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Mapping out Illuviums Ecosystem

With web3 gaming positioned to be a strong narrative this cycle (again) I’ve been surprised to find out how many people in my conversations aren’t actually familiar with the tokenomics of games that did well last cycle and continue to do so. So I’m going to try to mend that. We’ll start with a game that has one of the cleaner token designs to this day (imo). 

Let’s talk about $ILV and Illuviuim!

First let’s cover Illuvium at a high level so we have context and a basic understanding for the currencies we’ll discuss next! 

It’s important to recognize that Illuvium as an ecosystem is more than just a single game or product. There are 4 different games (at this time) w/in their ecosystem. These are: 

  • OverworldPlayer captures, mines, and harvests other resources set w/in a beautiful open world environment.

  • ZeroIs a mobile/desktop resource management game with some assets being interoperable with the other titles w/in this ecosystem. (also available for mobile) 

  • ArenaAn autobattler game with several different game modes w/in that allows a player to test their strength and prowess against others. 

  • BeyondA TCG of sort where players acquire collectibles to craft Illuvitars (Avatars based off the in game Illuvials)

Before diving into the meat and potatoes of the tokens and tokenomics, it’s worth quickly touching upon other products or areas that a token could touch besides actual games (also a token could be an NFT as a reminder). 

  • IlluvidexIlluviums Marketplace built on IMX where P2P transactions can occur w/ assets from the 4 different games. But also where the ILV team can conduct sales and drops themselves. 

  • GovernanceCommunity members can use their token to have weight in elections/governance. 

  • StakingA way for users to interact w/ the ecosystem w/out ever having to play a game if they choose.

  • PolemosWhile the financial tokens may not touch this platform as much, players can use their NFTs to work here to allow others to rent them collateral free. This is a major unlock as it should help onboard a LOT of players into the game. More players potentially = more economic/token circulation.

Hopefully the previous two points helped to drive home that Illuvium is more than a single game, but rather an ecosystem full of items for tokens to touch. Beyond the token it’s worth noting that other “users” than just “gamers” can find a place to call home w/in the ecosystem and contribute to the growth and success of it. 

 Now, let’s talk tokens! Again, first we’ll unpack all three and then tie it back together. Starting with ETH.   

$ETH uses w/ Illuviums ecosystem: 

ETH can be used as a payment method for all things in the Illuvium Universe and Illuvidex (I.E universal currency). 

$ILV uses w/ Illiviums ecosystem:

ILV is the primary token for the Illuvium ecosystem, however it is not used or spent in-game or in P2P transactions. Rather, ILV is for governance, staking, revenue distribution, and sILV2 peg (although it can be rewarded in-game). 

$sILV2 uses w/ Illuviums ecosystem:

sILV2 in a way is like a gift card in the ILV ecosystem as it’s tied to ILV 1:1 both price & circulation wise (although it can’t be traded for Eth or USD) and can be used in the place of ETH or Fuel in certain areas. 

$sILV2 like $ILV also cannot be used in P2P transactions, but can be used to purchase anything from the Illuvium ecosystem (meaning from the ILV team). 

Now that we understand the ecosystem, tokens, and Illuvium at a high level, let’s peel back another layer and examine revenue distribution, where taxation happens w/in the ecosystem, and then finally we’ll conduct a bit of an analysis on the whole picture! 

All roads lead back to Illuviums DAO vault, as at the end of the day ILV is a DAO. That DAO consists of the team, token holders, governance members, and others. 100% of revenue generated w/ the ecosystem flows back to the vault and then is distributed back to those staking $ILV. 

The DAO uses Eth from the DAO vault to purchase $ILV to distribute to $ILV stakers.

There are some other flows back to the vault as well in certain places or in certain transactions. Those being: 

  • When Eth (or USDC) is used in a P2P transaction 5% of the total goes back to the DAO vault. 

  •  When $sILV2 is earned in yield from staking $ILV and sent to the IMX wallet to be used in game 4% of the value of those transactions goes to the vault. 

  • IMX takes a 1% tax fee on the IlluviDex

  • Users can stake their $ILV in order to generate yield on it. We won’t go into the finer details of staking in this thread but the yield generated is worth discussing.

Yield can be used in one of 3 ways: 

  1. Users can choose to compound the yield generated in their staking position. 

  2. Users can choose to withdraw the yield from the protocol, which is first held in escrow for 12 months before being claimable. 

  3. Finally, users can choose to forgo the $ILV reward and claim the equivalent value in $sILV2 (which means that $ILV doesn’t come into circulation). The claimed $sILV2 can immediately be transferred to the users IMX wallet to be used w/in the ecosystem. 

So if we take all we’ve discussed throughout this thread and zoom out a full complete picture forms. Illuvium has crafted a tokenomics system which truly allows holders of their $ILV token an avenue to shape the destiny of the ecosystem via governance and a way to share in the success of the entire ecosystem being created and grown. While at the same time using blockchain payment rails to allow their users to take full advantage of the technological promises of web3.

It’s a great example of how a project can separate its primary token from its core product while still allowing it to retain a great value proposition and share in all the revenue flows generated w/in the ecosystem it belongs to (which isn’t exactly an easy feat in any manner). 

It’s important for this separation because game economies (especially multiple different ones w/in one ecosystem) can be insanely tricky to balance, so in separating that volatility from your primary token then you shield the token from those effects. 

There’s also different motivations for different types of users, and they might want to interact w/ currencies in certain ways. For example, a gamer might want to just play the game and not worry about all this “crpyto nonsense”, where someone more web3 native and degen may only want to speculate on a token (i.e the success of the project if tokenomics are done correctly. 

And this separation of ILV from the primary ecosystems allows for the above to happen quite nicely. Which is easier said than done in this space. 

It also demonstrates how other tokens (including ones that aren’t their own native ones) can be used at various other places w/in the ecosystem to fully lean into the web3 narrative and leverage the benefits of the technology. 

Illuvium is a Delphi Ventures portfolio company and we couldn’t be more excited to be backing such a quality team and it’s been a joy to watch them grow and develop over the last couple years.

If you’re wanting to continue your learning and digging, check out Illuviums website/discord, dive into what Polemos are up to, and learn more about the IMX ecosystem in general. 

Thanks for reading! 

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What has D(M)AU trend been like over the last 6 mo? Maybe link to accurate dune dashboard if not including live data set in the note? Last I checked a few months ago $ILV had an outrageous FDV compared to actual usage vs any other large title game project…