An Introduction to the Tokenomics of Purigotchi
Steven Sabol 2024-07-20
This paper explores various aspects of the Purigotchi model, highlighting how its features address lessons learned from numerous project failures over the crypto cycle. It delves into sustainability in a Web3 project, balancing growth with stability, and the unique aspects of the Purigotchi model compared to previous iterations.
A tour through Purigotchi’s tokenomics will reveal a survival plan and a formula for growth and collaboration. In designing Purigotchi’s structure, several major ideas and goals emerged:
Vulnerability to the Crypto Cycle: We identify what makes a project susceptible to failure due to market fluctuations and build resiliency into our tokenomics.
Web3 Collaboration: Effective marketing in Web3 involves collaboration among existing communities. We embed multiple features within our tokenomics to maximize the likelihood of strategic partnerships, providing tangible benefits to both external projects and the Purigotchi player base.
Stable Player Earnings: Declining player earnings can harm retention and asset values. Our tokenomics ensure that player rewards and take-home earnings remain stable (in USD terms).
Philosophy, history, economics, and community intersect to create Purigotchi’s tokenomics: a new iteration and a brand-new adventure.
PURI Goes on an Adventure: An Introduction to Expected Revenue
The initial rendition of the game Adventure allows players to craft a consumable item known as an Adventure Survival Kit (ASK), enabling them to send their Purigotchi on an hour-long adventure. This model demonstrates that the game leverages the Solana ecosystem rather than focusing solely on its token or NFT. We illustrate our philosophy by projecting in-game activity over one month, estimating the quantity of Purigotchis on adventures and their average daily adventure hours.
Economic research from Star Atlas shows that ships requiring frequent maintenance spent more time unemployed. Like a Fimbul Airbike, Purigotchi must eat to adventure and earn. Daily employment rates among XX-Small ships in the Star Atlas ship staking program S.C.O.R.E. ranged from 60 to 70 percent. Exercising caution, we model Purigotchis with a 40% daily employment rate.
Unlike XX-Small ships with a roughly 24-hour food capacity, Purigotchi must eat every hour to level up and earn. Players can relax this requirement by using a queuing feature to pre-program up to 24 hours of adventure. Therefore, we expect players to spend an average of 24 hours daily on adventures. Out of a maximum potential of 7.2 million adventures during 30 days, we assume Purigotchis will be on adventures 40% of the time, equating to 2,880,000 adventures.
Crafting an ASK costs roughly ten cents. The recipe is broken down as follows: for every $10 spent on kits (100 adventures), $2.5 in PURI, $0.5 in Food from the Star Atlas Universe , and $7 in a Solana Ecosystem token (currently JUP, BONK, ATLAS, and POLIS). Our conservative estimates put the total fees collected from ASKs at $288,000 monthly.
In this model, the team collects 12% of the fees paid, $34.6K in revenue, 42% from selling collected Food via the PURI Marketplace and $20.2 from the ecosystem token in the recipe. Since the team never collects PURI, the option of selling it to raise funds is off the table, applying lessons learned from past failures. This approach ensures the project’s long-term sustainability by avoiding de- pendency on the project token (as seen in the case of FTX and its substantial share of “Wealth” in FTT). Table 1: The Distribution of Total Fees Spent on Adventure Kits (Over One Month, Thous. USD)
| Team Revenue | Adventure Rewards | Burned | PCF | |
|---|---|---|---|---|
Food | 14.40 | 0 | 0 | 0 |
Puri | 0 | 70.56 | 1.44 | 0 |
Ecosystem Token | 20.16 | 171.36 | 4.03 | 6.05 |
Total Collected (in USD) | 34.56 | 241.92 | 5.47 | 6.05 |
% of Total | 12 | 84 | 1.9 | 2.1 |
84% of the fee revenue collected is redistributed as adventure rewards, primarily in PURI but also in ecosystem tokens. This amount supplements monthly adventure rewards. Additional sources include interest earned on the Rewards Sustainability Fund and NFT giveaways by the Purigotchi Collaboration Fund. It is important to recognize that there is a random element to adventure rewards, on average players should get back 84% of what they paid in fees. Some times they will win big and sometimes they will lose their fees from playing.
