Iluvium-Splinterlands-Crypto Unicorns-Staratlas

Executive Summary


  • ILV tokens are kept entirely separate from in-game utility, meaning that they are valued solely as a security-like object rather than for their buying power.
  • In-game spending is kept steady by focusing on purchasing an algorithmically-stabilized Fuel token directly with ETH. The ETH is automatically used to buy ILV tokens from the ILV/ETH liquidity pool, propping up the price of ILV. That ILV is then distributed to ILV stakers as a reward, which they can then sell back to the pool.
  • This system appears to be sustainable for ILV stakers as long as players continue to happily buy Fuel at a net-negative spend in the game.
  • The ability to create many new Illuvial NFTs for players to collect, as well as shifting the meta to favor different Illuvials over time, will help sustain interest in Fuel.


  • The utility token (DEC) is envisioned as a rough stablecoin with a target peg of $0.001. While it fell well below this peg earlier, the team has shut off nearly all minting and kept demand for it through its card market and rental system. This has helped DEC regain much of the lost ground and has held most of its value since.
  • The governance token (SPS) ended up replacing the DEC emissions. This in turn caused SPS to inflate significantly. SPS recovered briefly with the release of content that could exclusively be purchased with it, but the lack of new utility and continued inflation has caused the token to plummet. 
  • The team will need to curb emissions and/or introduce significant sinks and burns for SPS if it hopes to bring the value back up for investors and early adopters.

Crypto Unicorns

  • The game has some smart design around sustainability, including a Treasury that captures its governance (RBW) token and holds it until the emissions pools are empty.
  • The core issue, though, is substantial Unicorn NFT inflation. No burn mechanics and little reason to own a large group of Unicorns means there is little demand for new Unicorns. The primary utility of RBW is Unicorn breeding, so RBW predictably has lost most of its value.
  • Laguna Games is going to have to solve its NFT inflation problem ASAP if it wants to retain any hope of reaching a sustainable point for RBW stakers and investors. 

Star Atlas

  • The economy has both utility (ATLAS) and governance (POLIS) tokens. Similar to Illuvium’s ILV, POLIS has no in-game usage. Instead, it functions like a stock, giving voting rights and future potential dividend-earning capability to holders. 
  • There is a complex but flexible and robust system designed for ATLAS, and in principle, the mechanics look like they should be able to provide a sustainable situation. 
  • The risk is that the cost to start playing Star Atlas is rather high, meaning that players may be expecting to earn a profit rather than just playing for fun at a loss. If Star Atlas can get players as a whole to spend net-negative on the game, then it looks likely to work, but it will need to actively manage expectations to do so.


Economy design is complex and difficult, and even the best-laid plans will run into unforeseen circumstances. In this essay, we will provide one lens through which to examine economy designs. We’ll then demonstrate how to apply that lens to a set of four influential blockchain games.

Economy Roundup

In one of our recent Game Radar papers, we looked at the economy of Illuvium and said that it “might actually work.” Getting a positive review from us caused a bit of a stir, so we wanted to take a second look at Illuvium and compare it to the economies of some current and future projects. We’ll be comparing Illuvium to titles from three different eras of blockchain gaming: the early hit Splinterlands, the actively developing Crypto Unicorns, and the highly anticipated Star Atlas.

These games have all been deconstructed by us already (links: Illuvium, Crypto Unicorns, Splinterlands, Star Atlas), so this paper will provide only quick summaries, plus any applicable updates to earlier deconstructions, before jumping in on the economy flows specifically.

Are these other economies sustainable? Is Illuvium an exception, or is there a more general movement to sustainability in design? Let’s find out!

The Ponzinomic Smoke Test Lens

In software, a “smoke test” is a set of tests aimed to broadly cover the project and make sure the core functionality still works after proposed code changes have been pushed to a build. The term likely originates from plumbers and their way of checking for potential leaks. They use a smoke machine to fill pipes under light pressure to be able to visibly see leaks prior to putting something with higher stakes (liquids, high pressure, etc.) in. In either case, it’s a sort of “sanity check,” a way to ensure they’re not about to do something unwise.

Many web3 economies have turned out to be unsustainable, often due to a requirement of constantly onboarding new users. This is by no means the only way to become unsustainable — runaway NFT inflation, poor land policy, exploitable governance, and so on are also potential traps. But this “Ponzinomics” hallmark of a necessary influx of new users is what we’re going to focus on today.

We propose a simple test as a check to see if there is likely to be a Ponzinomic component to a game’s economy. While it won’t catch all issues, if something fails this test, it’s really in trouble. 

The test is this: what happens to the economy if we assume the overall player count stays constant (i.e., new players join at the same pace as old players churn out)?

For nearly any F2P game the answer is easy — it continues to generate money at a steady rate as long as it continues to be live-serviced. In particular, in-app items are non-transferrable, so all new players will, on average, spend the same as churning players did. For a “premium” (paid) game, a constant player count would mean that there is no further revenue, since “leaving” doesn’t really mean anything for a one-off purchase. This is okay, though, because that’s the expected model. Paid games generally make the vast majority of sales very quickly and then taper off to comparatively little revenue within a couple of years.

For a game like Axie Infinity, however, a steady user count meant that there would be almost no demand for new Axies. The reason is that churned users would sell their Axies to new users, and there was no need to have a continually-growing Axie population. Since the primary functionality of its SLP token was breeding new Axies, this meant that the utility, and thus the value, of SLP would drop. That would cascade into play-to-earn rewards becoming worthless, losing most play-to-earn players, and ultimately collapsing — which is largely what has happened.

Throughout the article, we will be applying this method to each economy to see if it can survive a significant reduction in growth — the hallmark of a failing Ponzi-based economy.

Economy Flowchart Design

Since we’re examining a bunch of different economies, we’re going to establish some standardized elements to make comparison and contrast a bit easier. Our diagrams will be made up of the following components.

Node and arrow examples
Node and arrow examples. Source: Naavik

The arrows indicate the paths along which tokens (or items, value, etc.) can move. 

  • Flow (black): Tokens can transfer between nodes along flow lines. 
  • Source/Mint (green): Tokens enter the system as mints, emissions from a time-locked pool, or from external sources (like purchases with USDC or ETH).
  • Sink/Burn (red): Tokens leave the system either as burns or something like a user’s profit with stable coins.

The rectangular nodes represent elements that can hold or manipulate tokens. 

  • Actors (blue): “Conscious” participants that can make decisions or adjust their behavior. Note that in some cases a single person may have two roles, like holding land and participating in PvP, but we consider those roles separately for this analysis.
  • Mechanisms (grey): Automated components that can process tokens.
  • Limited Pools (orange): Typically, a capped source of tokens intended to be emitted over a period of time until emptied.
  • Exchanges (green): A mechanism of swapping tokens, fungible or not, with prices adjusting based on supply and demand. Can include Centralized Exchanges, Decentralized Exchanges, and Automatic Market Makers, among others.
Example of currency split
Example of currency split, source: Naavik

In some cases a percentage will be listed as well, and this represents a situation in which tokens are being split between sources. In the example above, 90% of RBW entry fees are given back to players as prizes, while 10% is kept by the Treasury.


Fight for eth

Let’s kick off with the game that inspired this article. Illuvium is an ambitious project that has become one of the most anticipated crypto games. While it consists of a variety of gameplay modes, the meat of the competitive game is in its autochess-like battle game. The other two current gameplay modes are the Overworld action-platformer and the Illuvium Zero mobile city-builder. Overworld is where players can find autochess battles and potentially collect resources. Illuvium Zero provides the interface for fuel miners to improve their land and generate fuel revenue. 

Currencies and NFTs Overview

As a refresher from our decon, there are three primary economic currencies, as well as a variety of NFTs.


There are actually three types of Fuel (Crypton, Hyperion, and Solon), but we pool them together for simplicity. Fuel is the required currency for most in-game progression-based activities, including travel to new areas, capturing Illuvial NFTs (akin to catching Pokemon), fusion (combining Illuvials to improve their strength), and forging equipment. 

Illuvium Token (ILV )

Illuvium’s own token, ILV, is isolated from the gameplay and used solely for staking investments and governance. The one exception is that stakers may choose to claim staking rewards early (in the form of sILV2) to spend as cash in-game, but we suspect this will be a small percentage of ILV use.

Ethereum (ETH)

The game’s systems use ETH as the primary token of exchange. 

Illuvial NFTs

Players collect Illuvials to use in autochess-style battles. They come in a wide variety of rarities, affinities, classes, and stages. Illuvials have yet to be minted, and their distribution details are generally unknown. 

Land NFTs

Land, on the other hand, has begun distribution, with about 20% of the total 100K minted so far. Land can be used to produce Fuels to be sold to the market, though the Illuvium DAO algorithmically produces about 95% of all Fuel (discussed below). 

