Old Fashion Interpretation of Thetan Arena: An Economic Model Better Than Axie

Original title: A Breakdown on Thetan Arena Tokenomics & Crypto Gaming Investment Thesis

Original author and editor: bigfatpenguinQ (Old Fashion analyst), JX (Old Fashion partner)

Original translation: TechFlow

Key points:

1) Unlike Axie Infinity and its cloned games, Thetan Arena adds more internal scenarios for consuming its native reward token $THC to hedge against inflation generated as rewards to users.

2) Thetan Arena attracts people not only through its P2E model, but also through the intense gameplay that traps users in the ecosystem. The more players it gets, the greater the value of $THG Token will get, because the profit of the entire ecosystem depends on the number of active users generated by its preset taxation model.

3) GameFi projects that combine high-quality game production capabilities with a deep understanding of crypto will stand out and create the next era of the gaming industry.

The rising star of P2E games - why Thetan Arena?

#PlayToEarn is definitely the most discussed topic brought about by the #AxieInfinity craze in the crypto market this year. Among the millions of new P2E games, we found #Thetanarena as a potential gem, which officially launched the game on November 27 and publicly listed its in-game currency $THC Token on November 26.

The main purpose of this article is to take Thetan Arena as a case study to explore the Token model design of P2E games in depth. From the analysis, we will summarize the general principles of Token design, hoping to bring insights to crypto game developers and players.

Important note: It is for research purposes only and should not be considered financial advice.

One: Introduction to Thetanarena's Token and NFT System

Thetan Arena is a MOBA game-earning game running on PC, Android and IOS systems. You can call your friends, form a team, fight against others, and earn Tokens with heroes. Rewards ($THC, $THG) are represented as NFTs in the game.

Unlike traditional mobile games where in-game items usually lack liquidity, Thetan Arena's core assets can be freely traded on the cryptocurrency market. There are mainly three types of virtual assets:

The first is hero NFT. As a MOBA game, players need to control a hero to fight in the game.

Most heroes are represented in NFT form with three rarity levels, from common, epic to legendary as the rarity order.

To lower the barrier to entry, Thetan Arena will allow players to get up to three free heroes in non-NFT form, which means it cannot be sold on the secondary market. The hero is also equipped with another metric skin, which also includes three ranks of common, epic and legendary.  The hero is also equipped with another metric skin, which also includes three ranks of common, epic and legendary.  

The hero is also equipped with another metric skin, which also includes three ranks of common, epic and legendary.

Usually, rarity determines the combat ability of the hero.

The second is $THG, which is a functional utility Token that will be used as a medium of exchange between participants in the Thetan Arena economic system. The total supply is 420,000,000. ( Token distribution is shown in the figure below)

In the current ecosystem, $THG can be used for:

1: Incentives. As a player in the game, completing game tasks or surpassing other players and ranking high in the game can reward players with $THG Tokens.

2: Voting governance. $THG will allow holders to create and vote on on-chain governance proposals to determine the future features and/or parameters of Thetan Arena.

3: Game currency. $THG is the only currency that can be used to obtain legendary boxes to recruit new hero NFTs. And $THG can also be used to upgrade the level of NFTs heroes in the game.

Finally, $THC, $THC is a pure game currency that can only be earned by playing games with an unlimited supply.

In the current system, the actual use of $THC can be summarized as:

1: In-game rewards. Players get $THC rewards by winning in the game.

2: Purchase the Thetan Hero box. $THC can be used to purchase normal boxes and epic boxes.

Two: In-depth analysis of Theta Arena's economic flywheel

Now here's the question: between playing for free and paying first and making a lot of money later, which way would you choose?

Unless you are extremely conservative with money, why not make money while playing the game? After all, whether you pay or not, you are playing the same game, so who can say no to free cash?

Welcome to the first cycle: buying in-game assets.

The first access to the game will be the hero in NFT format. It is worth noting that Hero has a maximum battle limit for obtaining $THC Token (see chart).

Heroes will not generate any income when the battle limit is reached. You can think of it as a sword that will rust after years of use.

Now, our loop looks like this.

Next, $THC will have two paths.

One is to use $THC to buy new heroes to continue the previous cycle, and the other is to sell $THC to lock in the proceeds.

If you choose the former path, it is a repurchase behavior (Second purchase). This operation does not necessarily lead to $THC inflation, because $THC will be locked in the ecosystem.

If we choose the latter path, then it will cause selling pressure on the market and increase the inflation rate of $THC Token .

In this closed loop, it seems that the $THC price will enter a bottomless abyss because there will always be selling pressure.

Every game has a resource consumption system to keep the in-game economic system balanced and healthy. For Thetan Arena, the consumption system is robust so far.

Nevertheless, in #Thetanarena, the consumption method is not easy to observe.

First of all, there are 4 game modes. I will not introduce them one by one here. But there is a mode in the game called Battle Royale where the minting rate of $THC is actually negative (other modes have positive minting rates), which means if you are playing Battle Royale you are actually helping to compress the $THC supply and if you only have a 50% win rate you will lose money.