Burning $1.44K in PURI and $4K of the ecosystem token supports the tokenomics of the broader Solana ecosystem. Burning another project’s token directly contributes to its value and serves as a marketing and collaboration tool. Allocating 1.9% towards token burns is a small price for a partnership that boosts participation and exposure.
The Purigotchi Collaboration Fund (PCF) collects $6K. The PCF uniquely earmarks these funds for whitelists and initial mints, supporting new projects on Solana and fostering future collaborations. Participating in initial mints helps fund innovation within the ecosystem and capitalizes on a key entry point in a project’s lifecycle. The fund can redistribute NFTs as player rewards, sell them for profit, or hold them as long-term investments. The PCF achieves multiple strategic goals:
Increase Fee Revenue: Using NFTs as player rewards boosts participation and increases fee revenue from Adventures.
Attract New Audience: NFT giveaways attract new audiences to the game.
Enhance Collaboration: Supporting new project mints and offering those assets as rewards enhances Purigotchi’s potential for direct collaboration.
Addressing Runway Problems and Earnings Erosion
The initial mint proceeds address two critical issues plaguing Web3 gaming:
1. The Runway Problem The runway problem affects all NFT and gaming projects, referring to the difficulty in maintaining operations amidst changing revenue streams or unexpected market conditions. Actions taken immediately following an initial mint are crucial for achieving sustain- ability and long-term success. Projects must manage these funds wisely, as opportunities to raise additional funds may be scarce. The assumption that initial success can be easily replicated is often misguided; market conditions, risk appetite, and the community’s financial capacity can all hinder future fundraising efforts.
2. Earnings Erosion Earnings erosion is a common structural design flaw in the tokenomics of most gaming projects. When in-game earnings primarily consist of token emissions, these to- kens are often swapped for USDC, causing constant downward pressure on token prices. This mechanical relationship leads to persistently declining wages. The strong positive correlation be- tween in-game earnings and willingness to play means that lower realized earnings result in a smaller player base.
The Purigotchi Model
The Purigotchi model addresses these issues by creating the RSF (Reward Sustainability Fund) and TSF (Team Sustainability Fund), decoupling the project’s success from the broader crypto market. Many projects suffer from significant dependency on crypto market conditions for their revenues and player earnings. By establishing the RSF and TSF, Purigotchi ensures long-term sustainability.
Tackling The Runway Problem: Team Sustainability Fund (TSF) We earmark 54% of the initial mint proceeds for creating a Team Sustainability Fund. The TSF provides supplemental interest income to weather crypto winters, enhance the share of in-game rewards allocated to players, and increase the flow to the Purigotchi Collaboration Fund. This approach ensures the project can sustain itself even during adverse market conditions, securing its long-term viability.
We allocate $330,000 to the TSF at current SOL prices, investing these funds into separate USDC staking accounts yielding between 5% and 15%.
The TSF will not be the primary source of funds for payrolls and operating expenses but will serve as a backup if in-game revenues fall short. We aim to use the interest income to supplement the team during crypto winters and eventually grow the fund to a point where we can redirect the team’s share from in-game revenue toward player rewards.
USDC interest earned will cover payrolls until the game launches, after which we will strictly reinvest interest allocations until the TSF reaches a critical mass.
The team’s current monthly compensation is around $3K. A 15% return would generate approximately $4,125 monthly, allowing the team to preserve the principal until the game launches.
Combating Earnings Erosion: Rewards Sustainability Fund (RSF) We created the RSF to com- bat the critical challenge of earnings erosion in Web3 games by steadily growing player rewards with supplemental interest income. This fund provides the initial endowment necessary to generate sustainable player rewards, which increase through compounding and contributions from in-game fees.
