Co-authors: Gui (Investment principal of Old Fashion Research) & Otto (Analyst of OFR) Advisor: JX (Partner of OFR)
Introduction
Since the launch of Axie Infinity our view of what GameFi and metaverse really is has been changing. We could quote Vitalik and say that “it’s far too early to know what people actually want” and we tend to agree with this. However, as Web3 venture capitalists our pursuit is to find those projects that will bring about significant adoption of blockchain technology and we firmly believe that Move2Earn combined with RPG is a trend that is being well captured by Genopets, a project we invested back in 2021.
According to Degame and playtoearn.online the overall trading volume in blockchain gaming was $6.322B in Q1 2022, of which Harmony accounted for 48.58%, Ronin 26.85%, and BSC 14.25%. What we see is that the playability of the gaming title is the main driver to chain usage as the number of players remained steady around 1.2 million. Their 2022 Q1 GameFi Industry Report also points out that 20-30% of new tokens listed are related to GameFi projects where average trading volumes is $100,000.
We will now take a snapshot of some key global metrics using Degame and Coingecko before starting looking into the game economics and playability of genopets which currently ranks Genopets project 24th in the GameFi space.
Game Economics and Playability
Genopets is an upcoming move-to-earn game, combining social fitness-incentives with free-to-play gaming mechanics and a player-controlled web-3 economy. Similar to Pokemon-GO, the app relies on the player to move around and not just sit in front of his laptop while playing. The game revolves around a personal Genopet, which is a virtual animal in the style of pokemon and anime. The steps you walk throughout the day can be used to convert them into Energy or E, which in turn enables several features like levelling your Genopet.
Yet, can a move-to-earn approach actually attract a sustainable and active gaming-community and allow for enough complexity in the game-play?
When you sign-up, you will first get a free Genopet, which will be created based on a few personal questions the player has to answer in the beginning. Once you accumulate steps by walking, you can transform them into energy, which in turn enable you to level your Genopets. The steps themselves are the most important part of the game, the whole economic flywheel revolves around how much energy a player generates which is not tracked on-chain but functions as the most scarce resource in the game which is required for most of the actions that are performed.
What is Energy?
The conversion to energy allows the game to add more strategic complexity and take away the passivity and force players to engage with the game in order to make progress, which brings an interesting dynamic where you can “play without exerting any effort”. Furthermore, steps are only valid for each day. So no matter how many steps you take, unless you are banking these (converting them to energy), they are lost. The formula defining the relationship between steps and Energy is not linear which means that Energy does not increase proportionally to steps and the “Step Efficiency Factor” starts to play a role, while also creating a game theoretical advantage of playing with a genesis genopet that starts at level 22, therefore drawing more energy for each step (Appendix A)
Another aspect in this context is Energy Efficiency. The conversion rate is not always 1 to 1. It is influenced by various factors, including the amount of steps, steps banked, the level of the Genopet and Mood, which will be explained later in the article. The goal is to prevent abuse of the technology while also supporting the values of the community of “play for fun” which brings about the nostalgia of nurturing a tamagotchi. Success should not be determined by whether or not you are a competitive athlete, but rather by consistent, balanced self-care and strategic in-game choices the litepaper goes on to explain. Furthermore, it adds a game theoretical choice of investing in a genesis genopet or starting from the lowest level. Since the level of a directly influences the conversion-rate to energy, when you buy a genesis genopet you are essentially reducing the time taken to level up in the game, according to the step efficiency factor (Appendix B)
Energy is the “active” in-game currency, ensuring that the players are actually engaging in the game-play and not just finding ways around the active part of the game. It is required to:
- Gain XP for your Genopet by conversion
- Harvesting KI in exchange for Energy
- Feed, Pet and Play with your Genopet to retain a good Mood
- Carry out PvP and PvE actions later on
What is Mood?
The mood reflects the mental and physical state of your Genopet and is determined by Nutrition (40%), Playing (40%) and Love (20%).
Nutrition represents the physical state of the Genopet and accounts for 40% of the Mood. It decreases at an even rate until it reaches 0 after eight hours. To prevent this, players are able to perform feeding. It takes place in the form of a mini-game, where you have to throw Food-items at the Genopet. It will boost the nutrition, depending on the item used. There are universal food-items, available for every player, and special items in the form of NFTs, which entail superior effects and benefits.
Joy stands for one part of the mental state and also accounts for 40% of the Mood. It diminishes over 50 hours and can be restored through playing. Similar to feeding, playing is a mini-game and can be executed by universal- and NFT-items. The kind of mini-game differs, depending on the toy-item used.
Lastly, Love is the second part of the mental state and accounts for 20%. It lasts over 80 hours and is not a mini-game, but rather a use of Energy with accompanied animations. The effects take place immediately and the action can also be continued, but without the result of increasing the Mood.
