The Top-Level Get-Rich-Quick Game - Exploring the New Flywheel and Governance Models of Web3 Games

With the recent recovery in the market, some interesting projects have emerged before our eyes. It also presents practical cases following web3 game design theories such as IAT (In-app Taxation) and BLOG.

So, this article aims to accomplish two things:
1) Take Gas Hero and Lumiterra as examples to illustrate the new flywheel of web3 games under the IAT business model, that is, the top-level get-rich-quick game.
2) Take Gas hero, Lumiterra, and Crypto Raiders as examples to analyze the governance model in web3 games.

If you are not familiar with the concepts of “IAT” and “BLOG”, please read our previous research reports (thanks to Jason and Kydo for their help in making these cutting-edge theories possible):

• IAT - Leaf Ventures
• BLOG - Kydo & Aiko

The Theory and Shortcomings of IAT

We’re happy to see that in-game taxation is taking hold as a means of monetization. As we have described, the total value of in-game value carriers * transaction turnover rate is expected to greatly increase the value of the entire life cycle of the game, bringing higher value to both ecological participants and game companies.

During the previous IAT research report writing process, we focused on describing how to transform traditional closed/semi-closed economic design thinking into a tax-based business model and its corresponding gameplay, in order to increase trading activity and tax revenue.

However, due to the limitations in the practice and theory of web3 games a year ago, we did not continue to describe what these “taxes” should be used for, forming a closed loop and more effectively supporting the long-term expansion of an ecosystem.
Previously, our imagination of taxes was limited. We saw that sufficient taxes and cash flow could support the team in developing the next project and constructing the entire ecosystem (look at Axie Infinity and STEPN now), but we did not envision or mention that taxes could actually serve as a powerful incentive layer and always exist within the game, forming a larger flywheel.

Before we get into the main topic, we should also agree on a major premise - the sense of purpose in web3 games.

Maslow’s hierarchy of needs in web3 games is completely different from traditional games. While the top level is still about gaining social recognition and admiration from thousands of people, in traditional games, this recognition may come from dealing 999 damage or having a fancy winged mount, while in the world of crypto, most of the admiration comes from envy of the myth of getting rich quick.

Therefore, the correct way to incentivize the ecosystem flywheel through taxes is to allow top players to fulfill their desire for wealth through organic in-game transactions and become objects of envy for all players.

Next, we will explore this point more deeply through the games Gas Hero and Lumiterra.

The New Flywheel For Web3 Games

Gas Hero

The Gas Hero game is a placement-based SLG game with five Gameloops. When players play in different Gameloops, they will drop various assets, which represent the most important power system for players besides heroes (weapons, pets, and various upgrade items). These assets can be combined into 1 unit of NFT and traded on the secondary market when there are 100 of them. At the same time, the official provides auction houses in different regions to sell goods that may be scarce in the area.

So, the first type of player -“Brick mover” There are players who use lower-level heroes to play various game loops, buy goods from the auction house, and sell them in the P2P market for arbitrage. The large transaction taxes of these players (50% of the auction house tax and 4% of the P2P market tax) have become the source of funds for the IAT reward pool.

As players continue to pursue higher returns and power, there are two stages that gradually differentiate players into “official players” and “PvP players.”

For official players, in areas below the city, they must use force to become leaders through intense PvP battles. In areas at or above the city, to become leaders, they must participate in elections and donate a large amount of GMT to compete for a top 15 world ranking. The higher the donation, the greater the chance of success (probability lottery). Therefore, the game for players is to donate more GMT to ensure they stay within the top 15 and increase their chances of winning by increasing their donations.

For PvP players, PvP is already a major game element. In order to compete for the donation prize pool, they must fully equip themselves, refine strategies, and optimize their formations. The extensive purchase and consumption of heroes, pets, and equipment promote the trading market and activity, allowing lower-level players to have a steady income (APY 30%~50%).

As shown in the figure, the entire flywheel is driven by an increasing number of NFT transactions, which generate abundant tax revenue, boost the reward pool for official players, and further incentivize players to donate more funds during official elections (higher donations lead to higher winning probabilities). The gradually accumulating donation funds also serve as rewards for PvP, attracting players to participate in PvP competitions. PvP players, in order to upgrade themselves with weapons, will become the main buyers of NFTs, bringing a huge and solid buying demand to the marketplace, further encouraging players to produce NFTs in the game and engage in buying and selling through auctions.

Ultimately, Gas Hero successfully utilizes two bonus pools, a trading platform, and an auction house to precisely incentivize three types of players and continue operating.

Lumiterra

The design of the Lumiterra game is actually very similar to the design presented in IAT: three gameloops correspond to three professions, but the growth of each profession must rely on resources obtained by other professions in the corresponding gameloop. This interdependence is seamlessly integrated, while maximizing commodity trading. Lumiterra has chosen a commodity-based economy society to present this interdependence, making it easier for players to understand, and farming simulation games (such as Stardew Valley and Animal Crossing) are also the longest-lasting category.

