A comprehensive interpretation of the operational mechanism, technology, and DAO governance of the blockchain game Illuvium

Original Title: “MetaPortal Research - Exploring Illuvium”

Authors: DarkForestCapital, AG and 1kx

Translation & Editor's Note: Mint Ventures

1. Core Insights Overview

In recent months, a wave of P2E concept blockchain games has attracted a large number of gamers. Unfortunately, most speculative games collapse within a month. While using gold farming subsidies to attract traffic in the early stages of a project is advisable, it is not sustainable in the medium to long term.

However, we believe that the future of blockchain games will not stop here; the financial + gaming model will have lasting vitality. Scalable entertainment models will attract more users from outside the circle, and having users and traffic is key to realizing the project's future value. The key to success lies in whether the game can form a healthy self-sustaining mechanism, attract users or third parties to generate non-investment consumption, and maintain long-term retention. Mint Ventures is very optimistic about truly entertaining non-Ponzi blockchain games, which is why we are focusing on Illuvium.

This article provides a comprehensive introduction to the blockchain game Illuvium from aspects such as game mechanics, backend technology, token economic models, and DAO governance, describing the advantages of the game.

Illuvium aims to be a truly decentralized AAA-level NFT game. It is based on F2P (free to play) and P2E (play to earn), adding immersive story scenes and NFT elements, allowing players to experience the fun of the game while traversing beautiful landscapes and battling magical beasts.

In the author's view, the team has put considerable thought into game design, with creative and innovative game mechanics and governance models, and a grand blueprint planned. Although the game has been delayed several times, it has hardly affected the community's enthusiasm and expectations for the game, and the author expressed eagerness to see the game's launch and future development.

2. Game Introduction

Illuvium aims to be a truly decentralized AAA-level NFT game. It is based on F2P and P2E, adding immersive story scenes and NFT elements—players battle illuvials while traversing beautiful landscapes. A key point is that all operations are built on the Ethereum scaling solution Immutable X, which means that in the future, Illuvium has the opportunity to become a crypto-native game capable of unlimited growth.

In this article, we will take a peek behind the beautiful graphics of the game to understand what makes it truly special. Next, we will begin to explore game mechanics, token economic model design, community, and organization to see how it will embark on its future journey.

3. Track and Project Status

NFTs and NFT games are currently hot trends in the crypto space. The "overnight fame" of Axie Infinity has sparked interest among researchers and players. Since mid-June, the popularity of blockchain games has remained high, including Illuvium—evident from the active engagement of nearly 90,000 Discord members and numerous YouTube analysis videos. The biggest difference between this project and other blockchain games is that it highly respects and adheres to the decentralized characteristics of blockchain.

The white paper states—“We firmly believe that a decentralized gaming economy will be the best fusion between blockchain enthusiasts and gamers seeking openness and freedom, free from corporate interference.”

Illuvium plans to adopt a DAO governance model, allowing community members to participate more deeply in decision-making, meaning community members can provide real-time feedback to the core team and influence the game's art design and mechanics direction to some extent, facilitating and improving game development. This contrasts with Axie Infinity, which is still primarily governed by a key team making game-changing decisions. Recently, Axie Infinity changed its spending and reward mechanisms, which immediately affected the price of its token AXS, forcing players to alter their strategies in the game. Illuvium combines the latest collaborative tools for DeFi natives, high-definition graphics, and an immersive open-world environment, along with the aforementioned decentralized governance model, hoping to attract a variety of players. We must admit that it seems to be working. It boasts a Discord community of 89,000 members (the number reached 227,459 during the editor's translation) and governance tokens with the highest liquidity levels (among the Metaverse projects we have seen), which proves this point.

4. Game Mechanics

Style

Illuvium is an RPG game with NFT collectible value, combining automatic combat. The main world offers an open-world RPG experience where players can mine, harvest, capture, and battle illuvials. Once players form a team, they can engage in automatic combat—players need to strategically build their teams to defeat opponents in battle.

