Xai is a decentralized gaming ecosystem focused on developing and launching blockchain games and supporting their underlying infrastructure. This blockchain is specifically designed for gaming, aiming to provide traditional gamers with a simplified wallet and account experience while offering developers convenient blockchain gaming solutions. Xai has established a fully decentralized ecosystem, committed to innovation and development in the gaming industry.
Project Information
Team Strength
The Xai blockchain was initiated by several key entities, each playing different roles.
Xai Foundation
The Xai Foundation is dedicated to promoting the development and innovation of the blockchain gaming ecosystem. The main responsibilities of the Xai Foundation include:
- Formulating blockchain network strategies, supporting blockchain games developed by Ex Populus, ensuring network stability and security;
- Responsible for creating and distributing XAI tokens, overseeing token governance, and ensuring fair and transparent distribution;
- Focusing on community development and governance, nurturing a supportive and inclusive community, and allowing community participation in network governance to ensure collective participation in important decisions.
Ex Populus
Ex Populus is a lab entity based in the United States, focusing on the research, development, and innovation of blockchain games. As a renowned game development studio, team members come from prestigious companies such as Pixar, Ubisoft, Activision, and Blizzard. Ex Populus’s strength lies in its leadership; Tobias Batton, a top expert in the gaming industry, serves as the CEO. With extensive experience in digital products and marketing, Batton has founded and successfully exited three companies over the past 20 years.
-Before joining Ex Populus, Batton facilitated nearly one billion app installs for top mobile game publishers through the Signal Zero launch and loyalty platform.
-He led the IGN Indie Open House project, helping independent game developers publish their games.
-He designed and released several best-selling mobile and social games, and his game design framework “Variable Dopamine- Wavelength Mapping Theory” is highly regarded.
Offchain Labs
Under the guidance of the Xai Foundation, Offchain Labs will be responsible for developing and servicing the Xai blockchain. Having created Arbitrum, one of the most successful Ethereum Layer 2 solutions, Offchain Labs can provide outstanding technical support for Xai. Additionally, Offchain Labs has a wealth of successful experience and will provide ongoing marketing support for the Xai network and ecosystem, aiding its continuous growth and development.
Other Core Contributors
Currently, the main contributors include:
- Team Secret: Responsible for reviewing games deployed on the Xai platform, deciding whether games go live.
- Thirdweb: Specializes in developing custom account abstraction technology and payment systems specifically for games and decentralized applications (dApps) deployed on the Xai platform.
- Paima Studios: Developing top-tier Web3 games for the Xai blockchain.
The uniqueness of the Xai project lies in its development being led by several teams with extensive and successful experience in their respective fields, which is quite rare in the blockchain industry. This provides strong team support for the success of the project, making it stand out in the blockchain field.
Funding Strength
Xai has raised approximately $1 million through three rounds of funding, with the price per XAI at $0.01, $0.032, and $0.035 respectively.
According to the official Xai website (xai.games), Xai boasts a strong lineup of institutional investors including Animoca Brands, CMS Holdings LLC, Outlier Ventures, Fisher8 Capital, Asymmetric, Akatsuki. Among these, Animoca Brands has the most significant influence, serving as a weathervane for investments in the blockchain gaming sector, having invested in 312 projects, mainly focusing on blockchain gaming, infrastructure, and decentralized finance.
The support from these renowned investors demonstrates Xai’s vast potential and appeal in the blockchain gaming sector.
Development Strength
According to the official Gitbook, its development roadmap mainly consists of the following three stages:
According to the chart data, the Xai team has demonstrated strong development capabilities, successfully completing the various plans in the roadmap on schedule. This indicates that Xai has performed excellently in terms of team strength and project execution.
Business Development Strength
Currently, Xai has achieved two influential collaborations in business expansion:
-Team Secret: Team Secret is a European-based esports club with divisions in Dota 2, League of Legends, League of Legends: Wild Rift, Valorant, and PUBG. Team Secret is responsible for reviewing the games deployed on the Xai platform and deciding whether they go live.
-Media Indie Exchange (MIX) on March 20, 2024: A well-known transaction platform in the independent game industry, primarily promoting various games, therefore having a wide network in the gaming industry. The purpose of this collaboration is to help Xai procure a diverse range of indie games and enhance their distribution through blockchain technology.
While these collaborations have a certain influence on Xai’s business expansion, it is currently unclear if Xai has strong resources in the field of business development. Therefore, the business development capability still needs further observation, which becomes a key factor that could constrain Xai’s growth as a leading project in the GameFi domain.
Project Information Analysis Conclusion
A comprehensive analysis indicates that the XAI project is in a leading position in the industry regarding professional team capacity, financing strength, and technological development, laying a solid foundation for its growth in the GameFi domain. However, the project’s business development capability is not yet prominently displayed, which is decisive for becoming an industry leader. Therefore, whether the Xai project will experience significant growth still requires continuous attention to its business expansion capabilities.
Project Innovation
In the GameFi domain, both players and developers face numerous issues in the field of blockchain gaming.