Cosmetic NFTs

A variety of cosmetic NFTs will eventually exist, but we won’t really look at them with respect to the economy flow.

Economy Overview

Our full economy flow diagram is shown below. We’ll go into detail on each of the currencies in the following sections, but let’s take a quick look at the nodes first.

Illuvium Economy flow
Illuvium Economy flow. Source: Naavik


  • IlluviumDAO: The DAO will have the capability to modify many parameters within the game and its economy. For the purposes of this analysis though, the primary interaction it has is to manipulate the supply of Fuel in the Fuel Balancer Pool to maintain a target price range. In general, it also aims to mint 19x as much Fuel as Farmers.
  • Players: Here we specifically mean people who are engaged primarily with the active gameplay; in this case that would be mostly Arena battles. 
  • Landholders: Users who hold land and use it to farm Fuel to sell on the market.
  • ILV Stakers: Users who stake ILV, giving them yield rewards and voting rights.
  • ILV/ETH Liquidity Providers: Users who stake ILV/ETH liquidity tokens.


  • Illuvium Vault: An automated process that collects ETH, buys ILV from the ILV/ETH liquidity pool, and distributes it to the Stakers. The specific parameters can be modified by the DAO.

Limited Pools

  • Yield Farming Pool: 30% (3M) of total ILV is reserved for rewards for Stakers and Liquidity Providers. Most of this is already distributed.
  • Gameplay Pool: 10% (1M) of total ILV is reserved for rewards for players for in-game activity.


  • Fuel Balancer Pool: A place for landholders to sell Fuel and players to buy it.
  • Sushi ILV/ETH Liquidity Pool: A standard liquidity pool for the ILV/ETH token pair.

Fuel Flow

Fuel is primarily minted by the IlluviumDAO at a 19:1 ratio of whatever landholders are generating, meaning that landholders will get about 5% of all Fuel-related purchases. Fuel is bought by players from the in-app balancer pool (in their IlluviDEX) and then burned when they spend it in-game. 

Illuvium Fuel flow
Illuvium Fuel flow. Source: Naavik

There is an algorithmic auto-balancing system in place that keeps Fuel prices within 25% of a predetermined target value. If it falls below that price, the DAO will start removing Fuel from the balancer pool, and if it gets too high, it will start adding extra Fuel.

Illuvium Tokens (ILV) Flow

ILV has 3 categories for its 10M total cap:

  • Pre-allocated (sales, Team, Treasury) - 6M, all concluded (some still vesting).
  • Yield farming - 3M, reportedly 2.35M of which has already been distributed.
  • In-game rewards - 1M, which players can earn over time and has not started.
Illuvium ILV flow
Illuvium ILV flow. Source: Naavik

The ILV sources from gameplay and yield farming will eventually run out (yield farming is already over 75% done), so we’ve colored them orange to indicate that they are limited. The only sustainable source of ILV is from stakers buying it. But even then, there’s only so much to buy, even if demand is high. 

Instead, the real star of the show is the ILV triangle on the right. We’ll explain this more explicitly later, but the fact that it’s a loop rather than a source/sink model is what makes it potentially sustainable.

Participants may also buy ILV from other DEXs, but we’re only going to look at the Sushi Liquidity Pool since we’ll assume that any differences in pricing will be fixed by arbitrageurs. 

Ethereum (ETH) Flow

The only way that the Vault can regularly purchase and redistribute ILV from the Sushi Liquidity Pool though is if there is some sort of valuable currency entering the system, and in this case that would be ETH. 

Illuvium ETH flow
Illuvium ETH flow. Source: Naavik

There is a single source of ETH, which is the players. ETH leaves the system in two ways: 5% of Fuel sales gets distributed to landholders, and then all remaining ETH is eventually distributed out to the stakers. Most of the ETH flows through the Fuel Balancer pool into the Illuvium Vault, and the Vault then puts that ETH into the ILV/ETH liquidity pool.

It is of course very important to note that with the sole source of valuable currency entering the system coming from players, the game has to be fun enough for them to want to spend money in it with no expectation of making the money back. In other words, the game is no longer competing with blockchain games but instead with AAA free-to-play games.

The Wheel of ILV

So how does this thing actually distribute ETH to stakers? It’s all done through the magic of the Illuvium Vault and the Liquidity Pool. 

As a reminder, a liquidity pool uses pairs of tokens and balances their value to always match a fixed total. The end result is that whenever tokens are traded, their relative prices change to reflect that change. If you were to sell ILV and get ETH back, the resulting price of ILV:ETH would go down (more supply of ILV means less value relative to reduced supply of ETH). 

Illuvium value flow
Illuvium value flow. Source: Naavik

Here’s what the Vault does:

  1. Receives ETH from players (buying Fuel, trading NFTs, buying Land)
  2. Periodically uses that ETH to buy ILV from the ILV/ETH liquidity pool
  3. Distributes that ILV to stakers

Buying ILV from the pool increases its value. That ILV is then given to the stakers who are in turn able to sell the ILV right back to the pool for ETH. On one hand, it’s a bit convoluted (after all, the Vault could just give ETH to the stakers directly), but on the other hand, it provides a sustainable mechanism for a cryptocurrency to act as a vehicle for investors to retrieve the value that the game generates. 

So what are the potential breaking points?

  1. Stakers don’t sell their ILV. If for some reason stakers decide to hold on to their ILV instead of selling back to the pool, the ILV value in the pool will simply continue to grow until it becomes too tempting to pass up. 
  2. Stakers sell to a DEX instead. In this case the ILV would be leaving the internal system. The only (rational) reason a staker would do this is if the DEX value of ILV was to be higher than the pool. Like any other system though, as soon as there is a price difference, arbitrageurs will quickly buy and sell to even it out. 
  3. Players stop spending ETH. This is a cycle, but it is not a flywheel. It is not gaining momentum and becoming self-sufficient, or even becoming highly resistant to adversity. If the ETH doesn’t flow, the wheel quickly grinds to a halt.

In other words, it appears to be stable with the large caveat that players must continue spending ETH into the system. Plus, if the amount of ETH being spent is low, the wheel will turn slowly — “sustainable” doesn’t necessarily mean large profit for everyone.

The Illuvium Smoke Test

As a reminder, our Ponzinomic Smoke Test is: “what happens if the game’s audience size remains constant?” 

For Illuvium, the primary source of inbound value is likely to be Fuel purchased by players with ETH. Let’s look at each of Fuel’s utilities to see if they hold up with a constant number of players.

  • Travel: It’s unclear what the motivation will be for travel, but it won’t be sustainable if it just becomes a “pay-to-play” game. The developers need to provide content and reasons that players would want to spend here.
  • Capturing: Because Illuvials are available on DEXs, there isn’t as much need for a player to capture their own. That said, having a variety of Illuvials is likely to provide gameplay variety and advantages in competition. If the Illuvium team continues to create new Illuvials in a balanced but meta-shifting way, there will be regular demand for them.
  • Fusion: Illuvials can be fused together to improve their power. Much the same as capturing, as long as the Illuvium team can continue to live-service the game with new content, there will be demand for high-end players to get their Illuvials into tip-top shape.
  • Forging: Players can use Fuel, along with other materials, to Forge new weapons and armor. The same as Illuvials, with proper live-servicing and content creation, there can continue to be demand for new gear. This doesn’t even have to be better gear, it may just synergize well with new Illuvials and meta shifts. 

Additional ETH will enter the system as creator fees on NFT DEX transactions, but unless new content is being generated, the exchange of NFTs among the same players will fade. If new content is generated, then we also see that Fuel demand would sustain, so the requirements don’t change.

Stakers will be looking to make a profit on their staked ILV. The cycle we saw earlier will continue to provide them with an influx of ILV, and with the Vault buying that ILV from a liquidity pool, the value of the ILV should be able to remain steady. 

As always though, this depends heavily on the ability of the game to maintain interest and demand for progress/content from players. If the uses of Fuel no longer interest players, the influx of ETH will drop, and ILV would likely fall in turn due to the lack of upward pressure and value.

Smoke Test Verdict: Pass

Illuvium has designed a system that passes earnings from the game to stakers by way of propping up the value of their token and then giving it to stakers. In principle, this should be fully sustainable — it’s a relatively simple model that relies on two automated processes (the Vault logic and the self-balancing Liquidity Pool). If it can do live-servicing at a quality equal to current AAA F2P games, the economy appears likely to be able to hold.


Splinterland Play Now

Splinterlands is a collectible card game that has consistently been one of the most popular web3 games, currently sitting at #3 on DappRadar with 335K UAWs in the past 30 days. That is particularly impressive given that it’s one of the older blockchain games with its alpha launch way back in May 2018 under the original name of Steem Monsters.

Card games are arguably one of the most natural matches for NFTs given the familiar metaphor of buying, selling, and trading physical cards. Splinterlands leaned into this early and combined a lot of smart design decisions, becoming one of the best entry points into blockchain gaming.