Early concept art

In fact, it shares many similarities with the famous turn-based RPG game Pokémon, and we draw a comparison here. (Left side shows Pokémon elements, right side shows corresponding Illuvium elements)

● Pokémon - illuvial (creatures used for battle)

● PokeBall - shard (used to capture creatures)

● Evolution - Fusing (upgrading teams)

● Type - Affinity and Class (attributes determine strengths and weaknesses, e.g., water vs. fire)

● PokeDEX - illuviary (used to track/manage your collection)

● Trainer Gym - Battle Arena (1v1 battles)

The main difference is that Illuvium replaces turn-based combat with automatic combat. Automatic combat, also known as auto chess, is a subgenre of strategy games that incorporates chess-like elements—players place characters on a grid battlefield to battle opponent characters without further control during the fight.

Automatic combat game

In a recent interview, Kieran and Aaron discussed how to embed more strategic skills into this type of gameplay, allowing players to engage in direct confrontations like in chess. This model requires players to manage their illuvial collections, considering which team performs best in each match, rather than relying solely on an extremely powerful character for success. In the game, not only illuvials fight, but also player characters, adding new dynamic elements to the combat.

Editor's Note:

Turn-based combat refers to all players taking turns to play, and players can only manipulate their characters when it is their turn, like in Fantasy Westward Journey. Real-time combat refers to games where there are no turn limits after encountering enemies, allowing direct manipulation, like in Honor of Kings or PUBG Mobile.

Automatic combat refers to a real-time combat mode that does not require manual player operation; its essence is a shift in gameplay. The design of automatic combat can shift the focus of the game's fun from the combat itself to pre-battle strategies, development systems, management modules, and social systems. Users will immerse themselves in richer and more challenging strategies and simulation management rather than the combat scene itself. On the other hand, a weaker immersive and operational combat style will better suit user needs in specific scenarios, such as work or childcare. We can see that the addition of automatic combat elements in Illuvium balances real-time combat and turn-based game modes, which is a significant challenge for the team, and we see their sincerity in their work.

Let’s further understand the "dynamic elements" mixed into automatic combat. The game adds elements beyond the combat power of battling monsters, such as player characters and collectible attributes. This design adds more randomness or optimal solution paths to the battle outcomes, enhancing players' gaming experience and deepening the game—here, depth can be understood as the depth of player skills and the difficulty of finding optimal gameplay solutions. Poorly designed games are more susceptible to the Zermelo's theorem, allowing players to easily predict outcomes before battles (for example, if character A's combat power parameters are stronger than B's, A will definitely win), thus depriving them of the "blind box fun." For instance, chess is a game with a strong decision-making depth and complexity, so although the first player has a 2-5% advantage in winning, this slight advantage is not enough to tip the balance of the game. Besides affecting expected outcomes, a rich and diverse development and collection system can extend players' enjoyment of competition from combat to pre-battle preparation, making pre-battle preparation an important part of gameplay.

Note: Zermelo's theorem states that in any transparent, deterministic, finite two-player game, one player will have a strategy that guarantees they will not lose.

Gameplay

The team has decided to make Illuvium free for players, attempting to make the play-to-earn journey easier. Kieran (the founder) explained that while "grinding" from scratch to build a strong team is not an easy task, it is certainly achievable—this requires relatively more game time, stronger strategies, and perhaps a bit of luck. Players who grind (a term in the gaming community for spending a lot of time) and those who spend money need to find an appropriate balance to avoid putting non-paying players at a significant disadvantage, which might deter them from the game.

Open world environment found in Illuvium

The game will launch on PC, meaning players need to have computer hardware worth over $700. Despite the upfront costs, we predict that a variety of players will emerge, each able to play and earn in different ways.

Editor's Note:

Unlike most projects that use a presale system as a participation threshold, Illuvium's game will be freely accessible for players to experience. They may have a longer-term vision and a broader perspective, rather than focusing on making quick money.

