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Source: Laguna Games

Crypto Unicorns is a blockchain universe created by Laguna Games. The Polygon-based project consists of two types of NFTs (Unicorns and Land), a couple of ERC-20 tokens (Rainbow Tokens and Unicorn Milk), and a set of games that use them. It is playable entirely in-browser, giving the project a wide distribution potential without depending on third party stores.

Currently, only the first of the planned game modes is available, which is a single-player farming / gathering / crafting resource manager. The other three announced games — Jousting, Racing, and RPG Battle — are all competitive variations that are (or were) scheduled to launch in Q2, Q3, and Q4 2022 respectively.

Crypto Unicorns has some good things going for it, perhaps most of all that its team is quite experienced in free-to-play games. They’re also browser-based, have a roadmap that doesn’t feel over-ambitious (except perhaps the RPG Battle), instituted a smart land design, are building slowly and steadily, and are keeping the community involved.

They do, however, have some bumps to watch out for, including unicorn inflation, some governance risks, and the risk of the highly-ambitious RPG Battle game mode. Their tokens have also performed much worse than their competitors, which is a concerning sign.

As a play-and-earn game, Crypto Unicorns doesn’t look very appealing right now. Between its tokens falling and the wider crypto crash there’s little earning potential. With only a small amount of gameplay, in the form of farming and crafting, having been released so far, the “fun factor” is rather limited. It does have a charming IP, though, and a team that theoretically can sail through this storm, making the game a more interesting than usual opportunity to get into while prices are so low.

Laguna Games

Laguna Games CEO and Co-founder Aron Beierschmitt began as a tech entrepreneur when he was 19 years old, starting Foundation Games in 2009, which eventually grew to 27 employees and launched 7 mobile games. He then founded social network Postly, telehealth company AxS, was CEO at Beyond Games, and finally founded Laguna Games in 2020.

He had previously been doing more “serious” games — war games, strategy games, etc. — and wanted to pivot and do something ridiculous and silly. The Crypto Unicorns IP is the result of that new direction.

In an interview with Delphi Media, Beierschmitt said “I don’t think you can have an economy built exclusively around play-and-earners. It comes down to having this healthy ‘middle class’ of players who are getting genuine enjoyment and fun out of the experience.” This was January 2022, months before the general crash of crypto, albeit after Axie Infinity was on its decline.

He focuses on “play-and-earn,” attempting to distance himself from the generally doomed “play-to-earn” that led to Axie Infinity’s rise and fall (among others). The distinction between the terms is generally that, for a “play-to-earn” game, the primary purpose of playing is to earn money. By contrast, the primary purpose of playing a “play-and-earn” game is to have fun, with earning as a secondary benefit. So it is with this “games need to be fun to be successful” mentality that the Laguna Games team is approaching Crypto Unicorns.

Granted, talking about making a fun game first is not unusual for 2022 blockchain games and is pretty much table stakes for this second wave of projects. However, Beierschmitt’s time with F2P seems to have given him a realistic perspective on how games can be sustainable and profitable.

Laguna Games itself is a mid-sized studio of about 60 people concentrated on the west coast of the US, though with some team members distributed around the world. Like Beierschmitt, the team has extensive free-to-play experience, which is good to see since many hard-learned lessons in F2P will apply to blockchain games. Much of the team’s leadership comes from Beyond Games, a San-Francisco-based studio that Beierschmitt was CEO of. They developed the big-budget-but-ill-fated Sylvester Stallone mobile game Battle Strike Force.

The experience of the team itself may be the biggest competitive advantage that Laguna Games has with Crypto Unicorns. It is a team that is built to create games rather than being stacked entirely with crypto experience. Don’t get us wrong; it’s necessary to have some great blockchain engineers on a project like this, but we’d argue that it’s not sufficient, and Laguna Games seems to be well aware of this.

Crypto Unicorns is a well-funded project. It raised $5M in a seed round in Oct 2021 and looks to have made at least 1,400 ETH in sales of its genesis unicorns and land. More recently, it had a well-timed coin sale in March that brought in $26M from investor coin purchases.

(N)FTs

We’ll do a quick overview of the various tokens in the game so that we can establish the terminology for discussing the game design. All of Crypto Unicorns’ tokens are on Polygon and are managed through any standard wallet like Metamask.

Fungible Tokens

Like the vast majority of blockchain games, Crypto Unicorns has two fungible tokens, one of which is a non-inflationary governance token, and the other is a “softer” token that is primarily created and burned in-game.

RBW (Rainbow Token)

RBW is the governance token of Crypto Unicorns, with a fixed supply of 1 billion that is distributed over a 5-year period. Half of that supply is reserved for Staking and P2E rewards, with the rest seeing a fairly standard distribution among team, investors, early drops, and a community fund.

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Beyond staking rewards and voting rights, RBW will be used for various in-game costs, market transactions, and PvP entry fees. RBW has a relatively high in-game utility compared to many governance tokens in blockchain games.

UNIM (Unicorn Milk)

Crypto Unicorns’ UNIM game token is designed to be earned and burned within the game. While supply is uncapped, all used UNIM is burned. Currently, a player can only gain UNIM by gathering it from their own land NFTs, while the primary UNIM uses are breeding, crafting, and evolving.

Non-Fungible Tokens

Participation in the Crypto Unicorns game world requires obtaining at least one Unicorn and one Land NFT. From February-May 2022, prior to the crypto crash, a set of 3 unicorns and a land plot would cost around 3.2 ETH. Things are obviously different now, and that same set would total to only about 0.15 ETH.