Problems faced by players:
— Wallet Operational Complexity: Blockchain gaming often involves the management of crypto wallets and digital assets, which can complicate the gaming experience and may not be user-friendly for the average player.
— Security and Privacy: Players may have concerns about the security and privacy of their digital assets, such as private key management and cryptocurrency storage, requiring additional security measures.
— Costs and Barriers to Entry: Participating in blockchain gaming may incur certain costs, such as purchasing cryptocurrency and paying transaction fees.
— Game Content and Diversity: The blockchain gaming market is relatively new, and there may be limited content and diversity, leaving players with fewer choices.
Problems faced by game developers:
— Technical Challenges: Developing blockchain games requires specialized knowledge such as cryptography and smart contract development, which presents a high technical barrier.
— Costs and Funding: Developing blockchain games may require significant investment in research and development, smart contract deployment, marketing, etc., creating substantial financial pressure.
In response to these issues, Xai has innovated in its technological solutions and operational models, making it stand out in the current GameFi field.
Solution Innovation
To address the issues faced by players and developers in using blockchain technology, Xai has adopted the solution of building an “accessible blockchain gaming backend + low-cost Gas public chain.”
Solutions to Reduce GAS Costs: To lower Gas costs, Xai chose to use Anytrust technology on Arbitrum, which allows the use of DAC without submitting transaction data on-chain, offering lower prices. Additionally, XAI subsidizes a portion of Gas fees for users, allowing them to incur minimal Gas costs when using Xai.
Integration of Wallets into Gaming Backend (Core Competitiveness): Xai directly integrates cryptocurrency wallets into the gaming backend, which is XAI’s core competitive advantage in the GameFi field, providing tremendous convenience to players and developers:
— For players: It manages wallets for GameFi users, enabling them to easily trade items without frequent wallet operations, significantly enhancing user gaming experience and playability.
— For developers: This design also eliminates the tedious work and development costs associated with developing separate wallet integration systems for game developers, saving a considerable amount of development time.
Operational Model Innovation
To address the limited content and diversity of blockchain games, Xai has adopted a strategy of “self-development + procurement of Web2 games.” Additionally, to ensure the quality of games launched, Xai collaborates with Team Secret, allowing professional esports players to review the playability of games, ensuring the quality of games that go live.
Xai’s core operational philosophy is “continuously expand the team composition, with professional teams responsible for their fields of expertise.” Compared to traditional blockchain startup teams, Xai’s team uses a clear division of labor to handle various aspects of the game development process, enabling sub-teams to focus on their specialties, significantly accelerating the project’s development pace.
By implementing innovations in solution and operational models, Xai has strengthened its competitive position in the GameFi sector.
XAI Token Model
Xai uses a dual-token model with XAI and esXAI, where esXAI represents another blockchain state of XAI, with a 1:1 correspondence, so the combined circulating amount of both represents the true circulation of XAI. Currently, the total circulating amount of XAI is 277 million tokens, and the circulating amount of esXAI is 64 million tokens (according to official staking data statistics), making the combined true circulating volume of XAI 340 million tokens.
Token Distribution
The total number of XAI tokens is 2.5 billion, with the specific distribution as shown in the following Figure 3–1:
According to data released in the official Binance report, July 2024 will see the first significant unlocking event, where token circulation will increase by 8%, which amounts to 200 million tokens. The unlocking schedule and quantity for each token holder are as depicted in Figure 3–2.
Token Utility
XAI is the token of the Xai blockchain and serves as the Gas fee token on Xai L3. It can also be destroyed in a 1:1 ratio to be exchanged for esXAI, which can then be staked to enjoy staking rewards.
esXAI is a non-tradeable and non-transferable token. Its primary purpose is for staking within the Xai ecosystem to gain various benefits. Key benefits include:
— Participation in staking pools to earn esXAI rewards;
— Ecosystem rewards, where esXAI holders can have early access to all games within the Xai ecosystem, receive token airdrops from game projects, and other rewards;
— Governance, where esXAI holders can vote on governance proposals.
By comparing the utilities of both, it is evident that the Xai Foundation favors users holding esXAI tokens, which helps stabilize token prices and provide more rights within the ecosystem.
Innovative Staking Mechanism
Unique Sentry Key
In Xai’s staking mechanism, the Sentry Key represents an innovative design:
— Sentry Keys are non-transferable and non-tradeable, solely used for staking to obtain esXAI rewards. This non-tradeable attribute prevents value fluctuations of Sentry Keys, avoiding negative impacts on holders’ behavior and thus ensuring the stability of the Xai network;
— Only users holding a Sentry Key can create staking pools, while users holding only esXAI can stake through these pools. Pool creators can decide the distribution ratio of rewards;
— The Xai Foundation has obtained 13,000 Ether from selling Sentry Keys, reducing the incentive for the team to sell off tokens after team unlocks due to significant sales profits.
Through the issuance of Sentry Keys, the Xai Foundation has not only generated substantial revenue but also ensured the stability of network nodes.