The main game does not pursue the common mobile game release, which, while limiting user growth to some extent, may also reflect the team's consideration of ensuring the quality of the main game's graphics and gameplay experience. However, to be honest, achieving the game's quality on mobile is quite challenging, and the project may also be constrained by technical capabilities. The official team has stated they will accelerate the development of the mobile version.

Collectors

These are players who roam the earth, exploring new areas, searching for rare monsters, and expanding their collection list. They can help and educate new players through tweets and YouTube videos, entertain fans through live streams to earn income, and make money by selling items on illuvidex.

Fighters

These are players who have spent a lot of time competing in ranked matches to build strong attribute teams. Achieving success in the arena is beneficial for upgrading teams, and they can also amplify their earnings by betting on themselves in the Leviathan Arena.

Merchants

Merchants spend time honing and upgrading items in the game, then sell their items on exchanges to those willing to pay a premium for quick upgrades.

Landowners

The team has developed a new side-based land mini-game where players can mine resources for the main Illuvium game. Landowners will be able to sell their assets to players looking to upgrade their shards or other elements. We will introduce this mini-game in the following sections.

Each player's gameplay varies, and the competition for benefits will ultimately reach a Nash equilibrium—wealth-effect methods will attract more players until they align with other options.

Land-based Mini-game Zero

The Illuvium Improvement Proposal (IIP) has just passed, indicating that a land-based mini-game will launch alongside the main game, named Zero. The idea is to create a city-building game, with resources including land ownership and mining. Resources generated in Zero can be used interchangeably in the main game, such as for upgrading shards.

Kieran stated in a recent interview that part of the resources needed to upgrade equipment comes from random drops in the game, while another part comes from resources provided by landowners—this means monetization of landowner activities. Zero is set to launch on mobile, further lowering the entry barrier for players.

The editor adds and refines the mechanics of Zero:

Free land will not generate resources that can interact with the main game. Paid land will generate resources that can interact with the main game. A total of 100,000 paid lands will be available, with the first land sale consisting of 20,000 blocks sold via a Dutch auction.

This adds a whole new dimension to the Illuvium universe while also increasing the difficulty for the team in development. The release date has been postponed several times, currently scheduled for the first quarter of 2022. While it seems that this has not dampened investors' enthusiasm for $ILV (similar to Sandbox, which has seen delays in game releases), if the team fails to deliver for an extended period, execution issues will eventually surface.

Zero game scene

Editor's Note:

The value of side games lies in enriching players' emotional experiences through scene design or colorful side stories outside the main storyline. Real-world games like Final Fantasy and The Witcher series have utilized this technique. I once saw a netizen describe that as a player, he often remembers side quests unrelated to the main storyline, such as finding lost animals, delivering medicine, retrieving underwear from a bedroom, or feeding little mice daily…

The gameplay within Illuvium Zero provides a way to acquire scarce resources for the main storyline, while this land-based mini-game may serve as a relaxation spot for players, acting as a regulator for the main storyline and fulfilling players' additional emotional needs. The launch of the side game makes me feel the sincerity of the project team in making games. The exquisite design of side quests is rare, and I am very much looking forward to it.

5. IMX Solution

The development team believes that Ethereum's high transaction costs, throughput limitations, and complexity are major obstacles to the operation of NFT games. Therefore, they chose to use Immutable X's L2 solution (Immutable X is also an Australian project, and both Kieran and Aaron are based in Sydney) to overcome the limitations of the Ethereum main chain, which offers the following benefits:

1. Your NFTs are secured at the same security level as the Ethereum main chain, which is not seen in alternative scaling solutions like Matic and xDai.

2. Transactions are instant, and returning to the Ethereum main chain is trustless and verifiable.

3. Unlike other solutions, you do not need to hold a unique L2 token to buy, sell, send, or receive NFTs.

4. Thanks to off-chain minting, you can obtain more interesting and attractive game mechanics and designs from Illuvium.

5. With the help of partners developing new technology Cairo at StarkWare, Immutable X will soon provide Turing-complete general computing.