Another deflationary situation for $THC is when playing a team mode and facing a tie in the game. The expectation model calculation is as follows.

Mathematical Expectation Model:

1: Assume you have a 50% win rate. Everyone pays $THC for the NFT.

2: Calculate the $THC results you get in Battle Royale mode compared to the other 3 modes.

3: Pure Battle Royale $THC rate of return - $THC cost of purchasing NFT = negative. That is, $THC shrinks

Pure other 3 modes $THC rate of return - $THC cost of purchasing NFT = positive. That is, $THC expands.

4: "Draw" deflation can be calculated in a similar way: just compare the pure draw minting $THC rate (negative means deflation) and the pure win and lose minting $THC rate. (Positive means inflation)

There is also a soft deflation mechanism in the game. The fact is that many players who are not full-time cryptocurrencies are likely to abandon the NFT heroes they purchased after losing interest. This will also accelerate the pace of deflation because the potential minting of $THC will not actually occur.

Another soft deflation system in the game is the $THC withdrawal lock.

There are two restrictions, one is that newly registered users should wait at least 12 days before claiming their earned $THC Token . The other is that at least 750 $THC and no more than 1500 $THC can be withdrawn at one time.

Each withdrawal request takes 2 days to cool down.

In short, the lock mechanism prolongs the inflation cycle of $THC Token to maintain the economic balance of the game ecosystem.

So far, the $THC cycle is self-sufficient and works well.

We will complete the last step of the cycle by providing a derivation at the end of the article section.

But what is the transaction of $THG? What is the relationship between $THC and $THG?

In short, $THG Token is the real value container of Thetan Arena.

1: Trading in the NFT market, withdrawing $THC&$THC will incur a handling fee, and $THG needs to be deposited in the game, and there is a tax on withdrawing $THG.

There are also three skin rarities for each hero, Common < Rare < Mythic

Therefore, as the user base grows, the demand for $THG will increase. In addition, staking/depositing $THG in the game will also reduce the supply in the secondary market.

2: $THG can be consumed to upgrade hero NFTs, which also reduces the supply of $THG on the market.

We can assume that if the author and you fight in the game, we will choose the same hero and be at the same level and get the same $THC Token because we both have a 50% win rate. We can't decide who is stronger because we both have the same skills and statistics. But one day, the author decided to use a little trick and upgrade his hero.

You start to notice that because his hero is getting stronger, it is becoming more and more difficult to win, and as his hero NFT level gets higher and higher, the win rate changes from 50% to 55% or 60%.

So you decide to use this trick as well, and upgrade your hero.

Finally, you and the author reach the same level, and the win rate is back to 50%

But $THG slipped away from our wallets.

This is a very typical action in many games, but it continues to work well, after all, who doesn't like in-game prestige? When more players enter Thetan Arena, more people must come to upgrade their heroes, thereby increasing the value of $THG, because it is the only material that can facilitate upgrades.

Therefore, if the user growth rate remains positive for a long time, the price of THG dollars will undoubtedly rise.

And don’t forget, $THG has a maximum cap on total supply.

In short, $THG captures the intrinsic value of the game by reflecting the growth of the user base.

Three: Comparison with Axie Infinity’s Token Model

So far, we have absorbed the overall vision of basic Token economics in #ThetanArena, which utilizes a dual Token model to keep the game profitable while maintaining the stable development of the ecosystem.

As a crypto game blue chip, Axie Infinity deployment also adopts a dual Token model ($AXS, $SLP). How does it look when they are compared to each other?

To compare, we also need to understand the basic Token ology of Axie Infinity. This is a special study from JX.

Let's summarize some key features of Axie Infinity first:

1: The protagonist you play in Axie Infinity will be your 3 Axies NFT (just like Hero NFT in Thetan)

2: Axies can fight and earn $SLP.

3: The utility of SLP will be consumed to breed new Axies.

There are various crypto games on the market, card games like Axie Infinity, DEFI-type games like Mobox, and MOBA games like Thetan Arena.

All crypto games rely on NFTs and fungible token systems to run their economic systems, regardless of the type.

In Axie Infinity, NFTs are Axies that can generate $SLP. And $SLP will be burned to breed new Axies. In Thetan, The NFT is Hero, which can generate $THC, and users use it to buy Hero.

The difference is the life cycle production limit of NFTs. As long as you play Axie NFT, it can generate $SLP in the game forever, while in Thetan, if the hero reaches the battle limit, then it can no longer generate $THC.

We can think of it as a simple metaphor.

Thetan Arena is like a casino, the chips are your hero NFT, and everyone here is risking $THC. The winning condition depends not only on luck, but also on whether you are a really skilled player to win your opponent. If you don't play well, you will most likely lose money.

Axie Infinity is like a utopia, once you pay the cost of buying 3 Axies, then you actually don't care whether you can get your principal back at all. Because as long as you continue to play adventure mode in the game, then you can easily get at least $50 of SLP every day. Then it suddenly becomes a question of "when" rather than "if". You don't risk anything except the initial cost, and one day you will eventually get your initial cost back.