Levelling
As mentioned earlier, Energy can be used to convert them into XP at a rate of 1 to 1. The evolution of a Genopet entails 12 stages and 78 levels, where with each stage the physical form changes and appearance and size develop. Once the 12th stage is reached, the Genopet will still be able to accrue Energy, which means that all the Energy can be used to perform different activities and levelling up is not a concern anymore, therefore the level of the genopet (which is tracked on-chain) should be directly proportional to its price in theory.
All of the above mentioned options are introducing another level of strategic depth to a rather simple and passive side of a typical move-to-earn game. But what makes the game so special and where can you actually “earn”? Perhaps the answer lies in habitat management, which has been the most awaited release in the game so far.
Habitats
Habitats are essential assets within the game, enabling several aspects of the gameplay. They are available for sale on the partnered marketplaces and exchanges in the form of NFTs and represent land in the Genoverse. It can be differentiated in three progressive levels, starting with 1. Each new level upgrades the effectivity of the habitat, which will be discussed below.
Properties
Besides their level, habitats have different domains, ranging between Earth, Fire, Metal, Wood, or Water. The domain dictates the type of unrefined crystals it is able to spawn with the exception of genesis habitats, which are able to spawn crystals from all domains and may be very handy in balancing the production of different elements as the game progresses and players start to identify which resources are more scarce. Moreover, around 4,1k of Genesis Habitats were minted, which offer several benefits and a special walking area.
Components
Habitats have 3 functional components which will have different performance according to habitat tiers which go from 1 to 3.
- Laboratory: This is the research building which can be used to mint unrefined crystals into Refined Crystal
- NFTs. Workshop: The player combines ingredients to create new items that can be used or sold in auctions. Players must have ingredients and access to the crafting recipe in order to use the workshop.
- Portal: Will be the portal to the genoverse and released later on in the game.
Harvesting, Alchemy, Crystals and More
Spawning unrefined crystals
As mentioned before, the crystal spawned is defined by the domain, therefore 5 different crystal-types are available. Each habitat can spawn up to 1, 2, or 3 unrefined crystals, depending on the level. Once they have spawned them, they remain in the laboratory of the habitat. Therefore, one crystal in the laboratory of a level 1 habitat hinders the production of a second crystal the next day.
Once the crystal is refined, it will be tokenized (exist on-chain) and can be transferred to the player's wallet by claiming it. This opens up the laboratory and conclusively allows the production of new crystals.
What makes refined crystals so special?
Refined crystals (RC) can be obtained by refining unrefined crystals that spawned in the habitat in the laboratory or via purchase on the open marketplace. Refining requires 10 KI per crystal and RC can be used to turn them into power-ups, items and accessories. It enables the player to change the elemental type of the Genopet (for example from Fire to Earth), which in turn changes the characteristics and properties of the Genopet. Moreover, it alters the battle performance (no details released yet), movesets and visual attributes. The above-mentioned items are all available for the player in the form of NFTs and can therefore, as well as the RCs, be traded on the open marketplace.
Last but not least RCs are also needed for upgrading a habitat and terraforming (creating new habitats).
Alchemy - How to turn RCs into powerful items
Alchemy is a special form of crafting items, where players utilise RCs and transform them into strong in-game assets. This is done via the laboratory of a habitat, where up to three RCs can be combined in crystal chambers using Gene and KI.
The first level of a habitat only has one chamber in the laboratory and therefore does not allow any sort of alchemy outside of refining one crystal at the time.
The second level adds one additional chamber, which empowers basic alchemy, transforming two crystals into power-ups. These Power-Ups NFTs allow the player to boost XP, refining time, crafting time, and unrefined crystal spawning and can also be sold on the open marketplace.
The third level entails three crystal chambers, conclusively entitling the player to perform advanced alchemy. This process involves three RCs, transmuting them to even more powerful Power-Ups and also allows for the crafting of other types of refined genotype crystals.
Harvesting KI
KI is one of the two essential in-game assets and can be obtained by harvesting it from a habitat using Energy. The rate of exchange depends on the chosen lock-up period. After harvesting, Ki will either be locked for 7, 10 or 14 days until it is distributed to the harvester.
The quantity of KI cannot exceed the daily limit, which depends on the active habitats of the player. One habitat can be assigned as the primary option, with up to two sub-habitats.
The daily limit with at least one sub-habitat is calculated by summing up the daily limits of each individual habitat and multiplying the result with a “Connected habitat bonus”, which is currently 10% (Appendix C).
Terraform Seeds
The Genesis Habitats were terraformed via a mint earlier this year. From here on, an existing habitat is needed in order to create a new L1 habitat. Every L3 Habitat has 6 seeds with which one new habitat can be created. Besides the seed, the player needs following items:
- 3 refined crystals of the same element type (determines the domain)
- A Habitat Laboratory
- 5 Gene
- KI, depending on the Seed which is used
Each seed has a grade, which determines the amount of KI required. Once claimed, all seeds are transferred in the player’s inventory and are available for usage.