In the year since our original decon of the game, the team has continued to iterate and refine, exploring how to create sustainability along with compelling gameplay. As we’ll detail more later, it’s made some substantial changes to how its token rewards are earned, modified calculations to combat botting, experimented with future-locked currency, and started production on a Splinterlands Tower Defense game.

Credits, DEC, and SPS balances
Credits, DEC, and SPS balances. Source: screenshot

Currencies and NFTs Overview

Splinterlands has four different currencies, three of which (SPS, DEC, and Vouchers) are on the Hive chain, while the fourth (Credits) is a standard F2P-style hard currency. Actually, a fifth currency, the off-chain DEC-B, was just approved a week ago to be added. The NFT front is a bit simpler, having two types: cards and land. Let’s check them all out in more detail.

Credits (off-chain)

We’ll start with Credits because they’re easy and form an important basis for DEC later. A Credit is very simply a standard web2 hard currency. It’s priced at a fixed 0.001 USD and can be purchased with PayPal and Venmo, in addition to crypto. It’s off-chain and bound to the account and allows players who don’t want to interact with crypto to play with the premium content.

Splinter Shards (SPS)

SPS is the staking/governance token of Splinterlands. It has a cap of 3B with plans to allocate over in about 6.5 years. The initial 12-month airdrop phase, during which SPS was given out based on ownership of Splinterlands assets, completed in mid-2022. In August 2022, the 65-month play-to-earn and staking rewards phase began, shifting the way in which the token can be earned. 

SPS currently has had almost no utility outside of staking and voting. Recently some options to spend SPS to buy packs (and validator nodes, but that’s a different essay) have been added, which is good to see. But limited use seems to be a very common concern voiced in the Splinterlands Discord, with many players citing “lack of utility with increased emissions” as the cause for the recent drop in SPS value.

Various player concerns about SPS utility and supply
Various player concerns about SPS utility and supply. Source: Splinterlands Discord, December 2022

An interesting future use of SPS that Splinterlands has discussed is the ability to “stake” on players directly. The idea is that stakers would get bonuses based on the players’ performance, and the player could earn more as more is staked on them. One other unusual use of SPS is that players can at any time burn it to claim DEC. We’ll explain the details in the next section.

Dark Energy Crystals (DEC)

DEC is intended as a pseudo stablecoin and the primary means of exchange in the game. The stated goal is to have DEC remain close to a peg of 0.001 USDC. 

Nearly all purchases (cards, packs, skins, potions, guild buildings) are made with DEC. This includes purchases on the market from other players and use of the built-in card rental system. In most cases this DEC will make its way to the Splinterlands team as a revenue stream, but in a few cases (Guild buildings and Potion purchases) the DEC is burned instead.

During the SPS airdrop period DEC was the reward given out for the play-to-earn content. At this point though, there is no regular source of DEC. Instead, DEC can generally only be produced by burning Cards or SPS, plus some seasonal rewards for top players in leaderboards. 

All cards have a guaranteed value in DEC based on their properties (rarity, foil, edition, tier, etc.). This serves to create a DEC price floor for cards but doesn’t directly translate into a USDC floor. 

SPS burning, on the other hand, creates a USDC ceiling on DEC. The way it works is that 1 USDC worth of SPS at any point in time can be burned for 975 DEC (it’s not 1000 even for some anti-exploit reasons). As a result, if DEC ever gets above 0.001025 USDC, arbitrageurs will begin buying SPS, converting it to DEC, and selling it off. This functionality only started in August 2022, which is why you can see DEC well above that target prior to August.

While this puts a cap on the value of DEC, upward pressure is created by fixed pricing of packs and other things in the store. For example, a Chaos Legion pack costs 4000 DEC or 4000 Credits. Because Credits have a fixed value of 0.001 USDC, the pack has an effective fixed cost of 4 USDC. 

As long as players actually value the pack close to that price, DEC should hold fairly well. Otherwise, if DEC fell, it would become very appealing to use it to buy packs. Pricing in Credits both allows non-crypto users to engage and serves as a price anchor that should help encourage that DEC floor. This balance is likely why DEC held value even when SPS dropped. 


These are on-chain tokens given primarily as rewards to stakers. Early on they were pitched as a sort of special access vehicle, but at this point they are primarily used as a sort of “store credit,” acting as a coupon for DEC purchases. 

While the name might suggest a temporary currency, it seems they are intended to be a permanent element aimed to provide extra incentive to stake and lock up SPS. There is even a Voucher liquidity pool, including SPS rewards for those who provide liquidity

SPS rewards for those who provide liquidity. 
Source: screenshot

Card NFTs

Cards are the stars of the show, and the NFTs work exactly as one would expect. Players can obtain them in a variety of ways (opening packs, random rewards, buying on the market, and renting) and then use them in-game. They have the normal compliments of editions, rarities, and foils, and identical ones can be combined (with no token cost) to increase their tier and power. Our previous decon goes into much more gameplay detail, but suffice to say that the team has created a clever system that makes it essential to have a wide variety of cards to suit many situations. 

Splinterlands land expansion

Land NFTs

Land in Splinterlands is paired with a new game mechanic: mid-battle interaction. Instead of a battle being completely autocalculated after each player submits their cards, there will be a second round. In this round, players will be able to react to what happened in the first round by playing spell and item cards. It introduces more complexity and interactivity to battles that could refresh interest.

The role of Land is that spell and item cards can only be minted by landowners; no spells or items will be sold by Splinterlands directly. As such, these players will be tasked with supplying 100% of these cards and will be aiming to sell them off for a profit. 

Splinterlands sold out all 150K plots of land in June 2021. At the time an ambitious expansion was scheduled to launch at the end of the year, but that timeline has shifted significantly. In December 2022, the first update was released, which allows players to claim their land with the tokens they purchased 18 months prior. They can see where the land is located, but it won’t be until early 2023 that players will even be able to survey the land to find out what rarity, terrain, resources, etc. are on it. 


It’s been nearly a year since our Splinterlands decon, which is about 18 in crypto years. In general, the game has maintained its course over that time, but there are a few significant updates we should call out before jumping into the analysis. 

Switching Play-to-Earn Rewards from DEC to SPS

The most significant change is a shift in the play-to-earn rewards. Previously, they had been in the non-governance DEC token, but starting in August 2022, this switched over to the governance SPS token. This comes at the end of the 12-month airdrop of SPS tokens given out to holders of tokens and NFTs. The airdrop ended as planned, and this switch starts giving out governance capabilities to the more active and skilled players. 

DEC will still be minted and given out as liquidity pool rewards, but at about 20% of the previous rate. The hope is that this will help reduce what had been an oversupply of the token and prop up the value. In practice, it appears that this has worked to some extent — DEC has gained slightly since August, while SPS saw temporary gains but has fallen since. 

DEC. Source:
SPS. Source:

Changes to Play-to-Earn Reward Calculations

In addition to switching from DEC to SPS rewards, the team made some significant changes to how those rewards are calculated. The adjustments were aimed at reducing exploits, curbing botting, and generally rewarding the type of behavior it would like to encourage (i.e., playing the game as a game of skill rather than to harvest coins). 

For context, players earn “Reward Shares” (RShares) based on wins. Rewards are then distributed and weighted on a player’s RShares proportion. If a day’s reward was 100K SPS, players earned a total of 2000, and you earned 20 reward shares, which would be 1K SPS (20/2000 = 1%). These are distributed in the form of reward chests. 

Here are some of the bigger changes recently made:

  • Rewards are only given to non-starter cards. The “starter” cards are unlimited, free, non-NFT cards that everyone can get. As such, they don’t add anything to the economy, but they were able to capture DEC before. Now rewards are scaled based on a percent of non-starter cards (3 starters and 2 non-starters would yield 40% rewards). 
  • A player’s ECR (Energy Capture Rate; basically, a value that reduces with each battle and recharges over time) is now used for calculating rewards. Because ECR drops for each battle, win or lose, players are now incentivized to keep high win ratios rather than just doing as many battles as possible.
  • Daily quest and season rewards, which together make up the bulk of rewards, now also depend on the above rules, so the incentives are consistent across all reward vectors.
  • Season rewards are based on the highest rank obtained in the previous season (with seasons lasting roughly two weeks). This is in place of the previous rules, where it was based on the current rank at the end of the season. This is a clever solution that has two benefits. First, it discourages people from briefly jumping into a top rank they can’t compete in to try to optimize rewards. Second, players no longer need to stop playing in a season for fear of losing rank and getting lower rewards.

Across the board, these seem to be well-considered and effective adjustments. The team has also shown an openness to tweaks and community feedback, making minor adjustments to a few specifics based on the response. The calculation of rewards is still a bit head-spinning in its complexity (in addition to ECR and starter card percentage, it also depends on current League, Win Streak, Card Set Bonuses, Foil Bonuses, Guild Bonuses, and Focus Bonuses), but the end result has continued to become more robust.