The motivational flywheel in the game can be simply summarized as:

1) In the game, players naturally generate a large number of transactions, and the transaction taxes are paid as rewards to DeFi users providing liquidity. The more players and transactions occur in the game, the more stable the APY returns for DeFi players providing stablecoin and $LUA liquidity outside the game;

2) This DeFi user also needs to interact with the DeFi protocol. The protocol benefits from buying and selling friction and slippage, and uses these proceeds to pay the basic bonus of the AMM lottery pool. More and more DeFi users interact with the AMM prize pool. getting higher and higher;

3) The high prize money also motivates gamers to collect specified materials in the game and mint them into lottery tickets to participate in the lottery, providing a large number of buy orders for players of the game content.

4) Moreover, participation in the lottery by gamers will be the biggest resource consumption point within the game, with approximately 60% of resources permanently consumed in this process. Additionally, the 5% tax generated by the lottery AMM will also be added to the prize pool.

If we remove all the intermediate links, it is essentially game content players that motivate DeFi users, and DeFi users motivate gaming players. Gaming players are the largest buyers of NFT and the largest consumer of in-game resources, so content is once again motivated. player. The ecological flywheel completes the closed loop.

If we assume that game players can earn an APY of around 10-30% by buying and selling NFTs to make a profit, then the APY for DeFi users depends on their operational methods and the volume of in-game transactions, which could range from 50% to 150%. Lastly, the APY for lottery players could potentially exceed 200%.

Therefore, the game always operates by leveraging a highly probabilistic excess return to incentivize all ecosystem participants, while providing them with their deserved long-term and stable returns as the ecosystem expands.

Summary

Through the analysis of Gas Hero and Lumiterra mentioned above, we can identify some commonalities in both games: \
1) The excess return bonus comes from real transactions and taxes in the game, while all other designs revolve around “how to increase transaction frequency and friction” and “how to design the linkage relationship between various types of players.”

2) The game always mobilizes some ecological participants with a small probability of excess returns, and at the same time gives other participants long-term and stable returns that match their labor as the ecosystem expands.

For example: Lottery players can expect a return of over 200%, while regular NFT players can expect an APY of around 30%.

3) Players who have the opportunity to obtain excess returns must consume the most game resources in the form of gaming, and the entire process will become the largest sink.
For example: Officials’ donation game and PvP game in Gas Hero, and the lottery game in Lumiterra. To drive the process of an individual winning the game numerically, it requires countless underlying resources, including the permanent resource burning of a large amount of player labor and resources.

4) For other participants in the ecosystem, try to extend the timeline and give them appropriate and stable benefits.
For example: Gas Hero NFT players’ normal price difference arbitrage and Lumiterra DeFi users’ liquidity mining are relatively stable incomes guaranteed by cash flow.

5) It is particularly important to shape a gamified mechanism for a commodity economy from 0 to 1.
For example: Gas Hero’s five gameloops and Lumittera’s three game loops create an interdependent commodity economy, which is the basis for the entire economic flywheel and governance operation.

Through these five design principles, we can see significant differences in the new design concepts conveyed by Gas Hero and Lumiterra compared to traditional GameFi designs. Specifically, the ultimate pursuit is probabilistic excess returns, supported by providing large-scale player arbitrage trading and gambling for cash flow. Additionally, players are rewarded with matching/probabilistic/slightly fluctuating long-term returns based on the different roles they assume in the ecosystem, rather than obtaining faster payback and unlimited mining returns by purchasing different levels of mining machines.

Governance in Web3 Games

Next, I want to briefly talk about governance in web3 games.

• Analyze how Crypto Raider governance combined with OHM but failed to launch due to game design flaws and flywheel disconnect.
• Analyze the difference between the “governance” architecture in Gas Hero and Lumiterra.

Crypto Raiders

Crypto Raiders is the first game to set game assets as ERC-20 and utilize AMM for transactions. It is also the first game to adopt OHM outside the game to try to govern.

This game initially came into the researchers’ view because they first used the Automated Market Maker (AMM) for in-game resource trading. The purpose was to reduce the presence of counterparties in traditional game transactions, create a real-time trading experience, and allow the team to earn fees from the protocol.

Subsequently, Crypto Raiders also started cooperation with Olympus Pro, hoping to transfer all liquidity rewards to bonds in the next few months. In order to meet two purposes: 1) LP pledge mainly attracts farmers. Moving to protocol-owned liquidity (POL) will allow the game treasury to earn an additional $7,500 per day (~$2.73 million/year) that can be used to fund game development; 2) reduce selling pressure on RAIDER. But it seems that this governance model has not yet been successfully launched, and the game has gone downhill due to the reduction in the number of players.

Today, the price of $RAIDER has dropped to $0.02, with a 24-hour trading volume of about $3,000.

The current liquidity is less than 200,000 US dollars.

So, now when we review this game after watching Gas Hero and Lumiterra, apart from force majeure factors such as market cycles and speculative currency price fluctuations, is there anything that can be improved in the design?

1) The lack of a commodity economy makes the entire economy unstable.