In their collaboration, Immutable X charges a 1% fee from market transactions (from sellers), and an additional 5% will go into the ILV treasury.

The scalability of Layer 2 transactions will facilitate the growth of the game, but it also brings new challenges. When Axie transitioned to Ronin, the number of players surged due to lower costs, leading to a massive demand shift to server infrastructure. The Illuvium team has considered this and chosen a "serverless architecture" as a solution, meaning Illuvium does not have to build and maintain servers itself. According to the developers, this setup is very suitable for automatic combat-style games and can scale the number of players to millions. Another unique advantage of this setup is that players are not regionally divided; typically, games restrict players to geographical areas like Europe or North America, whereas Illuvium players will come from all over the world. Of course, this serverless architecture will increase reliance on AWS.

Editor's Note:

Serverless architecture refers to backend hosting on top-tier Infrastructure as a Service (IaaS) and Platform as a Service (PaaS) providers like Amazon Web Services (AWS). Its core backend services are built using a serverless model with AWS Lambda to provide effective infinite scalability and cost-effective solutions. Behind the scenes, it fully utilizes AWS monitoring and security services, including CloudWatch, GuardDuty, Inspector, Detective, and Security Hub. Compared to games with self-built server infrastructures, the downside of this architecture is the strong dependency on AWS.

6. Token Design and Value Capture

ETH is the main currency within the game. ETH used for in-game purchases and trades (armor, revivals, shard upgrades, etc.) will be sent to the Illuvium Vault, used to purchase ILV, and distributed to stakers. sILV is a token that can be earned through staking ILV and can be used to pay for any fees except for illuviDEX transactions and Leviathan Arena bets.

Vault revenue streams come from two categories: in-game purchase item fees and illuviDEX transaction fees.

illuviDEX

Every sale on illuviDEX generates transaction fees and betting fees, with an initial rate of 5% of the total transaction value. As mentioned above, the Immutable X platform (IMX) charges a small fee for all transactions on its network to cover its gas fees (1%).

Coming to your area, illuviDEX…

Value Capture and Use Cases of $ILV

The Vault contract will periodically and automatically use fee income (in ETH) to purchase an equivalent amount of $ILV from the $ILV/ETH Uniswap V3 pool, and $ILV will be proportionally distributed to staked token holders. This process is very similar to what is used on the WAX chain—using a proprietary chain for activities, but accumulating economic value back to Ethereum Layer 1. Illuvium builds gameplay and markets on Immutable X to generate value, then bridges that value back to Ethereum and distributes it to the staking pool.

To incentivize stakers to hold tokens for a longer period, the game has designed lock-up periods of varying lengths, with the longest being 12 months. Those who choose to lock their tokens will increase their mining pool weight as a reward for their confidence in the tokens. The weight of staked tokens is double that of unstaked tokens, and this weight affects mining rewards and treasury distributions, with reward releases being linear.

Holding $ILV not only allows for additional earnings but also participation in community governance, which will be detailed below.

Output and Use Cases of $sILV

$ILV rewards earned through staking mining are held in the treasury and saved for 12 months. During this period, players cannot withdraw from the protocol. However, stakers can forfeit these rewards and withdraw an equivalent amount of $sILV (valued at $ILV) that is minted and transferred to IMX. $sILV serves as in-game currency, and holders can effectively spend it in the game within 12 months.

It is worth noting that the process of claiming sILV rewards consumes an equivalent amount of ILV. The consumed ILV will be used to purchase fuel, which is consumed in the game, effectively reducing the supply of ILV.

We will find that in this economic model, 100% of the revenue is returned to players, reflecting the team's "DAO first" philosophy. The main allocations include 40% of the supply reserved for staking rewards, 30% for token holders, and 10% for in-game rewards (mainly tournaments).

Editor's Note:

This is the staking data as of December 8, 2021 (sourced from the official website):

The current total staked amount of ILV (including the value of ETH in trading pairs) has reached 1.826 billion.