Unicorns

The central NFT of the game is unsurprisingly the eponymous unicorns. Unicorns are needed for nearly every in-game action but have limited amounts of energy. The energy limitation slows the pace of the farming game and provides incentive to hold a large stable. It’s unknown what the role of energy will be with future competitive game modes.

Very unusually for a blockchain game, there is no explicit rarity for unicorn NFTs or even for their parts and genes, with the exception of some parts appearing as “mythic parts.” That said, there is a complex system of 18 genes spread across the 6 unicorn parts.

Source: Laguna Games

It’s a bit of a black box as to what the specific genes are in a particular unicorn, though there are eight “core stats” that are visible for each unicorn.

Source: Laguna Games

The lack of an explicit rarity designation could make it more difficult for players and investors to differentiate the value of unicorns. This could help to even out pricing by avoiding clear tiers of “betterness,” though whether that’s the goal is unclear. Either way, OpenSea’s ability to filter by stat ranges (for example, looking for a unicorn with Attack > 200 and Speed > 150 will help with searches). It seems likely that in the long run players will seek unicorns with specific combinations of strong stats, depending on the type of gameplay they wish to participate in.

As mentioned above, there is one element of rarity that exists. Each of the six different unicorn parts has a small chance of being “mythic,” which comes with increased chances of upgrading genes. A unicorn can theoretically have up to six mythic parts, but as of now there are none with more than three on OpenSea. The odds of each part being mythic aren’t published, but based on the prevalence found on OpenSea, it looks likely to be 0.2%. Note though that adding boosters can increase odds of getting a mythic one, so the actual raw odds may be lower.

Unicorns and land are divided into nine classes. It’s unclear what impact these classes have on stats, but matching classes between unicorns and the land they work on gives bonuses to output. The classes are organized into three groups: Light, Wonder, and Mystery, as illustrated below. Three of the classes — Rainbow, OmNom, and Star — are considered “hidden” classes. It’s unclear what exactly this means, but they appear to be about half as common as the other classes based on OpenSea distribution.

Unicorn NFTs have three lifecycle stages: egg (apparently unicorns are monotremes), baby, and adult. They are also apparently hermaphroditic, since any two unicorns can breed — they have no assigned biological sex. The overall process works like this:

In addition to required costs, there are optional inputs at each stage that can impact the next result. These inputs come in the form of berries and boosters, which are off-chain resources that players can earn or buy in the game. They have the following impacts (and note that berries are a required resource for evolving):

Land

Land is what produces resources in Crypto Unicorns. Players assign their unicorns to do a particular action on a particular piece of land, and when that action is finished, the player gets the rewards. At the moment players are limited to importing only nine plots of land in the game at a time — other plots in their wallets must remain inactive. This seems likely to create a strong incentive for multi-accounting.

Unlike unicorns, Crypto Unicorn Land NFTs are broken into three explicit rarities of common, rare, and mythic. Players get bonuses to production if their unicorn class matches the class of the land it is working on, so the difference with land rarities is how many classes the land matches. Common plots match only a single class, rare match a group of three classes, and mythic match all nine classes.

Source: Laguna Games

As we’ve talked about in past papers, land ownership can be a slippery slope, easily leading to “housing” crises, rent-seeking, and wild speculation. Economically, we can define a token as “land-like” if it meets all three of these requirements:

  • Necessary for production
  • Strictly scarce in supply (cannot be produced)
  • Obtains value based on its location

Land in Crypto Unicorns meets two of these three: it is necessary for production (currently, there is nothing that can be done in the game without owning land) and it is scarce, with a cap of 900k common, 90k rare, and 10k mythic plots ever to be minted, and only 30k have been minted so far.

Interestingly though, land plots here have no absolute location. This means that there is no rush to try to snap up more centrally-located plots, or to try to be Snoop Dogg’s neighbor. Instead, each player has their own “instance” of a unique world separate from all other players, and they are free to arrange their land without encroaching on others. This may end up being a wise move for Crypto Unicorns using land as a game mechanic but avoiding some of the worst risks of having ownership of true land-like tokens.

That said, there is a clever mechanic in which land plots do have value in their relative location. A player can “stitch” together their land plots and gain bonuses for having adjacent land of compatible classes.

Source: Laguna Games

Laguna Games has also teased an upcoming feature in which players in the same guild can start stitching land with other players’ to build mutual adjacency bonuses. It is just a mockup so far but could look something like this.

Source: Laguna Games

This mockup also suggests a good mental model for how land works in Crypto Unicorns: it’s like every player has their own flying island made up of their land plots, but if land changes hands, it can just be joined to a new flying island.

Eventually land will be purchasable via the “Land Vending Machine” at the cost of some ETH as well as what will presumably be a very difficult-to-craft item called a “Keystone.” Despite being a vending machine, the land will still have the capped quantities listed earlier for each rarity level, and each type of land will be priced using individual pricing functions that increase the cost of each subsequent plot.

Game Design

Laguna Games is building up a suite of game modes for Crypto Unicorns to give players a variety of ways to interact with the game world and economy. It’s an aggressive roadmap, aiming to release a new game mode every quarter this year. It’s also at least a little behind (Jousting was supposed to release Q2 2022), though in the world of game development a few months behind is practically ahead of schedule.