The RSF provides a continuous source of income for player rewards, circumventing the problem of a depleted rewards pool by continuously reinvesting interest to build the capital base. We distribute the interest income earned as follows:
50% goes to the Purigotchi Player Rewards.
50% is reinvested into income generation (growing the principal), with: - 60% earmarked for reinvestment into USDC yielding accounts. - 40% strategically placed into non-USD sources of yield.
The RSF is a crucial component of the project’s long-term success. It creates a self-sustaining pool of funds to increase players’ real rewards. Since the interest income will primarily be in USDC, in-game wages, and player retention will be more resilient to swings in the broader crypto market.
Since the RSF is funded by in-game fees, it’s logical that players who contribute more in fees should receive a larger share of the interest. Therefore, we have designed the interest rewards from the RSF to be directly proportional to their contributions. Not all in-game earnings are positive for players, as portions are allocated to the team, burning tokens, and contributions to the RSF, TSF, and PCF. The interest payments from the RSF serve as compensation for overall performance, ensuring that, in the long run, those who contribute more receive a greater share of the interest earned on the funds.
A players monthly interest earnings takes into account their engagement and contributions over the previous four months. Last months activity is given a 40% weight, the month before 30%, and so on. The RSF rewards players for their past contributions and Purigotchi ownership.
Where AS refers to the players adventure share, .
A players monthly earnings is then shaped by four primary factors, in-game token rewards (recycled from fees), their share of RSF interest rewards, and NFTs they may have won, less the sum of fees paid.
Increasing Real Rewards Over Time and Stable Team Funding
One of the main advantages of steady increases in real rewards, independent of current market conditions, is that player retention remains stable even during crypto winters. Player earnings become detached from the crypto cycle, making retention more about the project’s attributes than any negative impact current conditions have on take-home wages. Rising in-game earnings are also a powerfully attractive feature of the game.
When market conditions turn unfavorable, the TSF and RSF create a safety net for the team and player earnings. Over time, the RSF produces a healthy mix of USD and non-USDC rewards, but the principal is heavily weighted towards USDC.
A critical feature of our business model is creating a sustainable player rewards structure. We facilitate this transition by gradually reducing the team’s share of monthly fees. We achieve this by investing fees over monthly team payrolls into the TSF. Once the TSF can sustain itself, we plan to reduce the share allocated for Team Revenue and direct it toward both the PCF and RSF.
Simulation Assumptions and Benefits
Having established the foundational strategies for the TSF and RSF, we now turn to a simulation that demonstrates how these funds will operate and benefit the Purigotchi ecosystem. This simulation will help convey the key advantages and long-term impacts of our financial strategies, illustrating the practical implementation and anticipated outcomes of our model.
Investment Assumptions of RSF
Initial Endowment of $280,000
Initially receives 12% of in-game fees, which jumps to 24% after TSF hits funding goals
Return on USDC principal is assumed to be 10% annually, and this pool receives 90% of the in-game RSF contributions
Non-USDC investments are assumed to yield 40% annually and receive 10% of in-game RSF contributions
We allocate 50% of the RSF interest income towards in-game rewards and reinvest the other 50%
Reinvested Interest Income: 60% to USDC, 40% to non-USDC investments
Investment Assumptions of TSF
Initial Endowment of $330,000
We re-invest all in-game Team revenue fees greater than $20,000 (or monthly payrolls)
Once the TSF can generate $20,000 in interest income, monthly fee contributions drop to 5%, and payroll withdrawals of $20,000 begin
Investments are USDC-only yield-bearing accounts
Assumes a 10% yearly USDC return
Conclusions from the Simulation First, the simulation highlights the strategy of building the TSF as fast as possible to achieve team sustainability. We save in-game fees above immediate payroll and operating needs until the TSF produces $20,000 in monthly interest and becomes self- sustainable. After this point, we greatly increase the fees redistributed as player rewards and significantly boost contributions to the RSF.