7. DAO Governance Structure and Committee

Although Illuvium is young, its governance model is very advanced. The team and community have learned from Synthetix DAO (a highly regarded and well-functioning DeFi project) and proposed the following methods to avoid common pain points of centralized organizations.

1. ILV holders vote based on their token weight to nominate the illuvinati committee.

2. Committee members represent the community in voting on proposals.

3. After a period of voting results, council members will vote again. This entire process is overseen by eDAO.

Let’s take a closer look at the meanings of the terms.

Committee

The illuvinati committee is composed of nominees elected by $ILV token holders through voting. This design ensures that committee members have a certain level of expression, debate ability, and community influence, but subsequent voting will not grant them excessive voting weight due to holding large amounts of ILV.

In the process of electing council members, $ILV holders can nominate individuals for council seats and delegate their votes to the nominees. Council member candidates must be listed by the election deadline, followed by a formal voting period lasting 72 hours, ultimately selecting five suitable candidates. Afterward, eDAO will compile a list of all proposed members and candidates.

Quadratic Voting (QV)

QV is used to reduce the voting weight of large $ILV holders, thereby minimizing the risk of oligarchic control. As a method of balancing governance, it is used throughout the crypto world, with good application cases such as Gitcoin's second funding rounds decision-making. Vitalik discussed the pros and cons of this method with QV co-creator Glen Weyl in a blog post in 2018.

The Illuvium Discord community has already discussed the potential risks of this model, and overall, the community has no objections and is satisfied with it. In the future, a group of strong leaders may emerge from the committee.

eDAO

This group consists of core contributors and administrators, aiming to maintain healthy and rapid community governance. Their work includes fully understanding community governance content, executing backend tasks such as distributing council NFTs or executing snapshot matters, etc. eDAO also has a special power to veto any content passed as a proposal, even if it is approved by the illuvinati committee. Therefore, when the committee makes decisions that are detrimental to project development, eDAO can protect Illuvium from harm.

Editor's Note:

In the current collapse of gold farming games, the trust between players and project parties is very fragile—most blockchain games are tokenized versions of traditional games, meaning their game mechanics can be modified by the project party and are not disclosed. If players suspect modifications to game mechanics (detrimental to players) or actions by the project party to dump and crash the market, they are likely to flee en masse.

Illuvium's DAO governance mechanism well protects this trust. The measure of having token holders nominate five committee members based on their token weight reduces the probability of whale holders acting maliciously for their own interests. The layered voting elections, supported by eDAO's oversight system, lay a solid foundation for creating a good community environment, potentially allowing users to accompany the project's growth in the long term. It resembles the deliberative system commonly used in national governance—leveraging the collective wisdom of multiple committee members to compensate for individual capability shortcomings, ensuring decision quality. All of this provides players with a strong reassurance, fostering deeper trust and connections between players and the team, allowing for a more immersive experience of the fun the game brings. We can see the project's respect for investors and players, as well as its reverence for the spirit of blockchain.

8. Conclusion

We can see Illuvium's ambition—intending to become a AAA-quality RPG concept game, with the entire game built on blockchain and utilizing a DAO governance model, among other high-difficulty designs. Most projects would feel burdened trying to achieve any one of these. However, the market seems to believe that this project can succeed, a belief reflected in the token price, which, at the time of writing, has a fully diluted valuation of $4.2 billion. During the previous NFT hype wave, Illuvium's NFTs attracted the attention of at least 89,000 people even before their release.

The game itself, like the governance model, is full of creativity and ideas. Illuvium targets different player preferences, attracting them to experience the game and generating many new ways to earn money. Illuvium players can play, create, and spread value without needing a large upfront investment, and the paths available to players are rich and engaging. Members of the blockchain gaming alliance have stated that Illuvium gives players the feeling of actively and positively earning money, rather than passively grinding for rewards. We look forward to Illuvium's future.