Public roadmap as of July 2022

The current version of the game, all released during the “Phase 1 Initial Launch,” consists of a variety of mechanics and mini-games centered around generating resources and breeding. The gameplay and resource loops for Phase 1 are very helpfully laid out in the Crypto Unicorns whitepaper.

Source: Laguna Games

As mentioned earlier, unicorns have limited energy — they can only store up to 3 energy, which recovers at 1 per 24 hours. Energy is required for all resource-producing actions in Phase 1, which we’ll see below.

The Plots Thicken

Plots of land in Crypto Unicorns are required for any participation in Phase 1 of the game. It seems likely that the subsequent PvP-focused phases will not require land, lest the number of players are capped by the fixed amount of land.

For now, the core function of land is to act as a place to put a player’s buildings. These buildings are what enable the various gameplay modes — farms for farming, workshops for crafting, and so on.

Each plot has a maximum number of buildings it can hold, as well as a cap on the upgrade level of its buildings. When a building is built or upgraded, it gives XP to the land it is on, which contributes to leveling it up. Destroying a building removes that XP and resets the level of the destroyed building, so this is rarely a good idea for anything above a level 1 building.

Land NFTs are mutable, and buildings are added directly to each NFT. As a result, the buildings transfer with the land plots, so leveling up buildings should increase the value of a land NFT.

Let’s take a look at each of the buildings currently in the game and the corresponding mechanics.

Farms and Farming

Farming technically doesn’t require a unicorn, but practically the payout is so much worse that it would be foolish to farm solo. It appears that the specific farming payouts have changed over time, but currently using a unicorn to farm increases the expected yield by over 10x. A plant takes eight hours to grow, minus any bonuses for adjacent matching land plots. An assigned unicorn will also expend one energy in this time.

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Strangely, there does not appear to be any bonus given by upgrading farms. Earlier screenshots of the farming gameplay clearly show increases to berry output and farming speed, but this no longer seems to be the case. As such, upgrading farms for now is only useful for leveling up land plots, though it would be surprising if a benefit isn’t added back.

Carts and Gathering

Gathering is the simple process of sending your unicorns off to scavenge for resources. The unicorn disappears from the plot of land and then returns 24 hours later (minus any adjacency bonuses). A player can also feed a unicorn 50 berries of their type before leaving to increase the rewards from the gathering, though by how much exactly is unclear. The unicorn will spend one energy to go on a gathering mission.

Source: Game screenshot

Upgrading the cart increases rewards (again, unclear by how much) and at certain milestones can increase the number of simultaneous gathering unicorns above the initial one-at-a-time.

Workshops and Crafting

The workshop is where a player’s unicorns can produce the higher-tier resources required for upgrading buildings as well as breeding boosters. A variety of recipes exist, with all of them requiring UNIM, energy, and time, as well as lower-tier resources.

Source: Game screenshot

Nurseries and Breeding

Breeding and evolving (the Crypto Unicorn term for growing a baby unicorn into an adult unicorn) are both done in the nursery. Breeding is a fairly typical experience, with genes inherited from the parents. Players can optionally add berries to try to influence the odds of the unicorn coming out as a certain class.

Source: Laguna Games

We’ll look at the economics of breeding more in the Tokenomics & Economy section, but for now we’ll note that in addition to each unicorn having a maximum of 8 children before becoming sterile, each successive breeding event becomes significantly more expensive, and the process takes 24 hours. Pre-market crash breeding would have ranged from about $250-$5,000, but now it ranges from $10-$120.

Source: Laguna Games

The hatching process is instant and free, though players can choose to add boosters to increase the chance of genes upgrading. Adding boosters will be important to those trying to breed unicorns with certain stats or mythic parts, but since all unicorns are useful on the farm, it’s possible that many players will forego the boosts.

The final step in breeding is evolving from a baby unicorn to an adult unicorn. A baby unicorn is fortunately not useless — it can actually participate in all activities outside of breeding. Evolving into an adult enables breeding and gives a 20% boost to all stats (though stats don’t do anything yet). Evolving has a fixed cost of class berries, UNIM, and RBW, and eight hours. The evolving process increases all stats of the unicorn by 20%. Like other steps, there’s another opportunity for players to add boosters and influence the genetics of the adult unicorn.

Source: Game screenshot

Stables and… Stabling?

Stables are the simplest type of building, which simply increase the number of unicorns that can be actively working on a player’s land plots. Land plots can hold lots of unicorns, but the cap prevents a player from tasking more than a small number at a time.

Source: Game screenshot

The Dark Forest & Shadowcorns

The Dark Forest, a surprise release from Laguna Games (not to be confused with The Dark Forest that we deconstructed last month) provided some light interaction prior to the game’s Phase 1 Initial Launch. The game was extremely simple; players could stake their unicorns for a 24-hour period to gain 500 UNIM. Players could also spend UNIM for a chance to get one of 3,000 Shadowcorn eggs. So far, the eggs are not hatchable, although that has been promised for a future update, along with a variety of additional shadowcorn features. In the meantime, The Dark Forest has been fully explored (i.e. all UNIM has been claimed) and the Dark Forest narrative is currently being used for a series of social sharing events.