Dark Energy Crystal Batteries (DEC-B)

Hot off the presses, in mid January the DAO voted in favor of Proposal #17: “Sell 2B DEC-B for DEC or Vouchers”. Getting 69% of the vote, it passed by a narrow margin, needing 66.7% to be approved. This controversial proposal now enables Splinterlands to sell 2B DEC-B notes to the public.

DEC-B is off-chain and “soulbound” (i.e., non-transferable) and can be used in the future in place of DEC anywhere that DEC would be burned as a cost. Currently, the possible uses of DEC-B are limited (Guild buildings and Potions), but the proposal suggests that future uses could also include Land-related gameplay and cosmetics.

The reason someone would buy DEC-B is that it is offered at a discount of 1 DEC-B for 0.8 DEC or 0.005 Vouchers. Any DEC or Vouchers used to buy DEC-B will in turn be burned. The stated goal is to “incentivize players to burn DEC and/or Vouchers in the short term in order to gain a discount on future features.” 

This seems like a very temporary fix though, and as we saw earlier, DEC is already holding value better than SPS. Some voters also pointed out that this could backfire, effectively reducing the amount of DEC that would have later been burned by 20%. Overall, this proposal is a somewhat puzzling decision.

Splinterlands Tower Defense concept art.
Splinterlands Tower Defense concept art. Source: Splinterlands support article

Splinterlands Tower Defense (SPLTD)

As the final update to mention, the team has announced a new game: Splinterlands Tower Defense. The game will feature an entirely new set of tower, spell, and hero NFTs, though players will be able to “stake” Splinterlands cards on towers to strengthen them. 

The gameplay is a very Splinterlands take on the genre. Instead of a real-time interactive battle that is traditional in tower defense, SPLTD uses the Splinterlands model of a preparation phase followed by automatic battles. Players will set up their defense, submit it, and then the game will calculate the results. In what should be an interesting twist, the game has a “push your luck” mechanic that lets players choose to keep going through harder waves or bail out and take what they’ve won.

While it implements entirely new NFTs, SPLTD will integrate SPS, DEC, and Vouchers, meaning that the core tokens will be shared across the games. Hopefully, this will serve to increase the value of these tokens, though that also depends on how much inflation is added with new reward emissions.

Economy Overview

While there are a number of currencies and tokens at play, we only really need to look at three: DEC, SPS, and card NFTs. We will ignore Vouchers since they are functionally similar to DEC, and Credits are a simple hard currency that primarily acts as a non-crypto option to DEC. 

Our full economy flow diagram is shown below. We’ll go into detail on each of the currencies in the following sections, but let’s take a quick look at the nodes first.

Splinterlands Economy flow.
Splinterlands Economy flow. Source: Naavik


  • Players: Users who are focused on game participation. With Land not yet functional, this is essentially the entire audience, outside of perhaps some speculative stakers. We will assume this group is willing to spend net-negative on the game.
  • Stakers: Users who have staked SPS, giving them yield-farming rewards and voting rights.
  • Liquidity Providers: Users who have staked liquidity tokens, giving them yield-farming rewards.
  • Splinterlands DAO: The project’s DAO that, among other things, collects SPS from purchases in the Shop. Collected SPS does not currently have a plan, and the DAO could vote to do what it wants with it.
  • Splinterlands: The development team.


  • Shop: The place to purchase card packs, potions, and a variety of other items. 
  • Gameplay Card Rewards: Players can earn cards based on their performance each 2-week season.
  • Card → DEC converter: All cards have a guaranteed DEC value that can be claimed by burning them.
  • SPS → DEC converter: A conversion that effectively caps the DEC price to just over $0.001, at which point arbitrage becomes possible.

Limited Pools

  • Gameplay SPS Pool: 30% (900M) of total SPS reserved for game rewards
  • Staking SPS Pool: 30% (900M) of total SPS reserved for game rewards


  • Card Market and Rentals: Proprietary market allowing players to safely sell and rent cards. All transactions occur in DEC (or Credits, which are then invisibly converted to DEC).
  • DEXs: Standard decentralized exchanges.

Splinter Shards (SPS) Flow

SPS is currently distributed entirely from reward pools, which are earmarked for various reward types. The table below represents the initial distribution and allocation. Each month distribution lowers by 1% over a period of 65 months.

Adding these up, gameplay rewards total 18.75M/month (Ranked Battles, Tournaments, Guild Brawls, and Land). Investment-style rewards total 18.75M/month (Staking, Liquidity Pool, and Validators). 

SPS that is spent in the Shop goes to the Splinterlands DAO. The DAO can then vote to do what it wants with the SPS, which could include, among other things, redistributing to players/stakers, selling to a DEX for stablecoin distributions, or perhaps burning it.

Splinterlands SPS flow
Splinterlands SPS flow. Source: Naavik

On the sinks side, we expect to see SPS leaving the system primarily through being sold to DEXs for a profit, though the ability to spend SPS in the Shop will shift some of the tokens to the SPS DAO. It reports 920K of the Riftwatchers packs sold at $5 in SPS (plus a voucher) apiece, indicating roughly $4.5M in sales. supports this estimate, identifying about 58M SPS coming from those sales, which would have been about $4M (though current value would be only $1.3M). 

SPS & Vouchers
Source: Splintercards, January 12, 2023

Technically, SPS can be burned for DEC, but as we’ve said, this would be rare unless the value of DEC is really rising, leading to an arbitrage opportunity. Strangely, per, it does appear that about 1.8M SPS has been burned for DEC. It escapes us how this would have been a good decision in any way.

SPS & Vouchers
Source: Splintcards via Internet Archive, September 22, 2022

If we look at an earlier snapshot of Splintercards from the Internet Archive, we can see that in September 2022 a total of 37M SPS had been spent on Riftwatchers packs. That means that over about 100 days roughly 21M SPS was spent on packs, coming out to about 200K/day. Compare that to the daily emissions of 417K SPS in gameplay rewards. 

SPS price since July
SPS price since July. Source:

When the Riftwatchers packs and Validator Nodes were available for purchase with SPS in September 2022, SPS held and grew in value. After that though, without further utility, the price has steadily rolled downhill. 

Dark Energy Crystal (DEC) Flow

DEC gets to float around the game’s economy a good bit more than SPS, and much of it makes it back to the Splinterlands team as a revenue source. It is rarely given out for “free,” with the only DEC rewards at this point being for end-of-season Leaderboards (and to only a few hundred top players); any other DEC has a cost.

Because players can do quite a bit with DEC (buy packs, buy cards, rent cards, buy skins, etc.), it is likely that some of them will be purchasing DEC from DEXs. While selling to DEXs was common when DEC was the primary play reward, now the flow should be much more inward than out. Again, SPS => DEC conversions are rare at this point and only serve as a cap on the price of DEC. 

Splinterlands DEC flow
Splinterlands DEC flow. Source: Naavik

A more common conversion is burning cards for DEC. Again, looking at, we can see that across all cards, roughly 4.1% of standard cards and 5.0% of gold foil cards have been burned for DEC. That is weighted towards common cards, though — looking at only legendary cards, the burn rate for standard cards was only 1.8%, while gold foil was still around 4.8%. With the equivalent of 6.5M standard and 200K gold foil cards burned so far, we’re talking about somewhere in the range of 250M-1B DEC generated. 

DEC is at this point the opposite of SPS — few mints, lots of utility, and some burning — and it is deflating, which is helping it hold value much better than SPS. Much of the turnaround is due to Splinterlands simply shutting off DEC minting almost entirely. 

The Splinterlands team deserves credit for reigning DEC back in and helping it trend back towards its target peg. The downside is that players still expect rewards, so they ended up shifting the inflation from DEC to SPS. That’s the reason the DEC-B proposal was so surprising — DEC isn’t the currency at risk right now.

Card NFT Flow

Cards are sourced either by buying packs from the Shop or through gameplay reward chests. Players can also buy, sell, and rent cards with each other through the game’s Market. Cards leave the economy if players choose to burn them for a DEC reward. Total card count is also reduced when cards are fused together, though the net card value (measured in Base Card Experience or BCX) is unchanged, so this doesn’t really have an impact on the economic value.

Splinterlands Card flow
Splinterlands Card flow. Source: Naavik

The Splinterlands Smoke Test

Splinterlands, or at least the SPS token, unfortunately is not in a sustainable state at this point. SPS is inflating substantially with a double-whammy of both increased supply (game rewards are now SPS instead of DEC) and reduced demand (no new content to spend SPS on since September). The only thing SPS really can do now is stake to earn more SPS. With more SPS entering the system than leaving, there is not a net demand to buy from DEXs, so there is minimal upward pressure. This should be a substantial concern for it and its investors: there is no inflow of value for SPS, and thus it will likely continue to drop. 

