Illuvium: Betting On The Nerds

Because I am a learned man of the law, I typically stick to legal topics on this blog. But I have been invested in an upcoming NFT game called Illuvium for a while now, and thought it would be a good change of pace to give some background on the game, insight on how you can get involved (if you aren’t already), and the reason I am so bullish on it succeeding long term.

What Is Illuvium?

Illuvium is an NFT based, part open-world role-playing game (“RPG”), part multiplayer online battle arena (“MOBA”), game where players will be able to explore various landscapes and battle other players online for cryptocurrency (AKA, play-to-earn model). Think NFT Pokémon. Similar to other play-to-earn NFT games like Axie Infinity and Zed Run, the players actually own their in-game assets, and these assets can be sold for digital currency such as ETH.

What sets Illuvium apart is its AAA quality game development and its unique digital currency mechanics. Check out the cinematic trailer and you can immediately tell this game is going to reach a level of quality and dynamic gameplay which we have come to expect in the gaming industry and which is currently missing from the NFT landscape. Additionally, Illuvium will be completely free to play. While a person will likely need to buy certain assets to get the most enjoyment from the game, individuals will be able to play the basic game for free and could, theoretically, grind their way to the highest levels of the game through gameplay and trading of earned assets alone.

From what we know about the gameplay, players are going to be able to explore an open world to complete missions and gather items needed to battle other players. The battles will be an autobattler set-up, meaning players will be able to choose their characters they wish to fight, arrange them on the field like chess pieces, and once both players have set their pieces, the game automates the battle based on the characters selected, and weapons/placements used by the owner. The gameplay trailer is set to be released this week, so we should know more then on exactly what gameplay will look like.

Currently, the full Illivum game is set to be released in the first quarter of 2022, but a major aspect of the game, called Illuvium Zero is set to be released this December on both mobile and PC.

What Is Illuvium Zero?

Illuvium Zero is the land ownership aspect of the game, which is what I am most excited about from an investment standpoint. If Illuvium is Pokémon, think of Illuvium Zero as Farmville. In Illuvium Zero, players can own land within the game and use that land to collect assets which all players will need to forge weapons and characters to be used in the main Illuvium game. Some aspects of this will be automated and run in the background even when not playing, and some will require actual attention.

In December, shortly before Illuvium Zero is released, people will be able to purchase this land using ETH or $sILV (one of the two Illuvium tokens to be discussed later) in a dutch auction styled drop. We know there will be 100,000 total plots ranging from T1 (most common/least valuable/least productive for in-game assets) to T5 (most valuable/most rare/produce best and most in-game assets). There will also be T0 land, which will be free to own/use, but which will be much harder to gather assets from and will generally produce less valuable assets than T1-5 land. There is currently no information on how many of the 100,000 total plots will be offered for sale as a part of this initial drop.

If you would like to read the full 18 page description of the early vision for how Illuvium Zero would work (which has changed since it was released in July but is largely similar to the current understanding of game mechanics) you can read it on their discord here. I also found this video and this video helpful in understanding how Illuvium Zero will work and the benefits of owning land before the game is released. Ownership of land (along with ownership of $ILV) is how the real money is to be made from the game.

What is $ILV and $sILV?

In addition to earning money from playing the game itself (play-to-earn) and from owning land/selling assets from that land, you can also earn money using the game’s tokenomics system. $ILV is the game’s governance and ownership token. If Illivum is a company, $ILV is a share of that company. Eventually, when the game is fully developed, complete control of the game will be passed off to $ILV holders, which will elect leaders (like a board of directors) to make day-to-day decisions, collectively vote on major decisions, and get a share of the revenue from the game.

Currently, you can buy $ILV on many major crypto exchanges such as binance and sushiswap. You can also earn additional $ILV from “staking” your $ILV or staking a combination of $ILV + ETH. On the Illuvium website there is a staking section which provides the $ILV whitepaper along with a link to a helpful guide with everything you need to know about staking. If you decide to buy and stake $ILV, I highly suggest you watch this video first which gives you all the info you need to stake your $ILV and begin earning rewards.

After you stake your $ILV, you can chose to claim your rewards in $ILV (which has a one-year vesting period, over which time that reward earns you compound interest) or $sILV (which is immediately available without any vesting period). $sILV is what will be used to purchase the in-game currency to play and buy items in the Illuvium game. It can also be used to buy land in the upcoming Illuvium Zero drop. $sILV cannot currently be bought on exchanges; the only way to get it is from staking $ILV.

There are mechanics which go into the use of $sILV which results in the burning of $ILV supply, thereby increasing the rarity and value of $ILV, which seem to have the crypto -savvy nerds excited. However, cogently explaining those technical details is far beyond my lawyer skills, so join the Illuvium discord to learn more about the tokenomics mechanics. What I can tell you is that $ILV is up around 380% over the last three months, and that’s without any game or even a gameplay trailer out yet. I could very much see this continuing to rise the closer we get to the release of the game, at which point the price of the token will largely be dependant on the success and adoption rate of the game among the NFT and gaming community as a whole.

Why I Am Bullish On Illuvium

I first bought into $ILV about 2 months ago after very little research and began staking immediately. I figured, worst case scenario, I could cash out at any time and I could research the game more while I earned rewards in the form of $ILV or $sILV. The more I dug into the game and financial incentives, the more excited I got.

First, I am overall big into the NFT gaming space. I believe there will be an NFT market crash at some point, and the projects that will make it out the other side (when the real gains are made) will be NFTs which offer some form of utility and mass appeal. That is why my largest NFT related holdings are Zed Run horses, Rumble Kong League characters, and $ILV. Just as I can see Zed Run races being broadcast on TV and in Atari casinos someday (there is already a Zed race about to be broadcast as a part of the Melbourne Cup), I can see Illuvium being played by gamers worldwide and massive tournaments being played in stadiums similar to how League of Legends is played and shown now.

Second, gaming is a massive industry. Call of Duty Warzone, one of the more popular free-to-play games right now, brings in over $5 Million a day largely from in-game purchases. In Illuvium, players will make those same types of in-game purchases, but they will be buying those assets from other players rather than from the developer. Getting in early will allow you to buy land at a fraction of the cost, and create largely passive income from farming that land’s assets and selling those assets to other players once the game is released.

Additionally, due to the profit sharing and burning aspects of $ILV, ownership of $ILV alone will be profitable if the game is successful (which I believe it will be). Owning $ILV is the same in my mind as owning Activision or Nvidia stock. It is betting on the success of of gaming going forward. In the wake of a worldwide pandemic when people are more likely than ever to stay inside playing video games and interacting with friends online as opposed to in the real world, that is a bet I want to make.

Conclusion

I know this breakdown on a single NFT is a departure from my usual law insights, but frankly I was tired of explaining what Illuvium was to friends via text, and figured if I was going to do a full write-up, I might as well make it available to the masses as well. If you enjoyed this type of content, let me know and I will try to work more of it into my regularly scheduled law blogs.