Source: Game screenshot

It’s good to see Laguna Games doing some experimentation, playing around with the idea of fully on-chain games. Hopefully, this is indicative of a culture of creativity for the Laguna Games team. That said, it is concerning that this may end up as a confusing distraction. As an experiment, it’s great, but now it seems that they are trying to involve shadowcorns in the main game. Unlike regular unicorns, shadowcorns have rarities (Common, Rare, Mythic), and also have their own classes (Fire, Slime, Volt, Soul, and Nebula) and traits (Might, Wickedness, Tenacity, Cunning, Arcana). There are only 3,000 shadowcorns and they can’t breed. So there is now this very rare type of NFT that the earliest supporters have collected, leaving Laguna Games in a pickle to figure out if it wants to support shadowcorns or risk upsetting its biggest fans/investors.

Upcoming PvP Games

The Crypto Unicorns farming gameplay was introduced first to help seed the economy with materials and work out some kinks prior to anything competitive starting. This was a wise move, taking one step at a time to make sure the right pieces are in place before the stakes are raised.

There are three announced PvP game modes coming to Crypto Unicorns. The details behind these are fairly fuzzy, especially for the third one, but we’ll do a quick overview based on what is known now. This is an area to keep an eye on; competitive gameplay can really ignite a community, especially if the games are fun and good for streaming. It will also widen the appeal of the Crypto Unicorns universe — many players who have no interest in a farming game would happily jump into a competitive RPG.

Jousting

The first of the PvP modes to be launched will be Jousting. This will be the first time a unicorn’s stats are used in the Crypto Unicorns universe, and thus it will be the beginning of specialization of unicorns rather than all of them equally contributing to farming, as it is today.

Source: Laguna Games

Jousts will be 1v1 battles carried out over a series of rounds. The joust ends either when one unicorn gets knocked unconscious or at the end of three rounds, with the winner determined by the AI judges’ scores. This gameplay appears to be entirely based on core stats and a random number; it does not sound like there will be any skill elements to the game.

Starting with a relatively simple, non-interactive game makes sense and is in line with Laguna Games’ approach of walking before trotting. Plus, with the planned ability to have RBW entry fees and prizes, jousting could lead to some lucrative breeding of champion unicorns.

Racing

The second PvP mode will be racing. Fewer details are available, but from what we gather, it will also be based on stats and random draws. Races are planned to run 8 unicorns at a time across a variety of tracks, with tracks vaguely promised to eventually “be managed by the community.”

Source: Laguna Games

While it is likely that no direct skill will be in the races themselves, there may be some strategy in selecting the right unicorn for a race based on track parameters, somewhat similar to ZED RUN. Again, RBW entry fees should build interest and demand for unicorns, and the best racing unicorns will likely be different from the best jousting ones, thereby continuing to specialize the unicorn population.

Team RPG Battle

Planned for Q4 2022, this mode is vaguely described at best. The team has said it will have more skill than the previous two modes, but that’s a low bar. We do know that it will be 5v5 battles, but are these turn-based RPG-style battles (a la Final Fantasy) or is it a full-on MOBA?

Source: Laguna Games

The chart it’s released does suggest something more along the MOBA route, but if so, that’s a couple orders of magnitude more complex and feels likely to be over-ambitious, requiring a very different skillset from all of the other gameplay and content prior to this point. Still, this additional PvP mode should again increase the utility and specialization of unicorns, increasing demand to try to keep up with the steadily increasing supply from breeding.

Crypto Unicorns’ appeal to professional gamers and guilds likely hinges heavily on executing the RPG Battle mode. Given the scope of such a project and how different it is from everything else it’s working on, this is a significant risk point that Laguna Games needs to pay attention to.

Tokenomics & Economy

It’s not going to surprise anyone that the value of Crypto Unicorns’ various tokens has tanked in the past few months. What’s a little surprising, however, is just how far the prices have fallen. The market crash happened around May 5, 2022. Here’s a look at token performance across six blockchain games relative to their May 5 prices in USD.

Token prices in USD were recorded, then each was divided by the value on May 5 to normalize

Everything has fallen to be sure, but while the other tokens have lost 50%-75% of their “starting” value, RBW has plummeted by 95% from its May 5th price. That’s a staggering drop in value and it is not commensurate with its peers. UNIM is doing even worse, down to about 3.5% of its May 5th price.

An alternate way of looking at this is to normalize by ETH price rather than by USD. This gives a sense of how the tokens are performing within the market and should minimize the impact of the more generalized market crash.

Token prices in ETH were recorded, then each was divided by the value on May 5 to normalize

The other five tokens vary, some improving their ETH price and some decreasing, but none of them have fallen to nearly the level of RBW, which has lost 86% of its ETH value. It’s not exactly clear why this is the case, but the primary culprit may lie in the supply of unicorns...

Unicorn Value

Unicorn NFTs have similarly fallen in price since early May. From February-April the unicorns had strong pricing with a floor over 1 ETH and median sales over 1.25 ETH. Peak sales varied a lot but a few unicorns sold for 20 ETH, a number that’s hard to fathom right now.

We see a spike in value starting on January 28th, which is when the Shadowcorn game launched. This marked the first playable content released in the Crypto Unicorns universe, and players could earn UNIM and try to win one of the only 3,000 shadowcorn eggs by staking unicorn NFTs. With the sudden earning utility of the NFTs, demand and prices predictably shot up.

Then prices saw a dramatic fall from May 11-May 15. While this almost coincides with the crypto market crash, the timing seems to be coincidental. The prices above are in ETH, so this pattern isn’t as affected by the market crash; this is separate from fiat exchange rates, instead just looking at the value of the NFTs in the market.

