We last mentioned Guild of Guardians (GoG) in our list of the 5 Most Anticipated Web3 Games of 2024 back in January, noting its pivot from real-time RPG to auto-battler, which may not come across as all that compelling.

Immutable has since released a new whitepaper offering further insights into the pivot, particularly on the web3 front. The game is in soft launch, and is set for a May 15th global release, so let’s assess the updated design of Immutable’s second game, which is also one of the first on its new ZK-EVM blockchain.

Business Model

GoG Revenue
Source: Naavik

Unlike many early web3 projects, the whitepaper explicitly outlines Immutable’s potential sources of revenue. First, GoG may sell NFTs (heroes, pets, energy boosters) directly to customers in addition to the founders and esports NFTs already sold. Next is the royalty fee from secondary market transactions — Immutable has the advantage here, enforcing royalties at the blockchain level as part of both its Immutable X and Immutable ZK-EVM chains. Finally, there are IAPs, something far too many web3 games have neglected as a foundational revenue source – although, to be fair, the clarity around mobile being a viable platform for web3 games has increased over the past few years.

As Immutable is looking to reach the broadest audience possible, mobile is key, which means it will have to deal with the complexities around web3 IAP. For example, the game can’t reward NFT heroes directly from the gacha system due to Google’s gambling policy, so gacha heroes will have to be converted to NFTs after reveal. This system also results in both Apple and Google receiving the 30% IAP fee from the purchased gacha summons prior to any NFT minting.

Takeaway: In many first-generation white papers, the economy was designed around theoretical revenues dependent on token inflation, NFT royalties only, or other vague sources of revenue. It’s reassuring to see at least an outline of how the economy is meant to function for players, platform rules, and the games business. But web3 has also taught us to be cautiously optimistic because what looks good on paper doesn’t necessarily translate similarly to the real world.

Gameplay

Gacha Roguelite Loop

The gameplay is an auto-battling roguelite RPG with the main goal of collecting and upgrading guardians. The whitepaper outlines a vast array of attributes, including rarities, essential for encouraging players to collect and own a variety of heroes. Players can acquire these heroes either by summoning them in a paid gacha-style mechanism, or by earning summoning shards through gameplay.

Similar to many gacha-based hero collection games, sacrificing guardians can fuel the upgrading process of other heroes, which also serves as a disposal method for unwanted characters. Converting a guardian into an NFT is incentivized by further enhancing its stats and introducing some cosmetic variations.

Minting Resource
Source: Naavik

Grinding for Resources

Acquiring equipment is essential to upgrading the stats and abilities of heroes, and it can be crafted from resources collected during gameplay. These resources can also be used to upgrade the equipment itself, and equipment can be exchanged for some resources. To increase the depth of the crafting system, resources can be merged to get superior versions of the resource necessary for higher-level equipment crafting. Immutable has also suggested there are certain levels or endpoints in the merging and crafting processes where these can become blockchain NFT items for trading.

Material level 1
Source: Naavik

The recent shift from real-time game controls to auto-battling risks shifting the game from a fun, party-based battle to an automated grind. There’s definitely interest in idle games, but the market is pretty crowded, and grinding for increased stats isn’t the most compelling sales pitch for the web3 integration, other than the ability to sell that effort to others.

Takeaway: GoG has the potential for spawning excess NFTs that could flood the market and quickly deflate the NFT values. Incorporating sinking resources back in to extend late-game progression and remove excess from the economy will increase in necessity as the game matures. Gacha games without trading already have to do this aggressively in the late game, but having a secondary-market exacerbates this effect as secondary market trading can work against the core gameplay pressures for acquiring new items (i.e. Diablo 3 auction house).

Token Value Accrual

Weekly Leaderboards
Source: Naavik

Token Sources

Guild of Guardians utilizes a single blockchain token, $GOG, for both utility and governance. Being a free-to-play game, the token cannot be given away just for playing. Therefore, a weekly leaderboard event in the endless dungeon mode will be used to determine the recipients of tokens and NFTs. Given that there are advantages to spending money on NFTs and IAP summons, it is unlikely that many F2P players will benefit from this system. 

Rewarding competitive play can put it out of reach of many players, but it tends to encourage reinvesting the token to stay competitive, as long as the player is dedicated to playing. This method of strictly controlled distribution will be more common as a way to keep inflation more in check. Immutable has experience with these types of distribution methods on Gods Unchained.

Another source of $GOG tokens is the community rewards pool. Tokens can be awarded for nonspending activities such as referrals, content creation, community participation, and third-party development.

Takeaway: A big issue with many P2E systems is token distribution increasing alongside player count without spending doing the same. Limiting token distribution to adjustable but fixed amounts will allow the game to control supply while awarding distribution based on specific merits. A risk here is that those merits could potentially be attributed to bots with the automated nature of gameplay.

Token Sinks

GoG
Source: Naavik

For investor-minded players, there will be an active staking pool, which requires staking and playing to earn future $GOG tokens. Unfortunately staking doesn't permanently remove tokens from circulation and instead adds to inflation by distributing more on a delay. Players can also sell NFTs on the marketplace in exchange for $GOG tokens from other players.

In addition to staking and purchasing NFTs, the tokens can also be used for minting in-game guardians into NFTs. This process requires a special minting resource, obtainable through gameplay. However, holding $GOG tokens influences the rate at which these NFTs are generated. It's an odd choice to use holding rather than spending or burning the tokens as, like staking, this provides rewards without removing the tokens from circulation.

