Both players and shareholders, the multiple values ​​behind L3E7 game NFT

The crypto market as a whole has continued to recover recently, and various tracks have ushered in small bull markets of varying degrees.

Among them, even in the NFT market, where the trading volume has dropped to freezing point, sales have increased by 64% in the past month; at the same time, in the game track related to NFT, the token prices of multiple projects have gradually bottomed out.

But does this mean that the value of game-related NFTs has returned?

After experiencing fluctuations, market participants may now be re-evaluating the value of NFTs. In the previous cycle, there was a surge of pure avatar NFTs. However, in the current cycle, these NFTs rely solely on concepts and consensus, which may not have a lasting impact. As the NFT market gains momentum, competition will intensify, and NFTs without continuous value input will consequently lack competitive advantages.

As players become more cautious, savvy, and comprehensive in comparing the value of NFTs, what other stories can be told about NFTs? What other value can be attributed to them?

The DeFi neighbor next door, the narrative of “real income” emerged in the previous cycle, meaning that projects have tangible income support, which empowers the tokens and causes them to rise faster under positive expectations.

Wouldn’t it be more attractive if NFT projects also had real income behind them, allowing NFT holders to also benefit?

Currently, NFT projects indeed need expectations of multiple values. An NFT can simultaneously be a bragging right, a ticket, and a proof of ownership. NFTs with multiple values naturally attract attention in the market.

Recently, a game project called L3E7 sold out 600 NFTs within a few hours. As of the time of writing, the floor price is also maintained at around 6 ETH.。

If we want to explore the reasons for its popularity, from the surface information, it appears that holding L3E7 NFTs allows for sharing long-term rewards in the game, such as airdrops, in-game rewards, and testing qualifications.

But how is the “sharing of game revenue” actually implemented?

We have seen too many projects where, when deciding whether to participate, we often use vague and abstract factors to convince ourselves, without seeking a deep understanding of the business model and profit distribution behind the entire project.

L3E7 has gained some popularity in the rising NFT market, so what we need to research more is: What are the specific gameplay mechanics of this game? What are the key factors that determine the profits that NFT can receive?

There is currently very little information available about the L3E7 project in the market, and there is a lack of research on the business models of such games. Therefore, in this issue, we will take L3E7 as an example to clarify the operational model behind the concept of “NFT empowerment” and explore the feasibility of the profit sharing model for NFTs from game revenue.

A NFT Holder and a Shareholder

Any transaction involving an NFT is a reflection of the digestion and anticipation of all known information. What basic information is available about L3E7?

Based on the current project’s social media and official releases, L3E7 is an open-world RPG game based on Location-Based Services (LBS). It immerses players in a 3D metaverse world through map graphics rendering technology.

The most interesting part is that L3E7’s metaverse is based on real-world cities on Earth, where you can experience well-known landmarks and cityscapes, all presented in a cyberpunk art style.

The combination of numbers and letters, L3E7, actually implies the sci-fi worldview of the game:

In astronomical terms, L3 refers to the third Lagrange point, which is outside of Earth but aligned with the Sun in a straight line. The planet E7 near that point is Earth’s twin, presented in a 1:1 scale. L3 also signifies the central symmetrical relationship between the two planets with the Sun as the center.

Clearly, the intention of the project is to recreate the real-world environment through the game.

For example, players can freely explore, battle, and grow their characters under landmarks such as the Tokyo Tower or Eiffel Tower in the L3E7 world. As part of the game’s ecosystem, there are currently 600 NFTs called L3E7 Worlds, with different levels of rarity, serving as the highest-level passes in the L3E7 game.。

In addition to these basic information, the additional value of NFTs is the focus of this article:

In L3E7, NFTs are not only game tickets but also shareholder equity certificates - holding NFTs allows for sharing the game’s profits.

But how exactly are the profits shared?

To answer this question, we need to clarify at least two key questions:

First, what is the business model and revenue logic of games like L3E7, that is, how can they generate income?

