a roll recently. Since the bridge went live in May, there’s been a steady climb in TVL on the L3, pushing $18m in DMT at the time of writing.

But, what can you do over there?

Camelot - where to begin your journey

The Arbitrum-native DEX has become the liquidity hub for all things Sanko. On Camelot, you can purchase DMT on Arbitrum One before bridging it to the Sanko Layer 3. Camelot is also the main location to provide liquidity and to swap between DMT and the ecosystem’s large selection of memecoins and gaming tokens.

By the way, I recommend using Defined for charting, as it doesn’t look like DexScreener has added Sanko support just yet. …We’re so early?

The Dream Machine - where it all began

Think of the Sanko© Dream Machine as the homepage for the ecosystem. Here, you can play some games like pinball, and Tekken. You can stake your DMT and you can learn more about the project through their documentation.

Though it is in its initial stages, The Dream Machine is set to host a variety of crypto/NFT-native blockchain games. Users can use DMT as a medium of exchange for in-game items, as well as a betting token for casino-esque games.

Holders of their Streets of Milady and Sakura Park NFTs can also “charge” their NFTs on the platform, earning additional rewards and in-game privileges.

Sanko.TV - SocialFi central

Sanko.TV is the Twitch of Web3.

Here you’ll find streamers playing video games, chatting about crypto topics, sharing their music, and occasionally watching movies/TV. Not too dissimilar to the early days of justin.tv, but with a crypto-native lean. It honestly brings me back to my earliest memories of exploring the internet. And the nostalgia is real.

The onboarding process is similar to Friend Tech, where users can sign up using an email/password or Apple/Google account. Then you transfer some Arb ETH to your account and buy one of your own passes (similar to a Friend Tech key), and you’re off to the races.

Viewers can watch public streams for free, but have to hold channel keys to access private streams and chat rooms. Instead of leaving “tips” a la Twitch, viewers can send streamers boosts of, say, a Zyn (0.00025 ETH ~= $1), or a Glock (0.01 ETH ~= $35), or even a Golden Glizzy (0.1 ETH ~= $350).

Usage has been steady, but relatively muted, accounting to roughly 300-400 viewers tuning in each day. Still, I think if a couple popular podcasts or streamers tried it out, these numbers could easily improve.

SankoPets - the big guns

SankoPets is Sanko’s first flagship game, where users nurture, interact, and absolutely drip out their low-poly companions - called Buns. To play the game, you gotta have your own bun, either through buying one on a secondary market (mainly sudoswap) or hatching an egg of your own (which minted out back in May).

By holding a Bun, players are able to bond DMT to earn additional DMT, xDMT, and GOLD.

xDMT: Despite the limited documentation, the community has been able to suss out some details about this token. It’s a callback to Camelot’s xGRAIL (which can be slowly converted to GRAIL or quickly converted, but with a reduced final balance), but with some notable differences that are set to be revealed soon. Think of it like a vesting version of DMT, plus some added capabilities.

GOLD: Is the in-game currency used at the Buns market, where users can buy and sell food, seeds, and wearable items for their bun and farm. Since it is a fully fungible token, it’s freely tradeable on DEXs. GOLD will also be used in future games as well!

GOLD can also be used to spin “The Wheel”, where users could win prizes of (more) GOLD, seeds, fruits, and wearable items (or lose it all - which we are all familiar with).

Buns themselves have varying stats that can be improved by feeding them fruits from your farm or equipping them with wearables. You must keep your bun fed in order for them to avoid hibernation (different food will fill them up for different periods of time). Since buns are ERC-6551 tokens, they are basically like little wallets that “own” the items you give them. When buns are transferred, these items (and the bonuses they give your bun) come along.

Different items have different rarities, and (naturally) rarer items tend to command higher prices on secondary markets.

On top of the base capabilities in existence today, Sanko plans to add on additional functions to SankoPets on a regular cadence. It’s like Neopets, but with narcotics and capitalism. Sick.

If you’re itching to get started, recommend using Mikeeuwu’s guide here.

A sprouting meme coin economy

Perhaps unsurprisingly, when you give a whole lot of degenerates their own chain (and name it “DMT”), memes are a natural follow-on.

