Undead Blocks Economy Breakdown

Let's break down the web3 economy for Undead Blocks, in this post we'll cover:

-game overview

-asset utility, faucets, and sinks

-financial incentives

-value inflows

-economic risks

-conclusion: is it worth it?

Game overview

Undead Blocks is a FPS zombie shooter with a relatively high focus on the web3 earning component, with P2E rewards starting at the end of February. The game is currently in open beta

Asset utility, faucets, and sinks

Weapon NFTs: give access to NFT game modes, with much higher box drop rates

-Faucets: purchased with standard, or in some cases gold, ZBUX. Also can be acquired through staking UNDEAD. Supply seems relatively controlled, but lacking details

-Sink: none

UNDEAD: fixed supply governance token with voting rights and staking rewards

-Faucets: direct uniswap listing (no sale), UNDEAD inflationary staking rewards

-Sink: none

Standard ZBUX: non-transferrable currency used to upgrade and purchase weapons

-Faucet: randomly find in boxes dropped from killing zombies

-Sink: spending on weapons

Gold ZBUX: purchase skins and exclusive weapons

-Faucet: randomly find in boxes dropped from killing zombies, ranking on leaderboards, and completing achievements

-Sink: redemption against treasury at $0.1 peg, spend on skins and exclusive weapons

Weapon and character skin NFTs: purely cosmetic limited supply skins, can act as status symbols

-Faucet: dropped from opening loot coffins (which are bought with gold ZBUX)

-Sink: none

Financial incentives

Gold ZBUX is the earning currency, distributed partially for skilled gameplay and partially participation, with earning primarily for those with weapon NFTs. Redeemable for a variety of crypto against their treasury at a fixed rate of $0.1

Value inflows to fund incentives

-Advertising on in-game locations and weapon skins

-Primary and secondary market skins and animations revenue

-Genesis NFT weapon sale

-UNDEAD backstop- this is a fixed token pool and not a long-term sustainable option for funding rewards

Economic risks

-Overly financialized focus on P2E in their marketing, misses an opportunity to attract higher-budget, non-earning focused cosmetics spenders to their free mode. The target players are not likely to drive significant cosmetic revenue, which is heavily relied on.

-Advertising revenue is based on in-game brand logo placement and if it is static, with a fixed fee, it may fail to cover long term costs and scale as the number of earning players rises. If they use dynamic in-game advertising, the rates I see on that are $4-$12 per thousand impressions, not enough to sustainably support player earning [disclaimer: not an expert on ad monetization, happy to be corrected].

-Weak utility for UNDEAD token, governance is not a strong incentive for ownership and the staking rewards are tied to circular UNDEAD rewards and speculative demand for weapons for earning.

-The only thing (indirectly) tying UNDEAD value to game revenue is the weapon distribution, but in order to keep this utility going they need to continually increase the number of weapons and therefore the number of earning players. Meaning they will eventually have to choose between removing the only meaningful utility for UNDEAD, heavily reducing earnings per player, or running out of treasury funds. This could potentially be mitigated through additional UNDEAD utility with non-financial rewards like skins, but at the cost of reduced treasury revenue from skin sales.

-UNDEAD could be a weak backstop if reward redemptions can't be covered by revenue as hitting the backstop would be a FUD event, exacerbated by earners selling UNDEAD. The lower token price would accelerate the speed the reserves are drained, causing a downwards spiral until the treasury empties.

Conclusion

I expect the UNDEAD token to get some speculative hype, but perform quite poorly in the long run with no sustainable utility and plenty of risk. There is a chance of the treasury running out, but see it as more likely that revenue will come in lower than expected and earnings distribution per player get significantly cut down to around the value of the ad revenue they drive, likely leaving many weapon investors unprofitable.