What are Xai's Advantages in the GameFi Field?

Team and Advantages

As a layer 3 chain built on Arbitrum Orbit, Xai is developed by Offchain Labs and supervised by the Xai Foundation, with Ex Populus serving as a specialized game developer and early partner on the platform.

What are Arbitrum Orbit and Layer 3?

Arbitrum Orbit is a Layer 3 (L3) infrastructure that introduces parallel processing. Typically, L3 prioritizes high customizability and scalability, sacrificing partial security for cheaper and faster transactions. L3 is actually akin to what projects like BEAM (a subnet built on the Avalanche chain) or Immutable zkEVM (a collaboration between Polygon and Immutable X) are building.

Xai is just one of many L3 chains on Arbitrum Orbit. However, Xai is considered the direct “offspring” of Arbitrum Orbit because it was developed by Offchain Labs, the team behind Arbitrum. It receives direct technical support from L2 and has a different roadmap, vision, and ambition than other L3 chains on Orbit.

How Does Xai Work?

Highly Customizable: Developers can freely choose the settlement layer

As an L3 chain, development teams for games can select any L2 chain in the Arbitrum ecosystem for settlement. If they use trustless data designs like Anytrust, costs will be lower, involving Data Availability Committees (DACs) (Learn more here on Gate Learn). If they choose Rollup technology, running Sentry nodes is necessary.

Resolving the Dilemma of Rollup Protocol Validators

Sentry nodes are used to monitor Xai’s Rollup protocol, ensuring the network’s integrity. Users can run a Sentry node on their personal computers or laptops to participate in verification and receive rewards. We will explain how to participate in the “Airdrop” section below.

Sentry nodes work like this:

Users purchase a Sentry Node Key and register it with Xai’s Referee contract to become trusted challengers. Then, Users can start running nodes, periodically publishing and asserting statements related to their operation. These statements are checked by the Referee contract to see if they meet the conditions. If they are correct, the challengers running these nodes will receive rewards.

This mechanism is designed to address the problem of lacking incentives for validators. With every new transaction on Xai, the state records maintained by the Rollup protocol change, requiring a validator to update these states. In Sentry nodes, once assertions are created, they directly determine the next assertion’s state record, which can be computed by any node. Therefore, node operators are motivated to try to compute the next correct assertion every time.

Advantages

What problems traditional GameFi often faces are primarily performance and mechanism issues. Performance issues involve high thresholds for wallet interaction, gas fee costs caused by frequent on-chain interactions, and network stability (such as downtime). Mechanism issues include an excessive emphasis on monetary gains (X-to-Earn), steep learning curves in economic models, and a lack of creative designs for games.

Currently, Xai mainly presents the strength of Arbitrum in infrastructure, focusing on solving the aforementioned performance issues. It adopts the specialized technology stack within the Arbitrum ecosystem to enhance game adoption, which shows its advantages:

• As mentioned earlier, it allows game teams to highly customize the L3 infrastructure Orbit based on their needs.
• The Stylus technology stack can write WASM contracts that are much faster than Solidity (e.g., Rust/C++). There are two benefits: (1) The increasing contract execution speed makes use cases previously considered impossible on the EVM now feasible. (2) Developers familiar with other languages (Go/Move/Solidity, etc.) can now easily migrate entire DApps to the Arbitrum ecosystem.
• Nitro and BOLD: Nitro enhances Ethereum compatibility, and BOLD enables faster settlement by using its permissionless verification/post-challenge mechanism.
• Xai seamlessly integrates with compatible ETH wallets on Arbitrum and is developing account abstraction features. It aims to enhance wallet experiences for the public through social recovery functions via email/social accounts.

Investor Analysis

According to research reports from Greythorn Asset Management, Xai has undergone three rounds of token private placements from 2021 to 2023, with participating institutions including Animoca Brands, CMS Holdings LLC, Outlier Ventures, Fisher8 Capital, Asymmetric, and Akatsuki. Five out of the seven aforementioned institutions also invested in the game developer Ex Populus mentioned below. The three fundraising rounds garnered approximately $10 million, with XAI priced at $0.01, $0.032, and $0.035 per token, respectively.