It is not difficult to conclude that the economic system of Axie relies heavily on the growth rate of new players.

There will be a lot of $SLP selling pressure entering the market every day, and when the market is fully saturated, new players will not need to use $SLP to cultivate Axies.

But in Thetan, if you are in a deflationary game mode or below average win rate, you may be in a situation where you lose money.

Inflation of the entire economy will be offset internally, independent of the inflow of new players.

The sustainability of Axie Infinity depends on how fast Axie’s Metaverse expands and whether new players maintain the confidence to participate in it.

The sustainability of Thetan Arena depends on whether people actually enjoy the game and stay active in it.

The ways to achieve sustainability vary.

So for the Axie team, they started deploying new utilities for the $SLP Token to sustain the price of $SLP, such as using $SLP to mine the new Ronin chain’s native Token $RON.

As you can see from the chart, SLP had been falling until yield farming was announced on $RON.

And it is expected that other practical uses for $SLP will be deployed in the Axie Infinity Metaverse next.

Four: Thetan Arena Token Economic Scenario Analysis

According to our analysis, the $THG price is closely related to the robustness and vitality of the Thetan ecosystem.

When the closed loop of consumption and inflation is formed, the goal of the $THC price is to remain relatively stable.

But since its launch, the $THC price seems to be underperforming. When will it be $THC's day?

1: Let's look at our $THC cycle again and focus on the places we haven't highlighted yet.

There is a time lag between when we buy Hero NFT and when Hero actually generates $THC Token yield. The time when players buy Hero NFT with $THC(Pump) will become the precedent for $THC minting.

Under this assumption, we can assume that the $THC price will rise.

However, if we look at the chart now, the price of THC USD is falling unstoppably and no signs of rising have been seen yet.

This reflects the sentiment that traders do not appreciate and believe in the $THC price and do not want to enter the game if they are not sure when the $THC price will drop to a certain level, which will cause the hero NFT box price to be cheap enough to attract attractive users to buy.

In speculative thinking, the discounted box sale caused a dump. Near the end of the discounted box sale, the $THC price was around 0.4. By default, 1 normal box requires 1000 THC ($400). But with the discount, it will only fetch $150 to do so.

This is a gesture to attract new players at the expense of old players. If $150 is priced as the regular price of Thetan Box, then the $THC price can reasonably settle at $0.15, because new players can arbitrage $THC between the price gap with less money.

The more discounted boxes they buy, the price will fall back from $0.15 to $0.4.

It also reflects that the project team believes that $150 ($0.15 THC) is a profitable price for early players to join the game. Given that all revenue from such discounted sales will be used to burn $THC, this may cause a surge in the future.

And Thetan Arena is a new game in the field, and it will naturally have some price premium once the garbage dump terror subsides. Therefore, we predict that around $0.3 THC will be a reasonable price and will be raised to the target in the short term.

Conclusion from Old Fashion Research Partner

Recently, Eva Wu from Mechanism Cap divided crypto games into three parts in her masterpiece:

1) Earn-First Games: Focused on making money, not gameplay; easy to bootstrap but not sustainable in the long run. (Current stage)

2) Play-First Games: Fun games with crypto incentive systems. It will be difficult to rebuild current high-quality games using crypto technology. (Medium stage)

3) Financialized Fun Games: Native games with built-in crypto assets and Token economy; users can achieve self-actualization while playing games while maintaining asset ownership and financial returns. (Ideal stage in the future)

The analysis of Thetan Arena aims to exemplify how traditional mobile games can be rebuilt into fun crypto blockchain games. Thetan Arena is adapted from a popular MOBA game “Hero Strikes”, which has a 4.4 out of 5 rating on the Google Play Store. The producer of both games, Wolffun, proves a great team with a rich knowledge base in crypto and games that can bring fun while bringing quality games.

Nevertheless, we need to point out that the game is not without flaws: key in-game metrics, such as battle rewards and Thetan Box listing price, are still controlled by the team in a centralized manner. Some users who are essentially ecosystem builders may be affected by adjustments to key attributes or metrics without notice, such as the discounted sales of the new Thetan Box we mentioned above.

Besides the analysis itself, we would like to describe the ideal crypto games we are looking for, which also represents OFR’s investment thesis in the gaming space:

1) P2E games with long-term sustainable models that can overcome at least one bear market cycle

2) Traditional game teams with a good track record of building large-scale games and a deep understanding of crypto or a humble learning attitude towards crypto.

Most traditional mobile game teams we meet still ignore the cryptocurrency invasion and have no idea what is going on.

3) Native blockchain games: originally built by DAO; gameplay is cryptocurrency-centric or rooted in blockchain technology. For example, Dark Forest, Worldwide Webb, etc.

Some metaverse projects like Sandbox, CryptoVoxel are not within the scope of the above discussion because we prefer to classify them as metaverse or virtual space rather than crypto games.

Original link

Welcome to join the official BlockBeats community:

Telegram Subscription Group: https://t.me/theblockbeats

Telegram Discussion Group: https://t.me/BlockBeats_App

Official Twitter Account: https://twitter.com/BlockBeatsAsia