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Reports

Overview
Market Design
Mechanism Design
Token Design
Conclusion

Illuvium Report

 

Overview

Illuvium is an upcoming open world RPG game that involves battling and capturing beasts called Illuvials. Illuvials, once captured, will be tradable NFTs and there will be a variety of other NFT items that can be traded for ETH. The game will be built around the Immutable X layer two solution, allowing for fast and gasless NFT transactions secured by the Ethereum network.

3 Key Highlights

  1. 100% of game revenue goes to ILV holders
  2. Game parameters are controlled by a DAO
  3. Likely to be the first AAA quality blockchain game to launch with a target of a public beta December 2021

Value-add

Why is ecosystem valuable?

Without integrating NFTs into games, players do not have true ownership of their assets. Illuvium will change this by allowing users to own and freely sell their in-game items to monetize their time in the game. Illuvium will also change the structure of game ownership by having the development goals and game parameters shaped by a DAO, shifting the control of a game from the creator to the community.

Objectives

Objective 1: Have the game be governed by the community

Objective 2: Seamless user experience that abstracts away many of the current blockchain UX hurdles

Objective 3: Allow users to be financially compensated for their time and energy spent in the game

Systematic Risks & Constraints

  • Regulatory risk around promising cash flow to token holders

Potential Solution

  • Plan for extensive decentralization from the beginning

Token High-Level Summary

Token Summary

ILV is a native token of the Ethereum ecosystem.

Ecosystem
  • Immutable X- Illuvium is using Immutable X to provide gasless and fast NFT transactions for the game

Market Design

Design of the environment in which the tokens and users exist in

1. Thickness of Market
    • Increase engagement from people in the crypto space by releasing NFTs in partnership with DeFi protocols to their users
    • Increase engagement from the traditional gaming space through partnerships with youtubers and other influencers

2. Reduce Congestion
    • Immutable X supports 9000 transactions per second using ZK Rollups with plans to scale much more
    • Transactions on Immutable X are instant
  •  
3. Safety
  • Using Immutable X, users self-custody their NFTs with the same security as Ethereum mainnet

4. Ease of Use
    • By removing the need for users to pay gas, the game will be approachable for a much wider audience than existing blockchain-based games
    • NFT market liquidity is increased by sorting NFTs by particular metadata traits in the market to easily find and price ones with particular characteristics

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Mechanism Design

Rules of the game that people have to follow


Governance

1. Decision Making
    • Decisions will be made by the Illuvinati Council, made up of members voted in periodically be ILV holders
    • Community members can create proposals for the council to vote on
    • Illuvium Configuration Change Proposals (ICCPs) suggest changing system configuration variables
      • Examples include changes for: marketplace fees, capture mechanics, and balance changes
    • Illuvium Improvement Proposals (IIPs) help with changes to make sure Illuvium is transparent and well governed
      • Examples include: new contracts, new systems, expansions, and character sets
2. Implementation
  • The eDAO, a multisig made up of team members and core contributors, implements the proposals that are voted in by the council

3. Resolution mechanisms
    • Being a small and active group, the council could move quickly to vote in changes to resolve issues
    • the eDAO has veto power in the event of a bad actor in governance


Market Structure

1. Bargaining Protocol/Pricing Model
    • Illuvials of higher rarity require rarer and stronger shards in order to capture them
    • supply of each Illuvial available decreases as more are caught, but new series of Illuvials will gradually be released
    • Players can pay for certain in game activities like fast traveling or quickly healing Illuvials with ETH or sILV

2. Community information
  • the game is community driven, with any member able to make a proposal for the community-elected council to vote on

3. Idiosyncratic Risks
  • Getting good staking rewards requires locking up ILV for an extended period of time, which prevents the user from selling if the game out look or market conditions changed drastically


Incentives

1. Voting Protocol
    • ILV holders vote in members every 90 days to be a part of the 5 person Illuvinati Council
    • Voting is weighted quadratically to reduce the voting power of large ILV holders
    • When council members vote, decisions need a supermajority to pass, which is ((N+1)/2) where N=the number of council members
    • Meta-governance changes to the council will need to be decided by unanimous council vote

2. Allocation mechanism
    • 100% of in-game revenue is used to buy back ILV and distribute to ILV stakers
    • Stakers can choose a flexible withdrawal time with no multiplier rewards, or up to a 12 month lockup with a linear reward multiplier with a maximum of 2x
    • Stakers can claim rewards at any time, either ILV with a 12 month lockup starting when they claim or sILV which can be claimed immediately, but only used in-game (not stakable)
    • Most of the rewards go to ILV/ETH liquidity providers, some goes to ILV single token stakers, and a small amount goes to flash pool participants that give ILV to partner protocol participants

Token Design

Rules of the game that tokens have to follow

Token Policy

1. Monetary Policy

2. Token Valuation 
    • the value of the ILV token comes from the volume of fees that will be used to buyback and distribute to ILV stakers
    • Axie Infinity is the closest comparable project that is already live, but I expect volume for Illuvium to be much higher given the greater complexity of the game, so using that as a very rough estimate
    • Axie had $785 million in volume over the last 30 days, which extrapolated over a year is $9.42 billion in yearly volume
    • There is no documentation yet on the cost of in-game transactions or size of fees, but a theoretical fee of 1% would imply almost $100 million in ILV buybacks
    • With $610 million of ILV staked, this implies a rough estimate of 15% APY from buybacks
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Financial Incentives

1. Platform Activities 
  • Platform Activities
    • ILV is used to vote in council members to control the future of the game
    • It can be staked to earn a share of fees in the form of market-bought ILV
    • sILV can be used instead of ETH for in-game purchases
  •  
2. Financial Returns
  • Yield farming returns are distributed over 3 years with most distributed during the first two
  • APY will vary depending on how much ILV is staked and at what multiplier depending on lockup
  • Also note that the long 12 month lockup for reward distribution affects returns. This can be mitigated by instantly redeeming for sILV, which will trade for less than ILV given the lower utility

  •  

Token Architecture

Useful for non ERC-20 tokens. And how financial products are structured.

1. Token structure
  • Both ILV and sILV are ERC-20 tokens

2. Token distribution

Conclusion

Illuvium is set for mainstream adoption and can show the benefits of the Play to Earn model to a much wider audience. It will act as a great test of the viability of decentralizing game management and evolution and bring in a wave of development on future P2E games.

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