We can get a clearer picture of what happened if we take a look at the number of unicorns over that same period of time:

The odd little dip in late May looks to be started by an announcement that the evolution feature was postponed (May 26) and then kicked back into full speed when evolution released (June 3).

Prior to mid-May there were only the original 10,000 genesis unicorns. Then the game launched breeding on May 13th. With the ability to now create unicorns, both the demand would drop and the supply would increase considerably. What we would expect is to see the price of a unicorn start to reflect the cost of breeding, which is exactly what happened.

Unicorn Breeding

Breeding was one of the biggest potential upsides to owning unicorns. With a floor price over 1 ETH (then $3,000) and median prices more like 1.25 ETH (then $3,750), players were dreaming of selling their unicorn eggs for hefty sums. As we saw above though, those prices quickly fell once breeding began, and median prices are now down to a painful 0.04 ETH (about $45).

As mentioned earlier, breeding is not free, and it gets much more expensive every time a unicorn breeds. This is the current cost table for breeding by remaining breeding points.

(For the sake of this discussion, we’re ignoring optional breeding costs as well as craftable item costs, which can be obtained easily through farming.)

When breeding began on May 13th, total breeding costs would have ranged from $70-$1,900. Today, that range is $6-$138. But let’s now step away from USD again and look at just the ETH costs, both on the first day of breeding (May 13th) and now:

Those middle prices look pretty similar to our median prices of unicorn sales. And in fact, if we overlay unicorn prices onto the breeding costs, there is a very strong correlation. The prices track closely with the cost of the 5th breeding of a unicorn pair.

A sharp drop occurs when breeding is first enabled, then price correlates to cost of a unicorn’s 5th breeding

There’s admittedly a bit of a “the unicorn or the egg” problem here — are unicorn prices reflecting breeding prices, or are players selecting breeding costs based on the unicorn prices? The fact that it tracks so consistently with the cost of a 5th breeding suggests that it is the former, and there’s a fairly good reason. Let’s look at the cumulative breeding costs for a single unicorn.

The price of breeding a unicorn 4 times is 5,200 UNIM and 100 RBW. A 5th breeding alone is 4,200 UNIM and 25 RBW. The price of evolving a baby unicorn into a breedable adult is a fixed 5,000 UNIM and 100 RBW. So in general, it’s going to be more advantageous to create a new adult than to do a 5th breeding, and if a player is looking to spend that much, they’re often better off just buying a known unicorn on the market.

As a bit more evidence of the correlation, we can look at the number of unicorns on OpenSea by the number of times they’ve bred (ignoring the virgins since they make up about 75% of all the unicorns). There’s a clear fall-off after breeding four times, and almost no one breeds more than five.

Number of unicorns on OpenSea grouped by number of times bred

But there are also changes in supply and demand that impacted the price. The supply has gone from 10k to 46k over this period of time, so with constant demand, we would theoretically see the price drop from 0.3 ETH to 0.065 ETH. The price, however, is even lower, closer to 0.04 ETH, suggesting that there’s also a drop in demand, as we would expect from the ability to now create your own unicorns off the market.

This in turn likely affected the prices of UNIM, the primary component of breeding fees. RBW is somewhat secondary, but one of the main uses is buying berries and boosters for breeding, so it’s possible that that was the source of the drop. Or maybe it is just reflective of the general reduction in value of the unicorn economy.

While it may seem obvious now, this is an important result that game designers, players, and investors should all note. If the ability to mint new NFTs is suddenly added to a system that has had a fixed NFT supply, the price of the NFTs is going to drop to reflect the cost of minting new ones. For game designers, it’s likely this drop could be mitigated by having a high minting cost. For players and investors, be wary of minting added later and try to determine what minting prices will be before investing.

Player Incentives and Token Value

Looking at the prices of RBW vs UNIM over the past few months, we can see an initial drop right around the crypto crash (as many tokens saw), but then UNIM held its value until June 7th, while RBW slowly and consistently slid downwards. Why did it hold its value?

UNIM holds value from May 13 - June 6, then suddenly drops

Our best guess for this pattern is based on the community event that was running at the time. From May 13th-June 6th Crypto Unicorns was holding its Breeding Milestone event. Players earned points the following ways:

*Evolving wasn’t available until June 3, near the end of the event.

Points across all three “Summer of Love” milestone events would be tallied and the top point-getters could score some significant rewards (top 25 would get what was then worth $6,000-$17,500 in RBW and UNIM). But more relevantly, rewards were also given out to all players hitting certain thresholds.

Source: Laguna Games

With a minimum breeding cost of 600 UNIM and 50 RBW, players could breed 5 times (3,000 UNIM and 250 RBW) and get 2,500 UNIM back. In other words, if they spent about $350 in breeding fees, they would get a refund of $150 in UNIM. In reality, it would be difficult to only breed at the cheapest price, but the returns were still quite decent.

This event ended on June 7th, at which time the evolution milestone event began. Reward tiers were the same and the rules were similar, but with different scoring:

The problem with this is that evolution is much more expensive, with a fixed cost of 5,000 UNIM and 100 RBW. To get that same 2,500 UNIM reward, players now needed to spend 25,000 UNIM and 500 RBW, at which point the reward amount is much less appealing. Right at that time the value of UNIM fell, and we suspect it was because the potential ROI on UNIM suddenly disappeared.

This doesn’t explain the more steady decline of RBW, but given that RBW is also involved in staking rewards and governance, while UNIM is only for in-game actions, there were other influencing factors at play.