DEC (left) and SPS (right) with USDC value flows
DEC (left) and SPS (right) with USDC value flows. Source: Naavik

For comparison, DEC has only a small source (burning cards) but regular demand, in particular with the market for players to trade and rent cards. Shifts in rules or seasonal goals can swing the demand for specific cards, enabling some level of market activity even with a constant player count and no new cards. Due to the small minting source, players have to buy DEC from DEXs, which helps prop up the price. 

For what it’s worth, the game itself can still function even if SPS falls to nearly 0, especially with DEC stabilizing. Part of this is because the SPS packs are pegged at 5 USDC worth of SPS. If that weren’t the case, packs could become nearly free, and the market would immediately be flooded with cards. By contrast, DEC packs are priced at a fixed DEC, but that makes sense because DEC is intended to approximate a stablecoin.

DEC itself is also propped up in value by the Shop prices, which have fixed pricing matched by Credits. As long as players feel that packs are a good buy at full price, DEC should continue to have sufficient demand to keep close to its price target of 0.001 USDC. And indeed, DEC has outperformed the market (i.e., Ethereum and Bitcoin) over the past six months.

Smoke Test Verdict: DEC - Pass, SPS - Fail

Splinterlands is a game with a sizable audience, especially by web3 standards, boasting 180K daily active users. The retention and longevity support the claim that the game is fun and that players are willing to spend net-negative on it. 

For Splinterlands as a company, things actually look pretty good. In addition to selling some content for fiat, it has an influx of DEC from both the Shop and the Market. It also has full control over card mints, meaning it can scale up or down with the audience. Still, it’s facing the challenging job of continuing to produce new, compelling, and balanced content. It’s been doing it fairly well for a few years already, so there’s no reason to doubt that it’s capable of continuing content generation.

The team has done a great job at stabilizing DEC, bringing it back closer to its target. Unfortunately, the SPS governance token lacks any real value in the current state. This might not break the game, but it could cause investors and early adopters to lose a lot of money.

We did see SPS prices jump significantly with the release of the Riftwatchers expansion, as well as with the Validator Nodes pre-sale. That gives a glimmer of hope and suggests that they may find some success shifting all new content to SPS pricing, leaving DEC for the market. The other problem is gameplay rewards flooding the market, and it might be worth proposing to the DAO a reduction in reward emissions. 

There is a strong core game here, so things are not beyond hope, but some clear action is going to be needed soon to avoid a full collapse of SPS.

Crypto Unicorns

Crypto Unicorns

Laguna Games’ Crypto Unicorns shares Illuvium’s approach of having a suite of games and modes for players to engage with. The unicorns can currently participate in farming and crafting, with future plans for jousting, racing, and battles. 

At a high level, players will collect land and unicorns to build up their farms, grow materials from seeds, and then craft into higher value items. The PvP modes are planned, but little is known about them, outside of some recently-released details on Jousting. So for now, let’s look at the economics of the gameplay that is live.

Currencies and NFTs Overview 

Rainbow Tokens (RBW)

RBW is the governance token with a capped supply of 1B. Of this total, 50% is reserved for staking and gameplay rewards to be emitted over 5 years. Unlike many governance tokens, RBW has substantial utility within the game itself, being required for breeding, evolving, and some PvP entry fees. It is also the currency for buying and selling in the Rainbow Marketplace.

Rainbow Tokens can be acquired through staking and gameplay rewards, as well as in the occasional lootbox. When RBW is spent, it is sent to the Rainbow Unicorns Treasury. This Treasury accrues value over the 5-year RBW emission period. Once the 5 years are up and all RBW has been distributed, the Treasury will take over as the source of rewards for gameplay and staking. The goal is for the Treasury to be able to indefinitely recirculate RBW to sustain these rewards.

RBW since release, March 2022
RBW since release, March 2022 (Source:
RBW since July 2022
RBW since July 2022 (Source:

RBW fell hard in May, much like the rest of the market, but has also continued to decay since July, holding only about 21% of its value over 6 months.

Crypto Unicorns Whitepaper V1
Yum? Source: Crypto Unicorns Whitepaper V1 (deprecated, use Whitepaper V2 for reference)

Unicorn Milk (UNIM)

UNIM is a fairly standard inflationary utility token. The functionality is actually almost identical to RBW, with it being used for breeding, evolving, and PvP entry fees. The only additional use is as part of the fee for crafting. The primary mint source is from landowners using Gathering Carts, with a small amount also appearing in lootboxes. UNIM is burned whenever it is used.

UNIM since release, April 2022
UNIM since release, April 2022 (Source:
UNIM since July 2022
UNIM since July 2022 (Source:

While UNIM’s price fell similarly to RBW in May, it has maintained much better in the past 6 months, keeping around 61% of its value since August.

Unicorn NFTs

Unicorns are of course the center of attention for player collections, coming in a variety of traits and qualities. They all have “energy” that is required for most game activities, meaning that having more unicorns allows a player to be more active and productive within a period of time.

Players can breed unicorns to mint new ones. An individual unicorn has a limited number of times it can produce offspring, but there is no overall cap. There are currently no burn mechanisms for Unicorns, though there are reportedly some planned for the future.

Floor and Median Unicorn prices
Floor and Median Unicorn prices. Source: Naavik’s Crypto Unicorns Dune dashboard

Unicorn prices have fallen somewhat since August, with the median sale going from about $40 USD to $20 USD. This is all well below February 2022-April 2022 when they were trading for 1-1.5 ETH (then around $3000 USD), but that tumble happened when unicorn breeding began. This is discussed in depth in our Crypto Unicorns decon from last year.

Land NFTs

Land is required for production activities like farming and crafting, though not for the PvP games. In addition to direct land sales from Laguna Games, players can use the Land Vending Machine to mint new land. There is still a cap to Land though, with a maximum of 1M plots ever to be minted. Using the Land Vending Machine requires UNIM, RBW, ETH, and inclusion of a rare Keystone item. The prices will also increase each time a land plot is minted.

Floor and Median Land prices
Floor and Median Land prices. Source: Naavik’s Crypto Unicorns Dune dashboard

Where Unicorn prices have not held well, Land is doing a bit better. It was never as expensive as peak Unicorn, with median prices being highest in May 2022 at around 0.25 ETH (roughly $600 USD at the time). In July 2022, that had settled to around 0.075 ETH (around $90 USD), and median prices since then have hovered in the $50 USD-$75 USD range. 

Crafting materials
Crafting materials. Source: Crypto Unicorns Twitter

Materials (off-chain)

One additional resource we will discuss is the group of “Materials” resources. We use this as an umbrella term for crafting materials that come in a wide variety of qualities, rarities, costs, etc. For the sake of this analysis, we’ll pull these together because they are largely similar in their economic properties.

All Materials are off-chain soft currencies but can be exchanged through the game’s internal Automated Market Maker “Rainbow Marketplace” in which RBW is the currency.

Economy Overview

Our full economy flow diagram is shown below. We’ll go into detail on each of the currencies in the following sections, but let’s take a quick look at the nodes first.

Crypto Unicorns Economy flow
Crypto Unicorns Economy flow, source: Naavik


  • Landowners: Users who have purchased land plots and are using them for production. In general, they will be looking for a profit.
  • PvP Players: Users engaged in competitive gameplay, likely willing to spend at a loss in general. They are thus the source of monetary value, represented here as USDC.
  • Stakers: Users staking RBW, aiming to get yield-farming rewards.


  • Farming, Gathering Carts, Crafting, Questing, Breeding, etc.: Various production mechanisms tied to land ownership.
  • PvP Battle Fees/Prizes: Representing the distribution of entry fees to winners, with 10% going to the Treasury.
  • Treasury: A holding pool that will replace the limited pools once they run out.

Limited Pools

  • Staking Pool: A 200M (20% of total) RBW pool set aside to reward stakers.
  • Gameplay Rewards Pool: A 300M (30% of total) RBW pool set aside to reward both landowners and PvP players for various in-game activities.


  • Rainbow Marketplace: In-game materials exchange that uses an automated market maker to adjust prices based on supply and demand.
  • DEXs: Standard decentralized exchanges.

Rainbow Tokens (RBW) Flow

The most complicated token flow is RBW. Unlike Illuvium, where ILV is effectively separated entirely from the gameplay, in Crypto Unicorns, RBW has high in-game utility. Specifically, RBW is required for Unicorn breeding/evolving (henceforth just “breeding”), as currency in the Rainbow Marketplace, and as an entry fee to high-tier PvP tournaments. As a result, it is passed around regularly with uses for stakers, landowners, and PvP players. 