The only real sink for the token is that a portion of the marketplace fee has to be paid in $GOG tokens, but this will most likely come from an automatic purchase of the tokens rather than the purchaser or seller. Not to mention that a portion of this fee goes to active staking, essentially returning it to the players over time. If the value of $GOG trends downward, then sellers are unlikely to sell $GOG tokens, further reducing the desire for it.

Coin Market Cap
Source: Coinmarketcap

While there hasn’t been a ton of usage for the token yet, it’s worth looking at its performance so far. As with most tokens of 2022, it started out at a high expected value ($1.80), but quickly plummeted as the market went cold. It has pretty much hibernated between $0.04 to $0.06, with a recent rise in interest due to the pivot and impending release. At the current price of $0.18 and a circulating supply of 554,324,001 tokens, that puts the current market cap at around $99,778,320 and a fully diluted market cap of $182,884,457. If all tokens were purchased and spent/burned, that would be a fairly large amount of money the web3 player base would need to absorb over a few years

Unfortunately, with the web3 elements being very optional and a lot of the usage focused on holding, staking or exchanging with others, it becomes significantly more difficult to absorb. Without changes to drive up token demand and more permanently removing supply from circulation, it’s probable that the price ends up lower over time.

Takeaway: Holding onto a token doesn't create any value for the economy, so if the goal is to reduce circulating supply, then Immutable should put it into a Treasury or just burn it. It's much easier to give away tokens than to get players to spend them. To drive value up, there needs to be demand high enough to absorb and exceed the circulating supply while reducing it via spending. At the moment there seems to be a design for expanding the token supply over time, but not a strong plan for how demand will exceed that in a way that more than temporarily reduces the circulating supply.

NFT Minting Systems

Once converted into an NFT, there exists another form of progression for guardians involving the sacrifice of other NFT guardians, known as "radiance". All progression is recorded in the NFTs, meaning the investment in sacrificing other guardians can at least influence the value of the NFT.

Web based event minting
Source: Naavik

Another NFT minting system requiring $GOG tokens is a web-based, event-driven minting system named "The Altar of Sacrifice". This system allows for burning a specific, limited-time combination of NFTs as a recipe to mint whatever the special event NFT is. This seems meant to be deployed to burn specific NFTs to reduce supply or drive specific behavior.

Having a secondary market for a game centered around a gacha system in general has some pros and cons. The upside is that revenue potentially benefits from both primary sales (NFT sales or IAP summoning) and secondary royalties. The downside is that the secondary market also cannibalizes primary sales as players can skip some of the gacha chasing by simply purchasing from the secondary market, leading to royalties being much lower than the IAP needed to chase rarer NFTs.

The secondary market is important to drive the web3 economy, so the game will have to drive players to use it frequently. Not only will that hurt revenue, but 20% of IAP and royalties also goes to active staking rewards, contributing to token inflation.

IAP
Source: Naavik

Takeaway: Immutable needs to make sure that if the secondary market competes with primary revenues, then those secondary market purchases also drive other forms of revenue when the NFT is used. Needing to potentially burn NFTs for continued evolution does help, but hopefully there are other IAP purchases that will be stimulated by NFT ownership.

Final Thoughts

The whitepaper sets up a wide array of knobs to tune from both the game design and economy variables sides that Immutable could use to adjust and balance things.

Those knobs are most likely going to have to be used to dial back many of the systems that lead to potential token and NFT rewards. The pivot from player controlled squad-based ARPG to an auto-battler tilts the gameplay heavily in favor of bots. This may or may not directly influence the leaderboard token rewards, but will definitely influence the ability to grind for heroes and equipment to turn into NFTs, leading to heavy downward pressure on the secondary market.

From a tokenomics standpoint, the most obvious risk is the game’s dependency on the guardian gacha acquisition. Not only does the in-game economy and revenue depend on the desire for guardians, so does the web3 side of things. Three of the five uses for the token revolve around acquiring NFTs through minting, purchasing or crafting using the Altar of Sacrifice. This means if there is little interest in the secondary market, it will severely impact the value of the token, so adding additional noninflationary uses of the token will help to reduce this reliance and offer more opportunities for an increase in token value.

Free player
Source: Naavik

There are also some concerns when it comes to the target audience and their motivations. In a F2P web3 game, there are four different types of players to try and work with: F2P, spenders, web2, and web3. The hope is to translate all of them to web3 players or at least have enough web3 activity to acquire more players.

In the current design, the web2 players are at a disadvantage compared to the web3 players in terms of maximum power of the guardians, lack of energy booster NFTs, and access to a secondary market. This helps put pressure on players to convert to web3, but at the risk of making the game unattractive to the web2 audience, and hurting revenue and growth. This could be further exacerbated by how crowded the market for this genre is, with the big differentiator leaning on the web3 features.

Balancing good game design, a sensible business model, and leveraging the advantages that web3 gaming brings is tricky. Involving outside investment in the form of tokens complicates things further in the need to drive value in utility and price over time.

All that said, there are likely more aspects to GoG that the market isn’t necessarily seeing in their updated whitepaper. In other words, even though the above-mentioned risks exist, the game’s first few global launch months will ultimately provide the concrete answers the market is looking for. We expect web3 games to continue iterating on these designs to find the right balance between giving players the right things to spend money on and the enhancements of improved digital ownership. We look forward to the global release of Guild of Guardians, among others, to see how these designs perform in this evolving market.


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