Second, the rewards coming from the RSF make up an ever-increasing share of player rewards over time, meaning player rewards improve over time. When the rewards pool achieves a high level of value, total in-game fees can be reduced, further improving players’ take-home earnings.
Third, the TSF and RSF provide separate aspects of the project’s liquidation value. In the event of liquidation, we would pay employees the value of the TSF and distribute the balance of the RSF to Purigotchi NFT holders. This exit option is lucrative for long-term holders and might, in the future, set the floor price for Purigotchi NFTs.
Fourth, we redistribute $642,504 in Solana ecosystem tokens in the first two years and burn $48,188. Including a small-cap token in a crafting recipe could skyrocket its value due to this sheer volume of activity. As a potential case study, consider that the ASK adds tremendous utility to the PURI token. The total amount of PURI burned after 24 months is $32,125, or roughly 25% of the total outstanding supply at current market values. The total PURI purchased after two years is $321,252 approximately 2.5 times the current market value. The introduction of Purigotchi is highly bullish for the meme coin.
How Purigotchi Creates Conditions For Seamless Collaboration: Using Soft Power to Shape the Zeitgeist
The structure outlined above provides tools that encourage seamless collaboration with projects across the Solana ecosystem. The means of soft power that bolster Purigotchi’s influence include early investments in mints, support for adoption, locking in token value, the integration of outside assets, and strategic token investments.
Recirculation of Ecosystem Tokens: Recirculation of ecosystem tokens (in the form of Ad- venture Rewards) increases their adoption through an increased number of holders, thereby raising awareness and reach.
Token Burning: Crafting involves explicitly burning partner tokens, creating a demand- based sink that permanently locks in a fraction of the token’s value.
The Crafting Recipe: Including Food from the Star Atlas Universe strengthens the bond between both projects. This asset is bought cheaply through the Star Atlas Galactic Marketplace, so its inclusion guarantees that each new Purigotchi player gains exposure to Star Atlas.
The Purigotchi Collaboration Fund: The company’s financial arm makes strategic investments in new projects via whitelists and initial mints, creating strategic partnerships and fostering goodwill early in their lifecycle. The mints can be used as giveaways in adventure tournaments, amplifying exposure to both Purigotchi and new NFT/Gaming projects.
Strategic Token Investments by the RSF: Twenty percent of RSF interest income is eligible for reinvestment in established projects yielding locker programs. This increases the fraction of tokens locked and further supports token values across the ecosystem.
The Purigotchi model makes it easy for Web3 projects to want to collaborate, creating a powerful suite of tools to increase the influence and awareness of PURI and Purigotchi across the Solana ecosystem.
Concluding Thoughts: A Game for Web3 Gamers
Ultimately, the Purigotchi model is built with one audience in mind—the Web3 gamer. We recognize the pain of losses, the diversity of projects players are typically involved with, and the desire to be part of a strong community. The Purigotchi model offers a radical alternative for those interested in Web3 gaming, particularly appealing to gamers who are also investors.
For the investor-gamer, Purigotchi gameplay offers several advantages:
Long-Run Returns: Returns increase over time in USD terms and are not dependent on in-game tokens increasing in value. Wages are protected from downturns, providing much needed USDC liquidity during market downturns.
Exposure to Established Projects: The RSF allows players to gain exposure to non-USDC token investments.
Access to New and Upcoming Projects: The PCF distributes NFTs, granting players access to fresh and exciting projects.
Diversified Token Rewards: Rewards consist of a diversified basket of Solana-based tokens and USDC, offering a balanced portfolio for gamers.
Earning Potential: Players can earn by playing the game or lending their NFT assets to others, seeking exposure to collaborators’ NFTs and tokens.
Players can be assured that the rewards pool and team operations have minimal correlation with the broader market, providing peace of mind. In a market crash, their daily rewards will not be significantly affected.
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