Asymmetric esXAI
Users can convert XAI to esXAI for token staking at any time, but converting esXAI back to XAI involves a lock-up period, which users can choose. The conversion ratio increases with the length of the lock-up period:
— 15-day lock-up period, after which the conversion ratio is 0.25, e.g., if a user applies for 100 esXAI to be unlocked over a 15-day period, upon expiration, the user will receive 100 * 0.25 = 25 XAI, and the remaining 100 esXAI are all destroyed (same below);
— 3-month lock-up period, conversion ratio is 0.625;
— 6-month lock-up period, conversion ratio is 1 (common choice for users).
During the lock-up period, users can retrieve all their esXAI, considered as canceling the staking. For esXAI chosen with 15-day and 3-month lock-up periods, the official has the right to reallocate 50% of the esXAI amounts that should have been destroyed to all stakers. As there is a lock-up period, the esXAI rewards from staking are not immediately released to the market. This means these rewards will only be converted to XAI and possibly sold after six months. According to data (Figure 3–3), the start point of esXAI rewards was December 2023, and from June 2024 onwards, a large amount of esXAI will be converted to XAI daily, so the pressure of staking rewards on prices will start to manifest from June 2024.
Potential Deflation
In XAI’s economic model design, the following mechanisms could contribute to a deflationary effect for XAI:
— All Gas fees are 100% destroyed, becoming a primary source of deflation;
— The Xai Foundation provides substantial rewards for esXAI stakers and the esXAI unlocking mechanism indirectly reduces the market circulation of XAI.
Thus, the deflation assessment formula for XAI can be stated as: the number of esXAI that can be converted back to XAI < the number of XAI converted to esXAI on the same day + the number of XAI destroyed as Gas fees that day, then deflation may occur. If popular games emerge on the Xai blockchain in the future, leading to a significant increase in Gas consumption, XAI could enter a deflationary state, potentially driving up the token price.
Value Capture Methods
Considering the above analysis, the investment stages for XAI tokens are divided into two:
- April to August 2024, game deployment stage, suitable for investors with a higher risk tolerance.
The investment appeal of XAI tokens stems from its anticipated circulating deflation. Given that the project is currently in the game deployment stage, the effects are expected to be visible after the end of this stage in August 2024. Therefore, the optimal investment strategies for investors with different investment budgets for XAI tokens are as follows:
— For investors with limited budgets: Purchase XAI tokens and convert them to esXAI for staking to earn staking rewards.
— For investors with medium budgets: Purchase Sentry Keys to create personal mining pools, thereby enjoying staking rewards and potential ecosystem rewards.
— For investors with larger budgets: Purchase Sentry Keys to create personal mining pools and buy XAI tokens to convert to esXAI, not only enhancing the pool’s level but also attracting other investors to stake their esXAI, thus earning a greater share of staking rewards.
- Post-August 2024, after the massive deployment of games, suitable for risk-averse investors.
After the game deployment stage, monitor circulation data meticulously to identify signs of deflation, and execute buy orders swiftly once deflation signals are confirmed.
Project Risks
1. Excessive staking weight of Sentry Keys: In the current staking system, Sentry Keys potentially offer high returns independently. If substantial rewards can be obtained solely through staking Sentry Keys, this could lead to an increase in the number of esXAI converted back to XAI daily, thereby exerting downward pressure on the market price of XAI.
2. Limitations in business expansion capability: If the Xai chain fails to attract more successful game deployments during the game deployment phase, reducing the likelihood of blockbuster games, this will directly impact the investment appeal and long-term growth potential of XAI.
3. Inflation-induced selling spiral: If XAI fails to achieve deflation and as the number of esXAI unlocks accumulates, the market could enter a “selling spiral” state. In this scenario, the esXAI rewards obtained by Sentry Key holders would continuously be converted to XAI and released into the market, placing sustained downward pressure on XAI prices.
Conclusion
In the GameFi domain, numerous projects are launched, but the success of a game relies not only on the rationality of its economic model and playability but also on external factors like marketing strategies and market conditions. The probability of a single game project’s success is relatively low, influenced by multiple variables. In contrast, blockchain platforms supporting multiple games, if effectively addressing user issues and launching numerous games, have a significantly higher chance of incubating blockbuster games. Furthermore, blockbuster games on the platform chain can greatly enhance the chain’s market appeal.
The Xai project demonstrates industry-leading advantages in professional team capabilities, financial strength, and technological development, providing a solid foundation for its development in the GameFi domain. However, whether its business expansion capabilities are sufficient to support it as an industry leader needs continuous monitoring. Meanwhile, the economic model of the XAI token contains potential deflation triggers; increased on-chain game activity could promote deflation and enhance token value. However, it is important to note that inappropriate staking weight settings, challenges in business expansion, and potential inflation risks could lead to negative market reactions to XAI, factors that must be considered when assessing the long-term investment value of XAI.
Reference Article
【1】Financing amounts and prices per funding round are referenced from: Binance Research — Xai
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