Land Value

Land values have been much more steady than unicorns, which is not surprising since the supply has remained fixed at 30,000.

That said, another 970,000 plots of land will be released through the Land Vending Machine, which should be releasing soon. Details are fuzzy on pricing — they have shared the UNIM equivalent for the crafted item that’s required, but there’s also an unspecified ETH cost. It’s also unclear how land prices will increase as more plots are purchased.

Unlike unicorns, land seems less like a speculation target and more just necessary for participation in the economy. We can see this through modest pricing — even the peak land prices rarely eclipsed 1.5 ETH. So it’s unlikely players are going to be hit as hard by a drop in land prices, but it’s certainly something to look out for, depending on how it ends up being priced.

Land Ownership

Land is a capped resource in Crypto Unicorns, with only 1,000,000 plots ever to be minted. So far though, only 30,000 plots of land have been minted, with more to follow in future phases.

Even with a relatively small number of plots minted, the ownership distribution is rather broad. There are 5,370 land NFT holders, and here are the top 10 by plot count. The #1 owner appears to be the minting contract for land.

This seems great at first, but when looking at the cumulative land ownership by wallet, we noticed a rather peculiar shape to the chart.

Land ownership percentage, sorted by largest owners first

That straight line is not at all what we would expect an ownership distribution to look like. It turns out there’s a big caveat to land distribution: as you may recall, a single wallet can currently have only nine plots of land active in-game at a time. Unsurprisingly, if we look at the most common number of plots of land owned by a wallet, we get this.

More than a third of all wallets hold exactly nine plots of land. While it’s hard to know for sure, it is likely that land ownership is more concentrated that it seems, by player if not by wallet. It is to a player’s advantage to split their land across multiple wallets to get around the cap of nine active plots. Crypto Unicorns even explicitly permits this as long as the accounts are not controlled by bots.

Another component of land is that because the number of plots is capped, it necessarily limits the number of land owners in the game. With 1,000,000 plots, they have much more land than Axie Infinity (90,601) and The Sandbox (166,464), which should give them some breathing room. Beyond that though, it is likely that PvP gameplay will not require land, though that has not been confirmed. If it does require land, that will indeed cap the number of players in the game, so Laguna Games should be careful about making that decision.

Staking Rewards

When someone chooses to stake their RBW, they receive sRBW (staked RBW) in return. sRBW comes with two primary benefits: staking rewards and governance voting power. They also enabled participation in a Founders program and in some staking leaderboards.

sRBW is given in larger quantities to players who time-lock their staking, increasing by 0.25 per month staked, as outlined here:

We’ll talk more about governance voting later, but let’s take a look at the staking rewards. All sRBW owners receive RBW payouts based on their proportion of the total sRBW pool. That proportion is then multiplied by the daily RBW rewards as specified by the RBW unlock schedule.

Specifically, about 100,000 RBW is released as staking rewards every day. Currently, the top sRBW token holder has 9.6% of the total supply of just shy of 100M. This means that every day that wallet receives 9,600 RBW as a staking reward. Back in March this would have been around $20,000 worth of RBW every day for that one wallet, but that value has now dropped to just over $1,000.

Marketplace

Crypto Unicorns has an in-game marketplace for all of its non-token resources (berries, materials, boosters, etc.). The market uses an Automated Maker Market algorithm, similar to what we discussed in our Skyweaver deconstruction. The short version is that an algorithm adjusts prices based on market activity, increasing prices when a good is purchased and decreasing when it is sold.

Source: Game Screenshot

The market serves two primary purposes: 1) it allows some players to spend money to get a head start and 2) is also a method of revenue for farming players. The free-to-play DNA of the team is apparent here with a system of consumable items that players can produce either with time or money.

With RBW as cheap as it is now, it will be interesting to see how the market reacts. One would expect players to primarily just purchase items since it’s not worth selling them, but if the market adjusts appropriately, the sell prices should go up considerably to match. Anecdotally though, prices have trended flat-to-down, which is surprising.

Token Sustainability

One of the biggest questions we, and most analysts, ask is regarding whether or not a project’s economy is stable. In other words, can it sustain players over the long haul, hopefully while staying lucrative for investors? At this point, players are hard-pressed to find any significant short-term earnings due to the general crypto crash. But let’s assume that’s not the case and we were still back in pre-crash price ranges. How do the four tokens look likely to perform over time?

RBW

RBW is being released slowly but steadily over the next five years. The increase in token volume comes with no inherent increase in value (minting a token does not create value on its own). As such, the value of RBW is going to depend heavily on the success of the game at large, and it will have to keep up with the inflation.

If governance becomes important, that could increase the demand for RBW, but that’s not a factor we would bet on having a significant impact. Staking rewards are a temporary source of value, but staking RBW to get sRBW creates a feedback loop that may magnify movement in either direction rather than provide stability.

Where RBW may become a source of value is in the PvP games. With plans to charge RBW entry fees for some premium events, redistributing those fees to the winners, competitive players could start to create a lot of interest in the game through streaming and social media. A combination of no/low-skill games (Jousting and Racing) and high-skill games (RPG Battle), a thriving community of players could participate and grow. There is, of course, the ever-present risk of regulation kicking in, especially for the luck-based events.

UNIM

As an in-game currency, UNIM is not intended by the developer to be a source of investment or speculation. It’s aiming to tune its economy to keep a relatively flat UNIM ratio relative to the number of players, and the team’s F2P background should help significantly with this goal. But it should not be a target for anything outside of immediate in-game use.

