Folius Ventures: Several Reasons to Be Bullish on GMT After the Launch of the Chain Game Gas Hero

Original Author: MapleLeafCap, Founder of Folius Ventures

Original Compilation: Felix, PANews

On January 3, the public beta version of the Web3 game Gas Hero, developed by the Stepn team Find Satoshi Lab (FSL), was officially launched. The game uses Stepn's GMT as its token and provides its own market and player voting opportunities for decentralized decision-making within the game. Since the game's launch, the GMT token has surged, reaching a peak of about $0.444. MapleLeafCap, founder of Folius Ventures, published an article interpreting how Gas Hero incentivizes the continuous rise of the GMT token. Below is the full content:

Note: Folius Ventures holds a large amount of GMT tokens, and the founder is an advisor to FSL.

Gas Hero (GH) has been live for 4-5 days now, and I can confidently publish this article because the reality aligns with my model—GMT is reversing its historically poor issuance status (with daily sell pressure reaching 1-1.5 million GMT). In the future, for every additional 10,000 DAU (daily active users) in Gas Hero, 1-1.5 million GMT will be locked daily at the current price. If Gas Hero can grow towards 100,000+ users and maintain the current asset price, the FSL ecosystem could achieve a daily lock-up of 15 million GMT, recreating the boom seen from March to May 2022. With the market placing high hopes on this new game, I believe the GMT token could return to the top 25-75 of the crypto market cap rankings within 2-3 months, with a short-term target of $1 (which would be three times the current price).

Current GMT Sell Pressure Status

Before the launch of Gas Hero, we estimated the monthly issuance of GMT to be about 115 million, decreasing to about 109 million per month starting in December; of which one-third is allocated to investors and advisors, one-third to the team and Treasury, and one-third to M2E rewards. The team does not sell, the issuance from advisors is small, and the Treasury's issuance is controllable. Therefore, the largest selling pressure mainly comes from M2E (assuming 80% of 1 million/day is sold, but about half of that is destroyed internally by Stepn, so the actual net sale is about 300,000/day) and investor sales.

Before October 23, about 75% of GMT was sold when private investors acquired it. If we include advisor sales, nearly 1-1.1 million GMT was sold daily.

Thus, since March 2023, the daily sell pressure has been about 1.5-1.6 million, nearly $500,000. No wonder the GMT ratio has declined when calculated against USD and BTC/ETH.

However, recent events have had a significant impact on the GMT/Beta ratio:

Since the start of the mini bull market in October, the selling pace of investors has slowed, with the sell rate dropping from 75% to about 40%. Therefore, daily sales have decreased from 1.6 million to 1.1 million. With increased liquidity of alternatives, this has had a direct positive impact on the ratio.

Additionally, around December 1, 20 million GMT was transferred from FTX to Wintermute; all of this was completed before December 15. This move added about 1 million/day of sell pressure. During this period, the ratio was significantly suppressed, and after the transfer from FTX was completed, the ratio began to recover.

If we assume that in the coming months, only 40% of the investor share is sold, we expect about 1 million GMT to be sold daily, but here we assume a daily sale of 1-1.5 million GMT.

Everything changed when FSL launched the Gas Hero game on January 3, 2024.

How Does Gas Hero Work?

In short, players in the game need to purchase BCV trucks + heroes to start mining resources (the mined resources are NFTs, not tokens). Heroes can carry weapons and pets (buff attributes), all of which need to be soul-bound to enter combat (cannot be resold after binding), and will die after 20-60 days of use (except for the genesis heroes, by the way, there are only 2084 of them). All resources can be traded in the game market. There are three ways to acquire resources: farming (in combat), bidding auctions (essentially purchasing from the system), and buying in the market (essentially purchasing P2P from other players).

GMT will be used as the base currency for key functions (breeding, upgrading, etc.) and for pricing transactions (market, auctions, prize pools). Importantly, 50% of the GMT used for functional purposes will be burned (the rest belongs to FSL), 2% of market royalties go to FSL, and 50% of auction proceeds are split equally between FSL and burning. This in-game tax, along with the initial cycle prize pool supply, should drive large-scale locking of GMT shortly after the game's release.

