SocialFi nouveau riche xPet One step away from greatness

SocialFi The Next Generation of Wealth, xPet on the Brink of Greatness

Introduction

@xpet_tech is a recent phenomenon in the world of SocialFi. In just one week, it has attracted over 2639+ ETH in funds and 7000+ on-chain users. The project is still in its early stages, with many rules yet to be clarified and gameplay mechanisms that still have room for iteration. The project team has been taking frequent actions, and the most controversial move was their decision on December 4th to liquidate the ETH deposited by users and establish a $XPET/WETH liquidity pool on Uniswap. On December 6th, they also listed $BPET. Honestly, the direct liquidation of funds was not done in the most transparent way. Since $XPET itself does not have liquidity, theoretically it does not qualify for borrowing and lending. Opening up the $XPET price without any prior explanation and directly liquidating it caught everyone off guard. Users’ doubts and concerns are not unfounded, and caution is needed before investing until further information is provided.

Members of the Economic Model Group, including @Fisher_manQ, @observerdq, @0xLukeCrypto, and @Janezh1111, have abstracted this case as an interesting mental game and economic model scenario for in-depth discussion. Among them, what we find most interesting is how the system can be designed to achieve a relatively balanced and sustainable state, and of course, we are also concerned about injecting external value into the economic model 🙂

What is quite rare is the synergy achieved between the design of the economic model and the product form based on the Twitter plugin. While the user base rapidly expands, the positive economic model flywheel of the system is also accelerating.

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The way to sustain the system

The quantity of XPET tokens available for conversion is equivalent to 50% of the XPET revenue earned the preceding day. – XPET Whitepaper

Combining the game mechanism, we can deduce the following formula:

Based on the above, let’s continue with a simple deduction:

1. In the initial mining phase, total computing power is low, resulting in a small amount of $BPET generated (denominator) and a large number of new $XPET created (numerator), which leads to high returns per unit of computing power. (Assuming that the daily generated $BPET will be exchanged, liquidity will be extremely scarce, and it will be relatively easy for the project team to control)

2. High returns incentivize more people to invite others to mine and buy mining machines, thereby filling the $XPET reward pool daily

3. This cycle continues until the growth rate slows down and the return rate becomes insufficient to attract new people and funds, causing the system to decline

From the above path, we can see that if we want to make the system sustainable for a longer period, we need to extend the high returns period as reasonably as possible. In terms of the formula, this means trying various ways to increase the numerator and decrease the denominator, and also keeping an eye on the relative growth rates of both.

• Molecular increase:

• The protocol design should be as smooth as possible to attract as many people as possible

• If XPET price can be at a reasonable level, it will help reduce user participation threshold and increase conversion

• Denominator reduction:

• Some mechanism designs mentioned in the whitepaper will help achieve this goal, such as the staking interest of $BPET (increasing BPET consumption in the game) and the queuing black box mechanism (min function sets the upper limit for exchangeable BPET)

• The commercial flow income generated by Quest will also bring positive externalities to the system, which can be used for the repurchase and destruction of $BPET when the yield is decreasing

From the formula, we have some other thoughts:

1. Stable XPET price may be a better solution

We believe that the fluctuating design of $XPET price may be a bad move. Under the current setting of unstable $XPET price:

• When it rises significantly, the entry barrier for users will increase significantly, which will undoubtedly hinder more players from entering

• If $XPET price is too low and the yield is not attractive, it will enter a downward spiral

Therefore, a stable $XPET price may be the optimal solution for this system.

In addition, since the system sets a daily limit of 100 $BPET for withdrawal, exceeding this limit will require queuing. For users who spend unlimited money to upgrade their computing power, if they cannot smoothly withdraw, their payback period will be significantly extended and it will not be cost-effective. For users, a better strategy is to spend a certain amount of money to upgrade the mining machine to an appropriate level, with the daily amount of $BPET that needs to be cashed out close to 100. As a result, this system will eventually form a state where the user base is relatively broad and the rewards are relatively evenly distributed. This also contributes to long-term stability. It is the desired ideal state for the product designers. From this perspective, the team should not set the entry barrier too high, and attracting more users to enter is the priority.

2. Introduce a decay mechanism for computing power

Currently, it seems that the team has never publicly mentioned a key issue – the lack of a decay mechanism for factory computing power. As time changes and the denominator in the formula expands infinitely, the yield will continue to decrease, thus XPET loses its growth attractiveness. We tend to believe that subsequent economic model designs need to introduce a decay mechanism for the factory to reduce the growth rate of the denominator. In an ideal situation, the project side does not need to be the opponent of inflation but uses various means in the toolbox to adjust the numerator and denominator to achieve system balance.

3. Dynamic optimal solution for computing power

As more and more users participate, the competition among them is based on the production efficiency of the mining machine. And due to the limited functions currently online, the competition between users is relatively homogeneous (currently there is almost only one optimal solution). Looking forward from the current form of existing games, some evolutionary possibilities can be imagined: the platform can continue to add gameplay within the game, impose regulation, such as making pets sick, hungry, or even conducting PK between pets (increasing BPET consumption scenarios, introducing more randomness). By introducing these new mechanisms, mining efficiency will be compromised, making the competition between players more unique. There is never an optimal solution for unit computing power, and there is no homogeneous optimal state. As a result, users will constantly be interested in exploring how to achieve the optimal solution and increase their recharge during the process. And as the project constantly creates new demand, the vitality of the game is always renewed.

4. Our Confusion

Currently, the functions of BPET and XPET are unclearly distinguished, and their values are maintained at a 1:1 ratio within the platform. However, BPET experiences a certain discount when traded outside the platform due to limited availability. This has caused us some confusion – if the exchange rate is 1:1, why do we need the design of two tokens?

In addition, the white paper clearly states that “the number of XPET tokens that can be exchanged for BPET is equivalent to 50% of the XPET income earned the previous day.” Upon checking the contract address, it is confirmed that 50% of XPET is being transferred to the contract address 0xaa2506e41ce0353eb407cd4cb294bb03899c5d77. Currently, this contract address has accumulated a total of nearly 13 million XPET tokens, with only around 1 million XPET tokens being exchanged, and there are still nearly 200,000 BPET tokens in the queuing queue.

If there are no other exchange restrictions, having an abundant supply of XPET tokens (13 million) but not rewarding them to BPET holders damages the users’ rights.

The automatically triggered queuing mechanism is also very confusing. Looking at the data from the browser, there seems to be no regularity in the queuing claim. This seems to be a bad situation, and the team needs to put more effort into the implementation of the code engineering.

Considering that the project has only been online for a week, it may need time for improvement, or the product is not yet in a complete state. We will continue to monitor the progress of the project and the iteration of the economic model. Feel free to join us in discussing and exchanging ideas.

We will continue to update Blocking; if you have any questions or suggestions, please contact us!