Second, in what form and proportion are the game’s earnings distributed to NFT holders?

To facilitate understanding, let’s take a look at the logic behind traditional entertainment projects and Web2 games.

• For an amusement park, the size of its revenue depends on the product of “number of visitors” and “ticket price”. The more people come to play, the higher the admission ticket price, and the higher the amusement park’s revenue.
• For a Web2 game, its revenue depends on the product of “active users” and “user payments”. The more active players the game has, the higher the price each individual player is willing to pay, and the higher the overall revenue of the game.。

Web3 games, although the nature and presentation of assets have changed, the revenue behind them follows the same logic - L3E7’s game income depends on the number of users and the amount each user pays.

Although the game has not yet been launched, it does not prevent us from discussing and estimating.

• How many users come to play: Games based on location services (LBS), such as the well-known Pokemon Go, utilize the positioning capabilities of mobile phones to enhance game features. According to the latest Appannie statistics, Pokemon Go has 3,000 daily active users. Therefore, in theory, a similar game type like L3E7 can also be compatible with PCs, allowing Web2 and Web3 users to access it using their mobile phones. The user base for L3E7 is obviously larger compared to purely web-based or PC-based gold mining games (you can perceive this difference by comparing StepN and gold mining games).
• Amount paid per user: Based on the gameplay revealed in L3E7, there are common treasure chests, weapons, props, and experience upgrade systems. These elements are typically linked to in-game resource consumption. Web2 players can invest by recharging fiat currency (commonly known as krypton gold), while Web3 players can use token exchange to make asset purchases.
• How profits are distributed: The specific share ratio of holders holding NFTs may change based on market conditions. By utilizing Web3’s token economy and governance, L3E7 can allow the community to decide the specific form of profit sharing through voting. This can include options such as ETH, game tokens, or other scarce NFTs.

Therefore, rather than saying that NFT holders in L3E7 are players, it is more accurate to say that they are “shareholders”: by holding NFTs, they bind profit-sharing rights and share in the profits of established game business models.

This design gives NFTs real value beyond storytelling, governance, and so-called consensus.

In terms of practical implementation, the number of active addresses (users) and the transaction entries and total value of users’ assets can be seen on the chain, which to a certain extent ensures that the amount of profit sharing has objective basis and does not become a completely opaque operation.

In summary, for existing NFT Worlds holders and potential investors, it is not necessary to understand the complex details of the business model mentioned above. It is sufficient to observe the number of active users and the payment value after the game goes live to roughly assess the value o​​f the NFTs.

If you are a “shareholder” of this game, then the next question of concern must be: Is the market large enough to ensure considerable and sustained revenue sharing?

The awakened LBS game market has promising revenue

If you are a “shareholder” of this game, holding NFTs entitling you to profit sharing, the next important question would be: Is the market large enough to ensure substantial and sustainable income sharing?

For a location-based service (LBS) game, the number of people who will come to play is closely related to the infrastructure. The overall trend of entertainment going mobile is undeniable, as most of our leisure time is spent on our phones. Moreover, with the improvement of network speed (such as 5G) and the increasing level of intelligence in mobile devices, the LBS-related games and entertainment industry is a continuously growing market.

Industry research shows that the current LBS entertainment market in the United States alone has a value of over $500 million, with a compound annual growth rate of over 26% for the entire market. If a Web3 game can be operated properly, even occupying a tiny share in it may bring tremendous changes to the project itself and the industry.

And if there are doubts about Web3 games or pure blockchain games, similar Web2 games have actually proven the market demand and payment potential of LBS games. Looking back, for example, with the support of a huge IP, the user payment volume of Pokemon GO increased year by year before the pandemic, and in 2020, global players’ spending in the game reached $1 billion.

And coincidentally, this year another AR+ LBS game based on the popular action game Monster Hunter, called “Monster Hunter Now,” achieved a revenue of 20 million dollars within half a month of its launch. This to some extent reflects the market’s recognition of the combination of LBS games and popular IPs.