Typical low-end players play the game to achieve ROI (i.e., recover heroes and put resources into the market), while big players mainly compete for the prize pool—the rewards will be distributed to PVP winners or regional officials. To win in PVP battles, players need to spend a lot of money to equip their hero lineup, and to become officials, they need to use similar hero lineups in smaller regions, but in larger regions, they require increasing donations/voting elections. The prize pool = the tax base of the Gas Hero ecosystem (i.e., taxes from the market and auction house)—importantly, there will be no additional GMT inflation in Gas Hero; the game only conducts net destruction.

The clever economic design should yield immediate results. In the short term, the influx of new users + reinvestment from existing users guarantees ROI; but over time, the spending of big players aiming to win the prize pool = demand for purchasing resources = ROI for small players. In the competition for the prize pool, many frequently failing players effectively turn sunk costs into "consumption" that pays everyone's ROI. The key to Gas Hero's success lies in:

• (a) Accumulating a substantial prize pool, expected to reach millions of dollars
• (b) Continuously attracting (new) whale players who consume and compete

To some extent, Gas Hero has indeed become a game with 100,000-1,000,000 DAU (all players share the same global state + the inherent social nature of Gas Hero), with a triple satisfaction of global recognition (fame), control over one's faction (power), and considerable monetary rewards (wealth), which should bring a massive dopamine rush, surpassing anything seen in previous SLG games.

Its positive flywheel works like this: initial FOMO (current stage) -> more new users and reinvestment -> more transactions and taxes -> larger prize pool -> more PVP and donation investment competition + more attention to the game -> more new users and reinvestment (repeating cycle).

Moreover, the existence of asset lifespan + old players choosing to restart the economic cycle will continuously destroy excess capacity. Assuming user attention and wallet share remain relatively stable, the excess of assets + declining ROI can be resolved over time (oversupply -> declining ROI and prices -> heroes die -> NFT output decreases -> if demand remains unchanged, prices will rise). A new season means rule adjustments, which bring new hope and incentives for player reinvestment.

As Gas Hero quickly reaches 10,000 users (currently 65,000) + internal testing data + current price (all of which can be observed on Mooar), I believe the rewards for becoming a global champion could easily reach $200,000-$400,000, meaning 500,000 GMT could be burned daily + 1 million GMT locked by FSL daily. This amounts to about 1.5 million GMT not entering circulation each day. Currently, Dune data analysis supports our estimates. The first batch of supplies obtained from the prize pool will take at least 14 days to enter the market, after which the meta-game (PVP + ordinary heroes dying on the 20th day) should lead to more destruction.

Future Predictions

Therefore, the supply-demand situation for GMT will shift from daily sell pressure of 1-1.5 million to net "deflation." As Gas Hero accumulates more users, this apparent shift will only accelerate. If a boom similar to the one from March to early May 2022 occurs, the destruction of GMT is expected to be even faster. Gaining more users in Gas Hero = more destruction = GMT rising = more attention = Gas Hero gaining more users. An additional benefit is that even Stepn + Mooar may accumulate more DAU in the process and increase the amount of GMT destruction.

I believe Western crypto funds are severely under-allocated to GMT. In any so-called "game beta" posts I've read on CT, there is no GMT. From conversations with most private investors in Stepn, none of them are spending time paying attention to GMT anymore, and some even don't know what Gas Hero is. Such projects that are still unfamiliar to Western players, driven by DPI, and in "automatic sell-off" mode are rare. Once Gas Hero captures the attention of Western players, the flywheel is expected to spin faster.

When Gas Hero reaches 50,000 DAU + the GMT price is high enough, the maximum prize pool will reach millions of dollars, and that's when the story starts to get interesting. No SLG game in the Web2 world has encountered such a situation (besides game companies, no one really makes money from SLG games). If the FSL team markets this well, the game is expected to gain tremendous traction from the traditional Web2 SLG community and become the first hot Web3 game in 2024.

The current price of GMT is $0.35, with a circulation of about 1.6 billion, but the market cap of GMT is actually 1/6 of IMX and less than 1/2 of AXS/SAND/MANA/BEAM. GMT has not gained much attention from the public beta, but it will catch up in the future (in my view, this is the best game public beta in Asia today, and we have closely collaborated with FSL on several other game/app investments in the region). The launch of Gas Hero provides the narrative and fundamentals for this catch-up (perhaps a bit fast)—Westerners recognize this story (just as Chinese people love SOL, or Westerners love Ordinals).

Related Reading: A Comprehensive Interpretation of the Game Mechanism of StepN Development Team's New Chain Game Gas Hero