Gaming Applications on the Xai Chain

Ex Populus is a specialized game developer and early partner on Xai, with members including industry veterans from renowned companies such as Pixar, Ubisoft, Activision, and Blizzard.

The official statements describe the relationship among the Xai Foundation, Ex Populus, and its games as follows: The Xai Foundation acts similarly to Activision, overseeing and supporting various projects within the Xai ecosystem as the overall organization. It sets the overall vision, goals, and guidelines for supported game developers. Ex Populus, on the other hand, is similar to Infinity Ward. It is entrusted to create the final form and bring it to fruition as a specific development studio that is responsible for designing, developing, and promoting games based on the direction set by the Xai Foundation.

At present, Ex Populus has some games undergoing development and migration stages, with no games officially launched yet. Final Form and LAMOverse are the most typical of the games in development.

Final Form

Final Form is the first game on Xai. The team collaborates with artists, celebrities, and athletes to create a cross-domain collectible card game, evolving NFT card sets, and a diverse metaverse trading system.

Players can purchase Iron Pigeons card sets in collaboration with boxing legend Tyson or hand-drawn style DAG card sets on the NFT marketplace and play and stake them in Final Form. Currently, both card sets are created based on Solana’s ecosystem NFT projects and will be bridged to the Xai mainnet in the future.

Tarochi

Tarochi, developed by Paima Studios using the Paima Engine, is a game that combines monster catching and RPG elements. It officially launched on the Xai mainnet on February 16th and leverages the account abstraction layer developed jointly by thirdweb and Paima Engine. In its first week on February 20th, Tarochi recorded an impressive performance with over 1 million transactions and over 8500 participating players.

LAMOverse

LAMOverse, produced by LAMO, is an action/shooter game in the development phase where players participate in multiplayer battles as NFT avatars. The game is associated with the physical LAMO toy brand and has released NFT projects and popular streaming gaming projects like Ninja and DrDisrespect.

Carnivale

Carnivale, developed by Ex Populus, is an open-world platform action game in the early stages of development. Set in a future century, the game explores how information influences and controls humanity, presenting one of the main dilemmas humans face.

Competitive Analysis

Overall, Arbitrum is not considered very dominant in the GameFi arena. If we only consider the adoption of technology stacks, referring to the graph, we can see that in 2023, the OP Stack of Optimism had the most chains chosen, and most games were deployed on chains adopting Starkware.

Game 7 Research Report 2023

In terms of the total number of games deployed within a specific ecosystem, Arbitrum ranks seventh, trailing behind Immutable. Considering the strategic partnership between Immutable and Polygon, Immutable stands as the strongest competitor deployed on Layer 2 ecosystems.

Game 7 Research Report 2023

One of the examples illustrating Arbitrum’s late momentum in GameFi is the subsidy proposal initiated on February 16, 2024, in the Arbitrum Foundation forum. Currently, the Arbitrum ecosystem lacks comprehensive gaming incentive measures, known as The Gaming Catalyst Program (GCP). In contrast, other players in the field, such as Immutable, RONIN, and Polygon, have invested hundreds of millions of dollars in incentive measures to attract developers and early adopters. Due to most funds being held in the Arbitrum DAO within the ecosystem, they also need to draft subsidy proposals for community discussion and resolution.

Therefore, given the lag in ecosystem development, Arbitrum’s current strategy is to concentrate on nurturing Xai. For game developers, this involves developing infrastructure and technical stacks to enhance the development experience and actively promoting incentive proposals to provide incentives. For ordinary players, efforts are directed towards actively developing features such as account abstraction and wallet integration.

Xai’s partner, Ex Populus, also believes that blockchain technology in the GameFi track should primarily be deployed on the backend. The team should abstract complex on-chain interactions as much as possible (such as connecting wallets and staking) to enable traditional Web2 gamers to enjoy the benefits of blockchain without encountering technical barriers that affect the gaming experience.