Unicorns

We’ve seen inflation of the unicorns starting to kick in already. The team’s theory is that the game modes will continue to create demand in hopes of keeping up with that inflation. All unicorns are helpful in the farming game, so “floor” unicorns are still useful. Meanwhile, high-stat unicorns will likely be good at only one of the three PvP game modes, diversifying the demand.

In addition to fairly standard increasing costs and breeding caps, the main anti-inflationary mechanism here is the evolution (growing a baby into an adult) fee. This is an amount that must be paid before a unicorn can start breeding, which creates a fixed cost before looking at the marginal costs of breeding. However, all this effectively does is create a clearer point at which breeding is less profitable than evolving a new adult; it seems unlikely to really fix the problem.

There are also currently no burning mechanisms outside of something shadowcorn-related (which is only available to a small number of users). It would be very surprising for there not to be burning added eventually, but for now the inflation looks likely to continue.

Land

Unlike most other blockchain games, land is not the high-value, exclusive NFT in Crypto Unicorns. This is good since it is required for much of the gameplay and should help keep the game financially accessible. The amount of land is going to inflate a lot, but without knowing what pricing curves Laguna Games will be using, we can’t predict what that will look like.

On Governance

One Token, One Vote

Like many blockchain games, Crypto Unicorns has a governance token, RBW — or more accurately, sRBW, which players receive when they stake their RBW. CEO Aron Beierschmitt has been quite explicit about his aspirations to progressively hand over ownership of the game to the players. It also has started using snapshot for official votes on game policies and fund usage. It held a successful vote to begin liquidity pool token staking rewards, establish RBW payments for moderators and bug-finders, and give RBW grants to various companies and individuals contributing to the project. Crypto fans are likely excited to see a game actually delivering on the promise of community-run decisions.

It’s using a linear voting scheme that is essentially 1 sRBW = 1 vote. Additionally, quorum on a proposal is 33% of sRBW. Like many economies, though, the top few individuals own most of the currency. Below is a chart of the cumulative sRBW ownership from the top owners down. This first chart shows the distribution of who own 95% of the tokens, which is 1,600 out of the 9,900 total holders. The second chart looks at just the top 28 holders who represent 50% of the total voting power.

sRBW ownership percentages, sorted with largest owners first
Absolute voting power of the accounts that hold a total of 50% of all sRBW

The voting power is incredibly concentrated. In fact, if the top 79 holders don’t vote, the remaining 9,800 voters can’t reach the 33% quorum. Even worse, that quorum can be reached with just the top 11 addresses. So in what is admittedly a contrived, but entirely possible, scenario of just the top 11 voting, literally the top 3 could jointly make a decision that affects all 10,000 sRBW holders, not to mention all players of the game. It is a plutocracy of the most literal kind, where money directly buys votes.

Governance Council Selection

However, what is not at all contrived is voting for positions in the Crypto Unicorns DAO’s Governance Council. Laguna Games is ceding control of determining which Draft Proposals make it through the draft stage and have an opportunity to be voted on. The council will have 11 seats, so the people who get the top 11 vote counts get a spot.

The thing is, by holding almost 10% of the vote, the top token holder literally cannot be outvoted — whomever that wallet votes for is guaranteed a seat on the council. And sure enough, that’s exactly what happened. In fact, that candidate won in what would generally be considered a landslide, even though 95% of their votes were from a single person.

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So maybe it’s a bit unlikely that the top 11 token holders would secretly hold a quorum vote, but it’s definitely the case that right now a single person has the ability to determine one of the council seats. And in fact, had they split their vote 5-ways, they could have appointed 5 of the 11 council seats entirely on their own.

This could be a big problem, too. The DAO controls the Ecosystem Fund, which is allocated 100M RBW over the course of 5 years; even at today’s abysmal prices, that’s still $11M. A malicious actor could theoretically appoint a majority of the council, get a proposal giving them all of the RBW approved, and then win the vote by brute force.

One share, one vote is of course how shareholders vote in companies, and one could easily argue that sRBW holders are effectively shareholders in the Crypto Unicorns economy. But blockchain technology and Web3 are often championed as ushering in a new wave of ownership by the participants. The narrative is that this is a fresh opportunity to create a new norm. Even without potential malicious actors, is ownership and leadership by the top 0.1% really the new frontier?

The is by no means a critique unique to Crypto Unicorns, but given its emphasis on governance and ownership by the players, it felt fair to do such an analysis. This type of situation is not surprising. Vitalik Buterin wrote a post in 2017 that predicted this type of situation, and if you want further reading, check out his excellent post from last year on the problems with coin-voting governance.

It may be that Laguna Games is perfectly okay with this situation, and if so, that’s fine; it’s their universe to create. But if they aren’t happy with it, it could be difficult to modify. Can they convince enough of their top coin-holders to vote for a resolution that would reduce their own voting power? It’s very understandable if the coin holders balk at such an idea.

A Possible Fix

Then again, the Laguna team did wisely build a safety valve. While the team’s and investors’ RBW has a time lock for 12 months, all of their locked RBW comes with lsRBW (locked staked RBW), which conveys voting power but no staking rewards. As such, while there are currently about 100M sRBW, the Laguna Games team holds 200M lsRBW, and investors another 150M lsRBW, making for an easy majority for now. Naturally, they have said that they won’t use this power unless truly necessary.