States of a Habitat
To add more complexity and dynamic into the gameplay, the habitats have a limited lifespan of 90 days after activation. After this, they will enter a state called dormancy, which means no economical activities can be performed with the habitat and it is useless to the owner.
The state of the habitat is influenced by three factors:
- Lifespan = the amount of life remaining to a Habitat (measured in # of days until Dormancy); can be refilled to a limited extent through Crystal burn.
- Repair = the act of burning a Crystal in order to increase current Lifespan
- Durability = maximum # of times a Habitat can be repaired
After reaching the dormant state, players can repair their habitats to stave off decay. The act of repairing a habitat extends its current lifespan by 1 day. Repairing a habitat requires the use of a RC, which is consumed in the process of repairing the Habitat. Depending on the level, this can either be done 90, 180 or 270 times before it reaches full dormancy. At this point it can only be restored using KI. Once it's Restored, it will regain 90 days worth of lifespan and the durability of its level.
Delegation
As an additional feature Genopets allows for sub-usage of the habitat. An Owner can decide if he wants to harvest the habitat and actively use it or if he rents it out to other players. He sets up a contract, which includes three roles:
- The Landlord
- Habitat owner; defined by the player wallet address that owns the Habitat via the blockchain ownership space
- Alchemist
- Delegate type; player who has been assigned Alchemy (Item Crafting) usage rights; defined by a nullable player address listed in the Habitat metadata
- Harvester
- Delegate type; player who has been assigned KI harvesting rights; defined by a nullable player address listed in the Habitat metadata
Alchemist and Harvester can be associated with the same player wallet address.
There are two types of contracts:
- the Harvesting authorization:
- The Habitat's KI harvesting capability is assigned, in exchange for a % of the KI Harvested (royalty).
- Alchemy authority:
- The Habitat's item crafting and refining capabilities are assigned, in exchange for fixed token payments (rent).
This will all take place through the Habitat Management section, which allows for:
- Adjusting KI harvesting royalty
- Onboarding tenants and/or delegates (either individually or batched)
- Adjusting rent amount or pay period
- Evicting delegates
- Monitoring key metrics, such as total KI harvested, crystals refined, and items crafted
Dual Token System
GENE is the governance and staking token used for Genesis NFT sales, seasonal drops, and in-game for crafting valuable items. Staking of GENE will make the wallet eligible for rewards and upcoming NFT-drops.
KI is an in-game utility token. Habitat owners are able to harvest KI by converting Energy from steps each day. KI is burned when used and has a max daily earning cap. It is used for Crystal Refinement, alchemy, crafting and Terraforming.
To conclude, Genopets is a promising move-to-earn game which has enough complexity and depth in its gameplay to become one of the top web-3 games in the space. With the upcoming launch it will become apparent if the game can attract a sustainable and active gaming community or is just another hype wave.
Conclusion
We could not end this report without a comment to the public beta of the game. For a few months we have been participating and tracking the team’s progress which has been an amazing journey . As more and more parts of the economic flywheel of the game started to be revealed we could also gauge growing community engagement on discord and twitter and how players in potential start to describe their preferences to act as alchemists or harvesters or landlords.
This has been a bit more evident with the volume of trades picking up prior to habitat management release which was expected in august as we can see below, both for genesis genopets and genesis habitats.
On top of this positive trigger on the retail side we are also expecting to see strong movements from guilds, given the high number of partnerships Genopets has crafted along the way and the high number of active players that those partners will bring to the game in a relatively instantaneous fashion. With that being said we will stop this first piece about genopets here and monitor the market for the tokens and NFTs until the game is launched. Unfortunately, given the recent Solana hack on 02/08/2022 we believe the team may have to review the launch date, and it seems that for now approximately 2% of Ki tokens are sitting in the hacker’s wallet.
Disclaimer: The report is only for research purposes, please do not take it as financial advice. DYOR.
Sources
2022 Q1 GameFi Industry Report by Footprint Analytics and DeGame
Source: Genopets Litepaper
(https://litepaper.genopets.me/overview/introduction)
About Old Fashion Research
Old Fashion Research (OFR) is a multi-strategy blockchain investment fund founded in late 2021 by former executive and investment teams from the leading cryptocurrency exchange in the world.
OFR adopts a multi-strategy approach to capture the underlying value of Web3.0 and to build a full-cycle ecosystem to support new-generation crypto native entrepreneurs. OFR incubates promising startups, follows up with traditional venture capital investment and scaling support, and finally supports the projects if they wish to exit through a merger or acquisition.