Daily transaction volumes are around $500k at the time of writing, which is quite impressive for a new ecosystem with less than $20m of bridged assets and relatively few tokens.  

It’s tough to attach quantitative value to an ecosystem’s “vibe,” but those that have been around awhile develop a barometer for this type of thing. If that’s you, I recommend jumping into one of the community-run telegram groups like The Sanko Sewer™ and see what you think.

The Dream Machine Token (DMT)

When The Dream Machine launched in May of 2023, their token (DMT) could be used to play their games, not unlike quarters in the pinball/arcades of yore. Back then, this token existed solely on Arbitrum.

The public launch was open to NFT holders (Streets of Milady, Sakura Park, Milady Makers, Remilio, Pixelady, Schizoposters) and xGRAIL stakers/holders first before opening up to the public. Additional tokens were set aside to incentivize liquidity for DMT on DEXs and to reward holders for locking up their NFTs and DMT.

Since the vesting for the team’s allocation (wallet) was quite quick (200 days), the majority of tokens (~60%) are already in circulation, despite how young the project is.

Gas: Now that Sanko has their own chain, DMT has evolved from a simple commodity token into a gas and liquidity token as well. Some would argue that this changes the comparables when we start talking about price considerations.

Staking: Holders can stake their tokens to receive protocol emissions (the 25% wedge above) as well as special access to games/products within the ecosystem. Note that there is a 14 day unbonding period. Liquidity providers also have the option to stake their liquidity pairs (e.g. USDT/DMT) in order to earn inflationary tokens. Finally, as mentioned above, Bun holders can also stake their DMT to receive additional rewards.

Medium of exchange: on the Sanko L3, DMT is the default trading pair for all other tokens. So when you’re loading up your shitcoining wallet, it’s not with ETH, but with DMT.

Bull Case for DMT

When analyzing ecosystem native tokens, I like to think of the ecosystem as a self-contained country, where the token represents real estate. In order to establish residency in this foreign land, you need some property (i.e. their token). As there’s more demand to move to this hip new locale, the property value increases.

In the sprouting landscape of Sanko, they’re taking a unique path, which aligns them with quite a few underexplored narratives:

• SocialFi (Sanko.TV)
• GameFi (SankoPets and The Dream Machine)
• Memes (their ecosystem of memecoins)
• L3s (they are one of the first Layer 3s)

If the vibes are good in the neighborhood, we have several hooks that could catapult DMT in market share.

The combination of these four narratives has accounted for 15-30% of the collective mindshare of the market according to Kaito AI over the past year. With definite spikes in the data, will Sanko real estate ride that wave to Valhalla?

Bear Case for DMT

It’s an understatement to say that meme vibes are down across the board. Broader market chop/drawdown has led to froth evaporating (quickly) from leading memes, and the top-callers are taking some deserved victory laps on the timeline.

DMT hasn’t been unscathed from the fallout, taking a ~50% haircut from the highs of $180, to just above $90 at the time of writing.

Network activity saw some impressive increases earlier in June, but have waned in recent weeks. I’d like to see the transaction count “find support” around 20,000 daily transactions in order to call this move sustainable.

Sanko is taking a bet that SankoPets will be their golden goose, drawing additional liquidity into the ecosystem, where it can be used to play their games and gamble on some meme coins. If interest in SankoPets starts creeping down, it may be a while until further developments revamp the hype of the network.

Our Take on DMT

First off, I’m biased - I frankly love the vision that Sanko is manifesting. Making products that are “fun” is such a breath of fresh air compared to the inane infrastructure products pushing their 1% improvements of current tech and raising at 10 figures.

Fuck infrastructure.

We need some goddamn applications to play around with.

At least what Sanko is building here dares to be different. It’s unapologetically left-curve and appeals to retail nostalgia in a way that is rare in today’s Web3 environment of the new-and-shiny.

Will Sanko succeed? It’s tough to say. We’re in the early days and it can be difficult to get the ball rolling within a new ecosystem, especially when it requires new entrants to bridge to yet another chain.

But what does it say about this industry if something like Sanko can’t survive? Let’s hope we don’t find out.