Tokenomics

According to the official documentation, the maximum total supply of $XAI and $esXAI tokens is 2.5 billion tokens. Gas fees within the ecosystem are paid in XAI and burned. The daily issuance of $esXAI depends on the total supply of $XAI and $esXAI, with the issuance rate dynamically adjusted based on the supply threshold. The daily issuance will begin to decrease once the total supply reaches approximately half of the maximum supply. 85% of the $esXAI issuance supports Sentry nodes, while the remaining 15% is allocated to gas subsidy nodes to improve user experience. Node issuance is expected to halve for the first time within 5-6 months after the Token Generation Event (TGE).

Token Utility

$XAI serves as the Token of Record on the Xai blockchain. Its utility aligns with the traditional token utility on popular L1 and L2 networks, used for paying Gas Fees on L3.

$esXAI is a token used for staking and obtaining other rewards. There is a 30-day unlocking period to unstake $esXAI. Users can stake $esXAI to gain governance rights, including participating in proposals for the DAO/Foundation vault.

Exchange Unlocking Period

$XAI and $esXAI can be freely exchanged with each other. The exchange process includes an unlocking period, with the duration being chosen by the user. The exchange rate increases with the rise in the exchange period, requiring a minimum exchange period of 180 days to swap XAI and esXAI at a 1:1 ratio (100%).

Initial Token Allocation as Described in the Official Documentation

Initial Token Distribution

Team: 20% of the total supply was allocated to the core team and early contributors. This will be released 6 months after TGE and fully released within 36 months, totaling 42 months.

Investors: Investors purchased 22.41% of the total supply in early rounds. This will be released 6 months after TGE and fully released within 24 months, totaling 30 months.

Ecosystem: 2% of the total supply is allocated to liquidity providers, immediately released at TGE. 5.5% of the total supply is allocated to the ecosystem, which will be released 6 months after TGE and fully released within 36 months, totaling 42 months.

Airdrops

Around August 2023, XAI began to release tasks on Galxe for NFT minting and social account interaction. On January 9, 2024, it was listed on major exchanges including Gate.io/Binance, igniting market enthusiasm. On the same day, the XAI mainnet launched, and Season 1 airdrop commenced, primarily rewarding early NFT holders and Sentry Node Key holders.

XAI allows independent node validators to run nodes on their own devices. Validators can obtain two kinds of rewards: (1) receiving esXAI as a reward; and (2) expecting airdrops.

One needs to hold a Sentry Node Key to run a node on the device and participate in the airdrop. Sentry Node Keys can be purchased through the official website, which are actually NFTs. Initially, there were 3000 Keys available (out of a total of 50,000) which are priced at 0.13E. Considering Season 1, users who hold this Key alone can receive an airdrop of 1658 $XAI, approximately worth approximately 0.59E at current prices. On February 10, 2024, XAI announced the Lunar New Year airdrop (the Year of Loong), with each Key receiving 88 $XAI, and an additional 8 $XAI for each additional key held.

A point to be noted is that even after purchasing a Sentry Node Key, users need to ensure they have enough funds to pay gas fees for the Sentry node they operate to receive rewards. Therefore, users intending to run multiple nodes for airdrops also need to take account of this cost.

Sentry Node Keys purchased through the official website will rise in cost with the increase in FDV. As of the time of writing, the cost of one Key is 1.43E.

Screenshot from the Official Website

Conclusion

According to the roadmap, Xai’s primary goals for 2024, besides actively expanding partnerships, are to release benchmark games led by Ex Populus to attract more developers.

Xai’s resources demonstrate Arbitrum’s intention to double down on the GameFi track. The price of its token, $XAI, was previously anticipated to break $1. Recently, with the upward trend in ETH prices, it has surged to nearly $1. Additionally, the progress and detailed content of grant proposals submitted by the Arbitrum Foundation to the DAO, including how the grants will benefit Xai’s development and which projects in the ecosystem will receive the grants, are also highly noteworthy.