The materials produced by the gameloop experienced by all players in the game are very single, and there is no clear/intentionally designed supply and demand dependency. At the same time, the game content is insufficient and the update speed is slow. As a result, the utility token AURUM, which is produced too quickly, is sold by most players because it has no long-term circulation cycle and consumption scenarios.

2) Incentive misalignment.

The beneficiaries of RAIDER are LP stakers, the team, and investors, but game players actually receive AURUM. This shows that the game does not achieve a unified interest between LP stakers and game players. In other words, the increase in time/money spent by the player community in the game does not directly benefit governance token holders. Conversely, the increase in governance token holders and liquidity does not provide any strong associated benefits to in-game players.

It can be seen that in Crypto Raider, there is not a good cooperation and dependency relationship between liquidity providers and players. Even if a governance layer is added or external liquidity provision solutions are improved, it still cannot bring a positive flywheel effect for ecosystem expansion.

3) The ecological volume is not enough to support the long-term operation of a complete governance system.

Because the Dune dashboard data is invalid, only approximate data can be recalled. There were five to six thousand active wallets at the peak, and it remained around two thousand daily. Such a magnitude is not only difficult to support a commercial game with AMM transactions as its core, but also difficult to become the foundation of DeFi and governance.

Gas Hero & Lumiterra

Although both Gas hero and lumiterra have elements of “governance,” the governance between the two is also different. The former adopts an in-game governance structure, where governance is a part of the in-game flywheel, launched with the game and effectively used by game participants (governance donations can further incentivize in-game PvP players); while Lumiterra adopts an out-of-game governance structure, where governance is not a part of the in-game flywheel, not launched with the game in the early stages, but rather a future playground for LUAG holders, and voting will be launched in the CRV ecosystem and its own game ecosystem when the respective timing is ripe.

Gas Hero’s governance is more like income distribution among the official class, and entering the official class requires donating a large amount of GMT as a prize pool for PvP. Therefore, governance within the game can boost the overall enthusiasm of the game. When regional officials want to encourage more players to actively participate in the game and trade, it will trigger more “meta-governance” / “meta-economic interaction” processes. For example, unified management can be carried out in private group chats (setting announcements and alarms for auction participation), and there may even be behaviors such as sending red envelopes or monthly salaries, similar to the game “Rise of Kingdoms”. Ultimately, this will bring better performance and rich rewards to the guild and region.

The concept of “governance” in Lumiterra is more aligned with the governance logic of DeFi. It is speculated that it will be similar to the locking of ve tokens/locking period to determine voting weights, and the voting results will be related to the return rates of all participants. This type of external governance relies more on the natural operation of the protocol rather than social and governance relationships between individuals. As a result, there may be a lack of effective communication channels between different stakeholders, such as a liquidity provider may not be familiar with the governance structure within the game, making it difficult to generate organic mutual promotion and boost economic incentives. Additionally, in the crv governance framework, there is a risk that the ultimate beneficiaries may be different from the in-game players. The benefits of governance may not flow back to the grassroots players, but rather remain controlled by DeFi whales. This lack of effective communication among participants at different stages can lead to conflicts and share similarities with the external protocol governance of Crypto Raiders.

Although Gas Hero has just launched and Lumiterra is still in the testing phase, the above conclusions are all based on speculation, and all the return rate values are also estimated. The true practical effects still require long-term observation. However, we still need to pay attention to the subtle design differences that may also cause different ecological development and changes in the later operation of the two games. Moreover, although games with inherent economic flywheels are different from the Ponzi models that used to require continuous user acquisition, they still have high requirements for user scale. The more players participate, the more they can play a role in stabilizing the ecosystem. Both parties should strive to expand the user base to support the continuous operation of the flywheel.

Afterword

This article focuses on the design of the top-level wealth game and the ecological flywheel mechanism represented by Gas Hero and Lumiterra, emphasizing the significance of aligning interests of all parties and expanding the ecosystem through the flywheel in web3 game design.

However, this article also has its shortcomings due to various data missing (Dune data panel malfunction), research theory missing (only IAT and BLOG designs we have previously written about), absence of involved parties (crypto raider team has moved on to the third project, game player loss), making it difficult to write an article that comprehensively analyzes the theoretical and practical development of web3 game economic models. Therefore, this article only serves as a record and summary of the industry development process, hoping to help entrepreneurs who are still designing and exploring economic models to find new paradigms and apply them quickly, rather than being a serious research report.

In addition, besides being a test field for new mechanisms, web3 games are still investment targets with playability/interactivity at their core. Therefore, in addition to the design of the mechanism itself, external traffic operation, community consensus building, brand endorsement, asset management, and other aspects are also important, as mentioned in our previous research report, a versatile team is still needed. Ultimately, the development of web3 games with a long lifecycle and a large flow-breaking effect requires the joint efforts of all colleagues.

Disclaimer：

1. This article is reprinted from [AIKO].All copyrights belong to the original author [AIKO]. If there are objections to this reprint, please contact the Gate Learn team, and they will handle it promptly.
2. Liability Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute any investment advice.
3. Translations of the article into other languages are done by the Gate Learn team. Unless mentioned, copying, distributing, or plagiarizing the translated articles is prohibited.