SocialFi upstart xPet: One step away from greatness
Author: @BuidlerDAO Economic Model Group
Arranged by: @createpjf
Note: The article only represents personal opinions and does not constitute any investment opinion
Write it on the front
@xpet_tech is a recent phenomenal SocialFi. One week after its launch, it attracted 2639+ ETH in capital and 7000+ on-chain users. The project is still very early, many rules are unclear, and the gameplay mechanics still have a lot of room for iteration. The project side has also been making frequent moves recently, and the most interesting and controversial one is that it directly liquidated the ETH that users deposited on the evening of December 4 and established a $XPET/WETH liquidity pool on Uniswap. On December 6, it went on sale again with $BPET. Frankly speaking, it is not very proper to do the direct liquidation. Since it itself is an illiquid coin, it is theoretically ineligible to participate in lending. Releasing the $XPET price without any prior explanation and proceeding directly with the settlement can be described as having caught everyone by surprise. Users' questions and concerns about it are not out of the blue; they still need to be cautious when investing until further information is clarified.
Economic Model Team members @Fisher_manQ, @observerdq, @0xLukeCrypto, @Janezh1111 and others abstracted it and discussed it in depth as an interesting brain game and economic model case. Among them, we think the most interesting thing is how to design the system so that it can move to a relatively balanced and long-lasting state. Of course, we are also concerned about the external value injection of the economic model:)
What is quite rare is that the design of the economic model and the product form based on the Twitter plug-in have achieved good collaboration. While users rapidly fission, the positive flywheel of the system's economic model also accelerates.
If you are interested in economic model research, please scan the QR code to add BuidlerDAO Assistant to join the group. Please note the economic model. Project parties are also welcome to discuss economic models with us.
The long-term path to the vitality of the system
The quantity of XPET tokens available for conversion is equivalent to 50% of the XPET revenue earned the same day (the number of XPET tokens that can be exchanged for BPET is equivalent to 50% of the XPET revenue earned the previous day). —— XPET white paper
Combining the game mechanics, we can derive the following formula:
In summary, let's continue with a brief deduction:
At the initial mining stage, the total computing power is low, generating a small amount of $BPET (denominator), adding a lot of $XPET (numerator), and the return per unit of computing power is very high. (Assuming that the $BPET generated every day will be exchanged, liquidity will be extremely scarce, and it will be relatively easy for the project party to control)
High returns drive more people to invite others to mine, buy mining machines, and fill the $XPET reward pool every day
The cycle goes back and forth until one day the growth rate declines, the yield falls to the point where it is insufficient to attract new people and capital, and the system dies
As can be seen from the path above, if the vitality of the system is to last longer, it is necessary to reasonably extend the high-yield period as much as possible, corresponding to the formula, that is, try using various methods to increase the numerator, reduce the denominator, and see if the relative growth rate of the two can be maintained at a certain level.
Enlarge molecules:
The agreement is designed to be as smooth as possible to attract as many people as possible to join
If the XPET price can be at a reasonable level, it will help lower the user participation threshold and increase conversion
Decrease denominators
Some of the mechanism designs currently mentioned in the white paper will help achieve this goal, such as $BPET staking generation (increasing in-game BPET consumption) and the queuing black box mechanism (min function sets an upper limit on redeemable BPET)
Commercial traffic revenue generated by Quest will also bring positive externalities to the system, and can be used to buy back and destroy $BPET when returns decline
Starting from the formula, we have a few other things to think about:
1. A stable XPET price would be a better solution
We think the fluctuating $XPET price design might be a trick. At the current $XPET price instability setting:
When it rises sharply, the entry threshold for users will increase significantly, which will undoubtedly prevent more players from entering
If the price of $XPET is too low, the yield is unattractive, and it will spiral into a downward spiral
Therefore, $XPET price stability is probably the optimal solution for this system.
Furthermore, since the system sets an exit limit of 100 $BPET per day, you need to wait in line if you exceed it. If users spend money to upgrade their computing power indefinitely, their payback period will be significantly lengthened, and it is not economical. For users, the better strategy is to spend a certain amount of money to upgrade the miner to an appropriate level, and the amount of $BPET to be cashed out every day is close to 100. As a result, the system will eventually form a distribution with a wide number of users and relatively average rewards. This is also more conducive to long-term stability. This is probably the ideal state that product designers are hoping to achieve. Seen from this perspective, the team should not set the entry threshold too high; attracting more users is a top priority.
2. Set up an attenuation mechanism for computing power
So far, the team doesn't seem to have publicly mentioned a key problem — the factory's computing power lacks an attenuation mechanism. As time changes and the denominator in the formula expands indefinitely, the yield will continue to decrease, and as a result, XPET loses its growth appeal. We tend to believe that subsequent economic model design requires the introduction of a factory attenuation mechanism to reduce the growth rate of the denominator. In an ideal situation, the project party does not need to counter inflation, but instead uses various methods in the toolbox to adjust the molecular denominator to achieve the goal of system balance.
III. Optimal solution for dynamic computing power
When more and more users participate, everyone competes for the production efficiency of mining machines. However, due to limited online features, current competition among users is relatively homogenous (currently there is almost only one optimal solution). Moving forward from the form of existing games, it is possible to imagine some evolutionary possibilities: platforms can continuously add gameplay and apply controls, such as making pets sick, hungry, or even PK between pets (increasing BPET consumption scenarios and introducing more randomness). Through the introduction of these new mechanisms, mining efficiency is impaired, thus making competition among players more unstandardized. There is never an optimal solution for unit computing power, nor is there a homogenized optimal state. As a result, users will also be interested to continuously test how to achieve the optimal solution and increase recharge in the process. And as the project party continues to create new demands, the vitality of the game is also constantly being renewed.
IV. Our Confusion
Currently, the functional distinction between BPET and XPET is unclear. The value of the two remains 1:1 within the market. Due to restrictions on BPET withdrawal, there are certain discounts off the market. This has puzzled us. If the exchange rate is 1:1, why is a dual token design necessary.
Furthermore, the white paper clearly mentions that “the number of XPET tokens that can be exchanged for BPET is equivalent to 50% of the XPET revenue earned the day before”. After checking the contract address, 50% of XPET was transferred to the contract 0xaa2506e41ce0353eb407cd4cb294bb03899c5d77. At present, the contract address has continued to accumulate close to 13 million XPETs, only about 1 million XPETs have been exchanged, and nearly 200,000 BPETs are waiting in the queue.
If there were no other exchange restrictions, there were plenty of XPET (13 million pieces) but no rewards were given to BPET holders, which harmed the rights of users.
The automatically triggered queuing mechanism is also very puzzling. Judging from the browser data, there is no regularity in queuing claims. This seems like a bad situation, and the team needs to work harder to implement the code engineering.
Considering that the project only took a week to go live, it may take time to improve, or the product is not complete. We will continue to monitor the progress of the project and the iteration of the economic model. Welcome to discuss with us.