Crypto Unicorns RBW flow
Crypto Unicorns RBW flow. Source: Naavik

There are 2 primary sources of RBW: the Staking Pool (200M) and the Gameplay Rewards Pool (300M), in addition to the other 500M which belongs to various investors, team members, and the like. These will provide an influx of tokens over the next 4 years (scheduled to end early 2027), in equal amounts of 3.33M (staking) and 5M (gameplay) every month. 

After February 2027, the Treasury will become the source of RBW rewards for stakers and players. Whether Quests will remain the sole player RBW distribution method is unclear, but it is safe to assume that the Treasury will cycle RBW back into the economy in some way.

That leaves three RBW interchange nodes: PvP tournaments, Rainbow Marketplace, and DEXs. 

PvP Tournaments

RBW is used as the entry fee for upper-tier tournaments (UNIM for lower-tier). The “house” takes a 10% cut, which goes to the Treasury, and the remaining 90% is redistributed to the winning player(s). 

Rainbow Marketplace

RBW is the currency in the marketplace, where landowners can buy and sell materials and goods. Similar to the PvP Tournaments, a 5% cut of each sale to the market goes to the Treasury, and the remainder goes to the merchant players. Purchases from the market have no fee.


There are three groups that will interact with the DEXs: stakers, PvP players, and landowners. We expect RBW flow to be net-negative from stakers. While some may wish to increase staking, in general, they are going to be looking to turn a profit by selling off RBW earned. 

Net RBW flow with PvP players is likely to be slightly net-positive. It’s not a zero-sum game (thanks to the 10% house cut), but the only PvP use for RBW is tournament fees. In general, weaker players will be buying RBW to pay for entry, while stronger players will be earning RBW and selling it back to the DEXs, and this will overall be fairly even. 

That leaves the landowners who may want RBW for Unicorn breeding and marketplace purchases. Players over the long-term are aiming to earn more RBW than they spend for marketplace transactions. Short-term expenses for needed materials should result in longer-term gains. 

The exception here is breeders, and the reason is that they are the ones who have a separate way of cashing out: they can sell Unicorn NFTs to the DEX. They are still aiming for a profit, but they’re willing to spend negatively on RBW to create valuable Unicorns. 

The end result is that the only real net demand for RBW is breeders. That could be okay, as long as there remains demand for breeders’ wares, i.e., Unicorns. That’s a question we’ll get to a little later.

Unicorn Milk (UNIM) Flow

UNIM is checkers to the chess of RBW. The flow is comparatively simple, with a single primary source of Gathering Carts. On the Land gameplay side, almost any activity is a sink, and they are true sinks: the UNIM gets burned. 

It’s possible that UNIM will be purchased by landowners to cover some of the higher costs, but that UNIM would likely have to also be sourced from landowners.

For PvP, similar to RBW, we expect the net influx of UNIM from DEXs to be very slightly positive, if there’s much activity at all. The only difference is that 10% of entry fees are burned instead of going to the Treasury. 

Crypto Unicorns UNIM flow
Crypto Unicorns UNIM flow. Source: Naavik

Materials Flow

Low-tier materials are produced by Farming. These can then be refined through Crafting or Questing into higher-tier Materials. Those higher-tier Materials are required for upgrading more advanced buildings.

Crypto Unicorns Materials flow
Crypto Unicorns Materials flow. Source: Naavik

While Materials are all off-chain, they can be bought and sold through the Rainbow Marketplace in exchange for RBW. Finally, Materials can leave the economy when they are used as inputs for Breeding and Evolving.

Unicorn NFTs Flow

Unicorns are produced through Breeding in a fairly standard breeding algorithm. Breeding fees go up substantially as a unicorn produces offspring, to siring a maximum of eight children. Breeders can then sell the Unicorns on a DEX, and new players can buy those Unicorns. There will be a few Land players buying from DEXs when they first start, but the volume should be relatively low, so it is not represented in our graph.

Crypto Unicorns Unicorn flow
Crypto Unicorns Unicorn flow. Source: Naavik

Ultimately, there is no permanent sink or burn mechanism for Unicorns. As such, they will continue to inflate until prices get low enough that breeding can’t be done for a profit. There is some incentive to have a bunch of Unicorns on the Land and production side of the game, but there are caps to what the Land can hold, and Land players are going to be looking for a profit. 

For now, there is no clear reason that PvP players would want or need a large stable of Unicorns, nor how the meta might shift to require competitive players to acquire new ones. As such, prices are likely to continue to fall, as we’re already seeing.

The Crypto Unicorns Smoke Test

So what happens if the Crypto Unicorns audience size stays steady?

It’s reasonable to assume that few of the landowners are in it just for the fun. There are far more fun farming/crafting games out there, even if Crypto Unicorns does have a unique and fun aesthetic. As such, all of the Land-based gameplay (farming, crafting, breeding) will need to be net-positive value for them. This means that no one on that side is going to be (intentionally) adding monetary value to the system. 

Crypto Unicorns monetary value flow
Crypto Unicorns monetary value flow. Source: Naavik

Any monetary value (represented here as USDC) entering the system must come from the PvP side, and in this case, there are two primary sources: tournament fees and Unicorn DEX purchases. We could also see adding some gear (cosmetic or functional) NFTs to the mix for an additional purchase option, though they would behave similarly to Unicorns. How then will these two elements hold up in a constant playerbase?

  • Tournament fees. As long as the game is live-serviced well, there should be continued interest in participating in tournaments. The ability of simple games, like Jousting and Racing, to stay compelling long-term is somewhat questionable. But if we give them the benefit of the doubt that they can create the AAA-class battle game they have pitched, it should be sustainable. 

This would create a demand for RBW as an entry fee and funnel 10% of those fees into the Treasury to be recycled into the ecosystem. There’s a catch, though: there is no real need for RBW to maintain value to act as a tournament fee. It’s true that low-value RBW would limit potential earnings, but these players are mostly in it for fun (if not, then there’s truly no source of USDC). Even professional players would likely do as well as with any other non-crypto game through streaming, regardless of RBW value. 

Additionally, many players are going to have limits to how much they are willing to spend on a tournament. If the RBW price goes high, that would increase the cost of the entry fee, and at some point that will rule out most of the casual players who are the primary source of earnings for top players.

  • Unicorn (and maybe gear?) DEX purchases. With Illuvium, it isn’t hard to imagine adding new Illuvials that mix up the meta and create interesting combinations and strategies to keep the game compelling. This does not appear feasible for Jousting and Racing though, being simple games with little to no interaction or depth. 

That puts us again in the challenging position of needing a deep, complex battle game that requires players to regularly acquire new unicorns to even have a chance of sustaining. Without that, there will be little need for new Unicorns, and thus no demand for the RBW required to breed them. The mismatch in Unicorn supply and demand is the biggest problem for Crypto Unicorns.

RBW’s current fading performance on the market suggests that the demand from tournaments is not enough. That then feeds back into staker sustainability. Without anything keeping the price of RBW up, RBW could fall, and Stakers would find themselves earning worthless currency rewards. 

Could this be countered with dynamically-adjusting RBW costs to create a pegged price for tournaments and breeding? Perhaps, but that comes with an additional problem: the buying power of RBW could drop significantly. So while it might keep consistent revenue, it could become challenging to keep stakers from selling off when they see RBW able to buy less and less in-game. It would also likely be necessary to peg any RBW rewards to avoid complications.

Smoke Test Verdict: Fail 

Crypto Unicorns designed some sustainability into the system by having a Treasury that collects RBW fees and recirculates them to stakers and players as rewards. We can also give a reasonable benefit of the doubt that the PvP games will be fun enough that players will be willing to spend net-negative on them. 

Things, unfortunately, fall apart in two places, though. First, Unicorns are inflationary from breeding but have neither a burn mechanism nor a clear reason to have a large number of them for PvP players. Second, RBW doesn’t have a source of value to provide upward price pressure. PvP players will want RBW for tournament fees, but most of those are won back and then sold to DEXs. Breeders would need RBW to produce Unicorns, but until the inflation problem is fixed, the lack of demand for Unicorns means a lack of demand for RBW.

With new games in the Crypto Unicorns world being developed, there are opportunities to shift the economy towards sustained value. Unicorns are at the center of providing demand for players, and the team needs to figure out how to deflate their supply and/or incentivize owning larger stables. For example, the ability to “burn” NFTs (in some lore-friendly variation not involving Unicorn immolation) to upgrade Unicorns or increase breeding results could go a long way towards helping the situation.

While the pay-to-play model of RBW-based tournament fees could provide consistent revenue, players will generally be more willing to pay for interesting progression and developing gameplay and power. That’s where we would recommend focusing first.

Star Atlas

Star Atlas is one of the biggest and most anticipated names in blockchain gaming, developed by ATMTA (pronounced “automata”). The project has raised over $15M across a $10M seed round in June 2021, an undisclosed venture round in January 2022, and $5M in token and NFT sales in 2021. 