If they’re willing to force a new proposal to be approved, what might it even be? While Buterin discusses some complex DeGov systems in his coin-voting governance article, one relatively simple improvement would be to move to quadratic voting (which Buterin details in a 2019 article).

Each pair of graphs below is looking at the same wallets, just with different voting rules:

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While still concentrated near the front, as we do want to see, the spread of power is much broader. The bottom 8,500 wallets that held 5% of the vote on the left now hold 35% of the vote with quadratic voting. A 33% quorum requires a minimum of 350 votes rather than only 11.

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The top token holder controls 0.8% of the voting power rather than nearly 10%. Power is still somewhat concentrated, and given how voting was originally set up, that’s likely to be seen as a good feature by Laguna Games. But with quadratic voting, the top token-holding wallet has a vote that is 1,500x as influential as a wallet in the bottom 10%, while with the 1 RBX = 1 vote system, that same top wallet was 2,350,000x as influential.

Game ecosystems are quite different from a company with shareholders. For pure FinTech projects, the “one token, one vote” may make perfect sense. But blockchain games, Crypto Unicorns included, often present themselves as “digital nations,” and as such have at least the opportunity to move away from a pure plutocracy.

Recommendations

Laguna Games has built some strong foundations but now must work through a bear market as well as its own challenges. If we were in their shoes, this is where we’d be focusing.

Control Unicorn Inflation

We’ve seen the existing unicorn inflation, which has led to a lot of value loss for early adopters. There are currently not any anti-inflationary measures in place, so the problem is just going to continue. The first step in trying to curb the inflation is providing a method of burning unicorns (or at least “sending them off to pasture”).

Laguna Games is already testing the waters here with having unicorn-burning required for growing shadowcorns. The trick, of course, is finding the right incentive, or reward, for burning. This could be an opportunity to help increase the unicorn floor price — a burning reward sets a minimum value for a unicorn. It would be tempting to give UNIM as a burning reward, and that could work, but thinking of this from a free-to-play perspective, it may be a better idea to avoid having a direct currency conversion. Instead, we would create an item that can only be obtained from unicorn-burning and use that as the incentive. Designing that item will have to be left as an exercise for the reader.

Be Careful With Land Vending Machine Pricing and Availability

Land pricing has held relatively stable, likely due to a clear value proposition and fixed supply. Of course, the addition of the Land Vending Machine will change the latter. The amount of inflation planned is substantial, eventually growing the current supply by 33x. Laguna Games has control over this distribution and has indicated that it will not necessarily release all of the land at once.

It is planning to put land on a “bonding curve” that increases the price with each successive purchase. Getting this curve right will be tricky — either it’ll be so flat that it’ll be relatively pointless, or it’ll get so steep that it’ll effectively limit land supply at much less than the planned 1,000,000 plots. What is perhaps more important though is to set the base price appropriately. It should likely reflect the market value of land at the time to avoid depressing prices, which is what happened with unicorn pricing (breeding costs were way below market value).

Do a Governance Gut Check

Evaluate how we want our governance to happen. If we’re okay with the plutocracy we have set up, then that’s fine, but make sure safeguards are in place to avoid bad actors. Otherwise, consider alternatives and how to get the top token holders on board.

Be Highly Streamable

The key way to build value in the Crypto Unicorns universe is to grow the audience and the interest in the IP. The unicorns are adorable and charming, which makes them great candidates for video. We would find ways to appeal to streamers and lean into them. For example:

  • Make watching events like jousting really cinematic
  • Emphasize dramatic timing and endings
  • Have easy streamer tools so they can get the most value out of streaming the game
  • Continue any influencer outreach programs, giving them NFTs and tokens to get them started
  • Run occasional high-stakes events to draw crowds

In general, find ways to make it as easy as possible for a streamer to entertain their audience.

Nail the RPG Battle Gameplay

This game mode represents the way that Crypto Unicorns can appeal to competitive esports players, including blockchain guilds and scholars. It needs to have a substantial skill element to it and be rock-solid in execution and balance. This is a tall order — live competitive games are very difficult to get right, and if there are tokens on the line, it’s even more important. Nailing this game mode opens Crypto Unicorns up to high-value players who bring high-value audiences. Flubbing it, however, especially given the hype and excitement around it, could bring down the entire economy.

Conclusion

Laguna Games has an interesting project on its hands with Crypto Unicorns. The experience of both the CEO and the team in general bodes well for creating a game that is fun and sustainable. That said, there are some significant concerns that we see.

Unicorn inflation is currently very high, which is depressing the value of unicorns, UNIM, and RBW. While land is more stable, it has yet to release any additional land to the system, which closely parallels the change that tanked unicorn value.

The game is currently fairly boring to play and even more boring to watch. In order to capture value, Crypto Unicorns needs to appeal to a wider audience — both players and ideally viewers. Upcoming Jousting and Racing modes should be fun, and the team is likely to execute well on them. The final game mode, though, RPG Battles, is a lot riskier and could represent a significant inflection point, in either direction, for the project.

In the end, Crypto Unicorns is currently hurting but is not down and out. The problems ahead of it are significant but not insurmountable, and it’s still very early in the broader development of the game. It’s difficult to bet on much of anything “x-to-earn” in the current climate, but if one is looking for a “penny token” to pick up, one could do a lot worse than Crypto Unicorns.

A big thanks to Anthony Pecorella for writing this report! If Naavik can be of help as you build or fund games, please reach out.

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