The project's ambition and the richness of its activity design inevitably raise questions about its execution capability. The project team has postponed the release date several times, but like Sandbox, the delay in the game's launch does not seem to dampen the community's enthusiasm. In terms of community governance, they have borrowed from Synthetix's design to mitigate risks, but it is by no means perfect, so we hope to see continuous iterations of its DAO governance mechanism in the future. We believe one of the biggest risks currently is that the initial PC release fails to attract attention as expected. Given the appeal of mobile game elements in other NFT games (especially Axie Infinity), PC games may miss the opportunity to scale from the start. Of course, its side game Illuvium: Zero will be released on mobile devices.

Official Twitter of the project team

Interestingly, the team seems more confident than ever, recently announcing a further two-year lock-up for core member tokens. We will closely monitor the project's development over the next six months, looking forward to it becoming a "Speedrun" on the blockchain.

Editor's Note:

Speedrun refers to a gameplay style where players communicate and continuously challenge each other with the goal of completing the game as quickly as possible, which is very popular among players in traditional games. The speedrun culture is fascinating; it is a way for players to challenge themselves—after mastering the game, they add various difficulties to themselves. Players do not compete against each other for speed but strive to break certain limits—they may spend dozens or even hundreds of hours refining game mechanics just to shorten their completion time by a few seconds. Many speedrunning methods invented by players are even beyond what the game designers themselves could imagine, making speedrunning an attractive gameplay style for truly passionate gamers.

I hope Illuvium becomes a "Speedrun" on the blockchain, perhaps hoping that the game will have a "speedrun culture," attracting a group of users who love the game itself and becoming a classic that players never tire of in the blockchain.

9. Supplementary Materials

Team and Investors

The Illuvium team consists of seasoned professionals from various fields.

Founder Kieran Warwick previously worked at Blueshyft, possessing rich financial knowledge and experience, with independent thinking on business logic. He helped The Burger Collective acquire 20,000 online users monthly and established partnerships with global companies like DoorDash.

Co-founder and game designer Aaron Warwick is a fervent pursuer of the significance of scientific knowledge and technological philosophy, obsessed with building and programming games. He also has a background in sports and business, managing multi-million dollar retail franchises.

Additionally, the team includes Business Head Danny, Game Producer Nate Wells, Chief Technology Officer Basil Gorin, Chief Server Engineer John Avery, Chief Concept Artist Rogier van de Beek, Chief Modeler Aleksandr, Chief Animator Alexandre Belbari, Marketing Manager Marcel Reyes, and Chief Environment Artist Dmitriy Ten.

We feel the completeness and professionalism of the talent configuration in this team. Investment is about investing in people; a compelling story can attract talent, and the synergy of talent can achieve a great project. Whether from the game's concept and style, token economic model, or DAO governance structure design, we can sense the team's dedication and attention to detail. They do not overly promote the material benefits they will return to users in the future; on the contrary, we can see that many current blockchain games are still relatively restless, born with terms like "gold farming output" and "return cycle." Illuvium envisions a future where users spontaneously form a market economy in this world, where each user has their own value creation and livelihood paths, helping others in the game while achieving themselves. The team's style seems to be pragmatic, unpretentious, and slightly perfectionistic and ambitious, making it hard not to look forward to an artwork from such a team.

Funding sources behind Illuvium include

Institutional Investors—

● IOSG Ventures

● LD Capital

● YBB Foundation

● Delphi Digital

● Stake Capital

● Moonwhale Ventures

● Lotus Capital

● BlockSync

● Yield Guild Games

● Bitscale

Individual Investors—

● Richard Ma - CEO of Quantstamp

● Kain Warwick - Founder of Synthetix

● Stani Kulechov - Founder of Aave

● Anton Bukov - Founder of 1Inch DEX

● Tyler Ward - Founder of Barnbridge

● Santiago Santos - Partner at ParaFi

● Dansih Chowdry - CEO of Bitcoin.com

● Jason Choi - Spartan Capital/Brockcrunch

● Sebastien Borget - Founder of SandBox

● Kevin Lu - Developer at Band Protocol