The game is roughly EVE: Online + NFTs, with a full player-driven economy, land rights, space combat, and more. It also features some truly impressive AAA graphics and production, with the downloadable client running in Unreal Engine 5. For a full analysis of the project and gameplay, check out our Star Atlas decon

Star Atlas is an ambitious game with economy right at the forefront. The team has clearly spent a lot of time thinking about the challenges of building such a system, to the point that in addition to the game’s detailed and polished whitepaper, there is an entire separate economics whitepaper. It’s great to see a lot of information publicly shared about the game’s economy. One important note though: the whitepaper is outdated in a few places, and we’re told that the economics paper should be deferred to when there are contradictions.

While it’s outside of the core scope of this article, it’s worth reminding that Star Atlas unfortunately took a significant hit as a victim of the FTX disaster. Per CEO Michael Wagner in a very open and transparent town hall, the team’s runway fell hard from 20-24 months down to 9-12 months due to the collapse.

Currency and NFTs Overview

Solana-based Star Atlas has a fairly standard complement of tokens for a web3 game of this scope, including two monetary tokens (one governance), land, item NFTs, and resource tokens. 

POLIS since July 2022
POLIS since July 2022 (Source:
ATLAS since July 2022
ATLAS since July 2022 (Source:

The two primary tokens, POLIS and ATLAS, have not been spared the general crypto downward trend this year. However, looking at the previous 6 months, POLIS has performed much better, holding about 55% of its value, versus ATLAS which held only 37%. This is mostly due to a substantial POLIS rebound in December. 

The rebound, which was visible to a lesser degree in ATLAS as well, came on the heels of the announcement of the sale of Habitation Plots and Mining Claim Stakes. It seems likely that this step excited the user base and drove increased interest in the currencies.


Deriving its name from the Greek word for “city,” and the topic of Plato’s Republic, POLIS is the governance token of the Star Atlas universe. While it perhaps betrays some hubris, it’s a fitting name given the ambitions of the project.

POLIS is a capped token with a supply of 360M that conveys voting rights to the holders. These rights are not just game-wide but also within factions and even sectors that a player resides in, all as an attempt to create a full hierarchy of governance. It does not, however, have any direct in-game utility.

In an example of the aforementioned discrepancy between the whitepaper and the economics paper, the former says that after a 20% initial offering, the remaining 80% of POLIS will be earned solely through staking ATLAS. The economics paper, on the other hand, states that 30% is reserved for the team and only 40% for rewards/emissions. 

Again, we’re assuming the economics paper is the accurate one, and in this case it appears to be due to realizing that the team needs to be able to have control over the DAO for the early stages. This is made explicit in the paper — 100% of the team POLIS is unlocked immediately, but only for staking in the DAO. Otherwise, it’s a 2-year vest period to actually sell it.

Interestingly, the economics paper also says that the POLIS supply cap could be increased by the POLIS DAO. Flexibility can be nice, but it seems risky as well. For example, we often favor quadratic voting as a way of balancing out power. While Star Atlas has not indicated that it will use quadratic voting, in this case it could lead to those holding less POLIS having the ability to vote to inflate POLIS and try to reduce the power of top holders. 


On the flip side is ATLAS, the primary currency within the game. It is somewhat oddly listed as inflationary but with a total supply of 36B. The whitepaper sheds some light on this apparent contradiction, stating that the 36B ATLAS would be emitted over the course of 5 years, and after that inflation would begin at 4% per year indefinitely. 

The economics paper does not include this information, though. Instead, it somewhat vaguely states that the team will modify emission rates “to make the game accessible and optimal for growth of the user base, while providing a reasonable revenue for the POLIS holders” (economics paper, pg. 23). 

In another example of the whitepaper and economics papers not agreeing, the whitepaper makes a bold statement: “Unlike many projects in the crypto economy, the development team retains zero stake in the undistributed token supply” (whitepaper, pg. 22). It also lists 80% of ATLAS as rewards to players. Meanwhile, the economics paper gives 5% of ATLAS to the team and only 65% as player rewards. 

Star Atlas Whitepaper
Star Atlas Whitepaper
Star Atlas Economics Paper
Star Atlas Economics Paper

In general, it seems that the economics paper needed to reign in some of the more hype-inducing but perhaps a bit naïve promises of the whitepaper. While such things understandably happen, it would be really nice to see the two sources of information, both of which are actively linked to from the website, updated to agree with one another. 

Land NFTs

Land is a big deal, and with headlines like a plot of Axie Infinity land selling for $2.5M USD, nearly every blockchain game wanted to get in on it. For some games, this feels fairly tacked on (let’s be honest, Splinterlands, even if “land” is in the name…), but it is central to the design and vision of Star Atlas. 

One particularly encouraging element here is the planned inclusion of a Land Value Tax. While Land Value Tax is its own complex topic, the existence of an LVT shows that the economics designers have an understanding of the type of predatory behavior that has plagued physical and digital worlds. 

That said, very few details beyond general policy have been established. It did recently have its first sale of housing (habs) and mining claim stakes, though the sales figures are quite underwhelming. Per analysis site Star Dust Economy, as of January 16th, about $1.3M in total land has been sold. 

Land (Claims + Habs) sales as of January 16, 2023.
Land (Claims + Habs) sales as of January 16, 2023. Source:

For context, this figure is far smaller than the total that was available for sale. The following table is constructed from Star Atlas’ land sale preview post and the data available on Star Dust Economy. While it may not be too surprising that none of the $2M Tier 5 Habs sold, not a single one of the $180K Tier 4 Habs sold either. Even Star Atlas’ high profile can’t get people to drop six figures on its NFTs. ATMTA is clearly not happy with it given that it didn’t even mention the land sale in its 2022 recap post.

Sale Preview

Item NFTs

This category broadly includes everything from ships to buildings to crew. Eventually players should be able to create and mint some of these, but for the immediate future they will all be minted and sold by Star Atlas.

Quite a few standard ships have been sold, with Animoca Brands alone buying $3M in ship NFTs in December 2021. However, ATMTA has to be a bit disappointed from the results of its Titan Ship sales. It announced in November that it would sell 1 of 3 different models of Titan mega ships. Priced at a very bold 5M USDC each, even at an early buyer discount of 80%, not a single person shelled out the 1M USDC needed to acquire one, again showing that, like land, no one is willing to invest in big ticket items at this point for Star Atlas.

Resource Tokens

Resources in the game are represented as fungible tokens. There are currently four resources (food, fuel, ammo, and toolkits), often referred collectively as “R4” in posts and Discord. These are the resources required to keep a ship (and crew) functioning. 

Eventually players will be able to mine their own R4 (and more if they wish to sell for a profit), but until that becomes functional, it can just be purchased from Star Atlas as needed.


ATMTA has been doing a staged rollout of Star Atlas gameplay, starting with the codenamed SCORE minigame in December 2021. In it, players are able to participate in a simple economic production game with their purchased ships, earning ATLAS in the process. SCORE will be deprecated eventually (SAGE manual, pg. 7) in favor of SAGE and UE5.

The second game mode, Star Atlas Golden Era (SAGE, earlier codenamed “SCREAM”), will be a browser-based game that allows players to pilot their fleets around the universe. Over time, SAGE will be fairly full-featured and will be one of two ways of interacting with the game. Players will again be able to earn ATLAS, though now the amount of ATLAS will depend on active participation and skill rather than passive economic growth. ATMTA is targeting early 2023 for release.

The SAGE manual and accompanying SAGE economic manual (both available to download from the Star Atlas game manuals page), provide a look into the extensive complexity that the Star Atlas economy will implement.

The final game mode is referred to as the “UE5 game,” referencing Unreal Engine 5, upon which that version of the game will be built on. With high-def 3D graphics, this will likely be the preferred way to engage in piloting and combat, as well as exploring a player’s home and ship interiors. An early version of this is available on the Epic Games Store and enables players to explore the ship interiors and participate in some space flight.

Economy Overview

Our full economy flow diagram is shown below. We’ll go into detail on each of the currencies in the following sections, but let’s take a quick look at the nodes first.

Star Atlas Economy Flow
Star Atlas Economy Flow. Source: Naavik


  • Players: People engaging with the non-land-related gameplay, primarily shipping, exploration, and combat. We assume that at least some players are willing to spend net-negative.
  • Landowners: People who have land stakes and/or habitation plots, engaged in mining, crafting, etc. We assume landowners are generally looking for a profit. Some users will have both player and landowner roles.
  • DAO Treasury: The DAO collects ATLAS fees and can optionally sell it off for stablecoins to distribute to POLIS stakers. This would be a DAO decision though, subject to voting on proposals.
  • POLIS Stakers: Stakers of the POLIS token, which conveys voting rights, POLIS yield farming, and potentially DAO stablecoin rewards.
  • ATLAS Stakers: Stakers of ATLAS, which generates POLIS yield-farming rewards.