We can see from the above trends that the LBS game market is broader than traditional PC games and has been awakened by the promotion of major IPs.

However, in the world of Web3, similar games are still in a vacuum.

With the decline of the pandemic and the economic downturn in some regions, Web3 games can also share a piece of the huge LBS entertainment market under the blessing of new asset models and interest orientation. In the previous cycle, the popular StepN cannot strictly be considered a complete LBS game, as it only combines some positioning characteristics and became popular.

This also indicates that Web3 games can take a share of the mainstream market cake, and more importantly, meet the common needs of players in different regions. Under the premise of ensuring a certain level of entertainment, they can also generate income from assets.

Based on the current promotion of L3E7, its game graphics and quality are even better than Pokemon Go and Monster Hunter. Although it does not have the strong appeal of these two IPs, with appropriate promotion, the game can still tap into more niche markets and even attract the attention of mainstream players.

For Web2 users, if they can enter the game and have a good experience without being aware of encrypted assets, through certain operations and user acquisition strategies.

For Web3 users, the gaming track has undergone reshuffling during bull and bear cycles, making players more attentive. Under the pursuit of profitability, they naturally pay attention to higher quality games.

In addition, the additional traits of the Web3 community also benefit the expectation of gaming revenue during bull market cycles.

Although the absolute number of Web3 users is relatively small, both the popularity of StepN’s running shoes and Axie’s pets have proven that the traits of profit-oriented individuals determine a potentially higher willingness and amount to pay for games.

Finally, based on the above logic, we make a theoretical calculation.

The profit that L3E7 NFT holders can share depends on the number of active players in the game x the amount of payments;

Taking the top mobile game Genshin Impact as a reference, public information shows that its average user income (ARPU) is ¥15 Yuan. Assuming that the ARPU of each user in the L3E7 game is only ¥5 yuan (less than 1U), the daily active game is only ¥10,000 yuan. According to conservative calculations, its daily gaming income can reach ¥50,000 yuan.

If L3E7 acquires 20% of Pokemon Go users, it will reach 6 million daily active users. Assume that the ARPU of each user is 5 yuan and the daily game revenue is 30 million yuan. After excluding operating costs, 20% of the profit If you take it out and share it with Nft Holders, it will also be a very large piece of passive income.

Therefore, from an overall perspective, with a large segmented game market and the willingness to pay Web3 users, the author believes that the profit sharing expectations of L3E7 NFT holders can at least guarantee the lower limit.

However, as for the upper limit of game revenue, it depends on the extent to which the project expands the Web2 market. The specific implementation remains to be seen later.

When empowering NFT becomes a trend

The trend of empowering more profits is evident in the second half of the competition between gaming and NFT projects.

Not only L3E7, but other NFT projects are also exploring similar avenues. For example, The Grapes, created with a well-known IP, also distributes profits to NFT holders, and the floor price of NFTs remains stable.

For pure Web3 brands like the PFP project, their communication follows the law of generating influence from within to outside. Expanding into more mainstream markets takes time and is not necessarily the main goal on the first day of the project’s launch. On the other hand, games like L3E7, which can be experienced by Web2 users without any difference in the category, require simultaneous impact from both within and outside the community from Day 1, making market expansion relatively easier.

At the same time, the gaming category itself benefits from economies of scale, and as the user base grows, the marginal cost decreases. Having an additional user does not require an equivalent increase in costs; instead, it can lead to more profits as the user base expands.

The association of NFT revenue sharing with overall game revenue also means that the size of the market determines the value of NFT entitlements. Once the market expands and monetizes, it can easily provide tangible benefits to holders. Therefore, combining LBS games with NFT revenue sharing is at least a good direction in terms of storytelling, as the business model can be tested and the target market is large enough.

From storytelling to action, we look forward to the future execution and operation of L3E7, hoping it can create another climax in the gaming industry.

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