  • Land Taxes: Taxes in ATLAS will be applied to landholders to discourage rent-seeking behavior and encourage productive contributions to the economy.
  • In-game Fees: Various ways to spend ATLAS in-game, such as reclaiming ships lost in the medium-risk zones (MRZs). Also currently includes sale of R4 from Star Atlas, but that will eventually stop in favor of player-created R4 sales.
  • ATLAS Recirculation Fund: A mechanism for bringing ATLAS back into the economy and/or burning ATLAS to reduce supply.
  • Gameplay Rewards: A mechanism to distribute ATLAS back to players and stakers.
  • ATLAS Inflation Mint: After 8 years, the mint will open up and mint new ATLAS at a steady 4% inflation rate (with the exact number being DAO-adjustable).

Limited Pools

  • ATLAS Rewards Fund: An 8-year fund to provide rewards for staking and in-game actions, to be replaced by the ATLAS Inflation Mint after 8 years.
  • POLIS Emissions Pool: Distribution pool for POLIS yield-farming rewards, intended to last 8 years before running out.


  • Marketplace: First-party market for NFTs, through which primary sales are currently made, in addition to player-to-player sales.
  • DEX: Standard decentralized exchanges.

ATLAS Flow (plus Resources and Stablecoins)

Star Atlas has a sophisticated system designed for ATLAS, including the types of flow charts we love to see. It even explicitly identifies the variables that the POLIS DAO can vote on and adjust (dark grey boxes). We’ve recreated its chart to match our style and simplify a few of the details.

ATLAS flow.
ATLAS flow. Source: Naavik

Because they are so simple and tightly tied to ATLAS, here are the R4 (resources needed to operate ships) and stablecoin (represented as USDC) flows as well.

R4 (resources) flow, Landowners selling it for ATLAS.
R4 (resources) flow, Landowners selling it for ATLAS. Source: Naavik
USDC flow with Players buying ATLAS from DEXs
USDC flow with Players buying ATLAS from DEXs. Source: Naavik

There are two types of ATLAS users here: landowners and players. There will be some overlap, and some players may be primarily subsistent landowners funding themselves, but we’ll assume most landowners are looking to turn a profit. That means that while they will have to spend ATLAS on land tax, they expect to bring more in by selling the R4 that they harvest and refine, thus being net-positive overall.

Players will need to purchase R4 with ATLAS in order to use their ships. Once they do, they are able to participate in the various non-land gameplay elements and earn ATLAS rewards. There are also some other ATLAS sinks such as reduced respawn times or fees for Starpath jump gates. So are Players also expecting a profit, or are they willing to spend net-negative for the fun of the game?

If they are making a profit, i.e., bringing in more ATLAS than they spend, then they will not need to purchase ATLAS from a DEX. New players may need some initial ATLAS to start up, but they should be aiming to become self-sufficient as well. This in turn means that there won’t be demand in DEXs for ATLAS, meaning there is little upward price pressure. So, either players in general will need to be losing ATLAS overall, or ATLAS pricing is likely to continue to sink. 


Without any in-game utility, POLIS has a much simpler flow chart. POLIS can currently be earned primarily in two ways: staking POLIS and staking ATLAS. Every day rewards are calculated based on the emissions curves, with stakers receiving their share on a pro rata basis (i.e., based on the proportion of total staked tokens that they own). Emissions are skewed to heavily favor POLIS stakers who receive over 92% of the POLIS rewards.

Daily POLIS emissions for POLIS Stakers
Daily POLIS emissions for POLIS Stakers (Source: Star Atlas help)
Daily POLIS emissions for ATLAS Stakers
Daily POLIS emissions for ATLAS Stakers (Source: Star Atlas help)

At this point, collecting POLIS is largely a move towards collecting power in the future governance of the game. Because governance will be done locally, in addition to globally, smaller POLIS holders may find that they have significant sway over their corner of the galaxy. 

POLIS flow.
POLIS flow. Source: Naavik

In addition to voting power, the DAO Treasury will have the option to sell off ATLAS captured from player spending and distribute the proceeds to POLIS holders, theoretically yielding long-term dividends on the success of the game.

The Star Atlas Smoke Test

Star Atlas is still in an alpha state, with most of the game and economy residing in the theoretical realm. That said, we can at least look at what exists now and make some guesses about how things will develop. 

POLIS is straightforward in that it isn’t “sustainable” but doesn’t need to be. The value of POLIS is not coming from in-game utility but rather political power. POLIS holders will also likely be able to gain some rewards from the DAO’s ATLAS treasury whenever the DAO votes to do some distributions.

The various NFTs, from ships to permits, are currently only minted by ATMTA, and players do not yet have the ability to build ships or other components. As such, there isn’t any inflation right now, and we will need to reexamine the NFT situation once the player economy spins up. 

That leaves us with ATLAS. With landowners looking for a profit, the sustainability is going to depend on the influx of monetary value from the players. 

It is not unreasonable to believe that if ATMTA can deliver on its vision of Star Atlas, then players will be willing to spend money to play it, much like EVE Online. If this were the case, then there would be a steady demand for ATLAS to keep their fleets running, and that could well keep the price of ATLAS afloat, creating a sustainable profit center for landowners and POLIS stakers. Of course, “if they can just make another EVE Online” is a heck of a requirement.

With some ships costing tens of thousands of dollars, however, one would assume that there was at least some expectation of turning a profit for those buyers. If this was the case, that the rewards that players are getting outpace their costs, then there is going to be a surplus of ATLAS on all sides, and the price will likely drop.

Smoke Test Verdict: At Risk

The ATMTA team has clearly spent a ton of time thinking about economics and trying to design a system that is sustainable, flexible, and can organically evolve and grow. It’s an extremely ambitious project in every sense, and getting the economics right is going to be a huge challenge.

At this point, the primary risk is around the expectations of players. For a game of this quality level, players would likely be happy to pay to play it. However, with the large startup costs of acquiring a ship, housing, permits, etc., many Players are likely to have different expectations. 

The mechanical system in place appears to have the potential to be sustainable. However, it seems likely that the promises of blockchain profits may have created a sticky situation that ATMTA is going to have to solve; namely, getting enough players to be happy to spend money in the game.

Wrapping Up

Sustainability has fortunately become a focus of web3 economic design. In this article, we proposed a lens through which to examine economies to try to avoid one particular sustainability flaw: the need for a constantly-growing audience. We do this through a sort of proof by contradiction, considering what happens if the audience size remains constant. 

Illuvium has a system in which players must buy Fuel for ETH at a relatively constant rate, with Fuel itself being algorithmically maintained at a roughly stable ETH price. That ETH is captured by the game’s Vault, which uses it to buy ILV tokens from the ILV/ETH liquidity pool. That ILV is in turn distributed to stakers who can then sell it back to the pool at a steady rate. The design is by no means magic; it still absolutely requires a fun, compelling game that players will happily spend money on. But assuming that is the case, it appears that the profits will be successfully spread out among the stakers while maintaining the ILV token price.

Splinterlands is a story of two currencies: a somewhat stable utility token (DEC) and a rapidly-inflating governance token (SPS). The Splinterlands team has helped DEC recover and approach the targeted value of 0.001 USDC by cutting back emissions and keeping regular utility. Unfortunately, those emissions were converted over to SPS, which combines with limited utility to result in SPS steadily losing value. It will need to curb SPS growth and/or add significant burns and sinks to have SPS turn around.

Crypto Unicorns has some mechanisms in place that would help with sustainability. For example, during the period in which its RBW token is emitted to stakers and farmers as rewards, all RBW spent is captured by a Treasury that will hold it until the reward pools are empty. At that point, it would start circulating RBW back to the stakers and farmers as a replacement for the pools. The problem with the system is a painfully familiar one, though: where Splinterlands has fungible token inflation, Crypto Unicorns has NFT inflation. A lack of burn mechanisms and reasons for maintaining a large stable of Unicorns means that demand for new Unicorns, and thus the RBW needed to breed them, is nearly zero. 

The upcoming Star Atlas is extremely ambitious in every way, economy included. Similar to Splinterlands, it has both utility (ATLAS) and governance (POLIS) tokens. Looking more like Illuviu, however, the POLIS token is completely separate from the gameplay. This allows POLIS to be valued more like a security, based on the success of the project as a whole rather than on direct utility. The primary risk that we see is whether or not Players will be willing to spend net-negative given the expensive costs of getting into the game. 

In all of these cases, the first requirement is one that we identify for all blockchain games — they have to be fun in order for players to spend money on them. But even if this is the case, we can see that some economic structures and balances are more prone to losing value than others. Unfortunately for some of the older games, lessons around inflation were learned late, and they will have a real challenge trying to reverse that tide.

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.

Don’t miss our next issue!

Sign up to receive the #1 games industry newsletter, straight in your inbox.