Introduction
Before you read: In this article we refer to concepts such as on-chain domains and levels. Dig deeper on those concepts here. Furthermore, LE7EL offers tools such as Unreal Engine SDK for developing games, and Creator tools to grow game communities. This article covers only the LE7EL network and protocol.
The LE7EL network is an ever-expanding network of interconnected user-curated games and experiences owned by their Creators and/or Player communities, run on public infrastructure and maintained by independent node Operators. Technically, it consists of three parts that the network stakeholders can use to achieve their goals: protocol, game clients, and tools. Our end goal for LE7EL is a cohesive, user-owned network of games operated on a public infrastructure, supplied by anyone in a permissionless way using the LE7EL protocol. The protocol sets out to be fair, transparent, secure, scalable and consensus-driven.
Games are available from the LE7EL game client (“XR app”), trusted by our community, or alternative apps provided as white labels and maintained by game developers, clans, and other interested parties. Regardless of how a game is accessed, all content published on LE7EL is available everywhere as long as Creators don’t make it exclusive to a specific app.
The goals of the LE7EL network are the following:
- Make game creation more accessible for non-professionals such as gamers;
- Maximize the creative potential of professional game developers;
- Streamline user onboarding by providing interoperability and optional interconnection between different games;
- Mitigate excessive value extraction by game publishing platforms;
- Reduce maintenance expenses for all network participants;
- Balance the interests of all main stakeholders and ensure a fair value distribution between them.
LE7EL uses its $L7L token to incentivize and distribute value fairly between users that produce value in the network, ultimately ensuring:
- Optimization of network value
- No value extraction
- Cost reduction by transforming all users into contributors
- No collection of private data
- Higher user engagement through co-ownership
Let’s take a look at the economics of the $L7L token. “Tokenomics” can be defined as the economics of a token-based system. It encompasses the design, distribution, and use of tokens and how these factors affect the token’s value and helps the project achieve its goals. Key factors that can affect tokenomics are supply, demand, and utility.
Stakeholders
The main stakeholders of the LE7EL network are Players, Creators, Contributors and Operators.
Players are having fun playing games and are the main beneficiaries of LE7EL. All other participants are providing them the means for having that fun. Players are also the ultimate source of income for all other stakeholders.
Creators provide content for LE7EL by building and publishing games and fun experiences. Anyone can be a Creator, using our world-building in-game tooling to customize existing game templates or create games and templates from scratch using our Unreal Engine SDK.
Contributors develop the tools that Creators need to produce content such as Unreal Engine SDK for developing games, and tools to grow game communities. The only Contributor for now is LE7EL Labs, but long term we plan to open up for others.
Operators provide the server infrastructure that powers gameplay. Same as for Contributors — the only Operator for now is LE7EL Labs — but we plan to gradually decentralize this part to reduce maintenance expenses, starting with multiplayer servers and expanding it to coordination infrastructure as the technology matures.
Economy
Let’s study the economy between those stakeholders.
Creators have different ways to monetize their games, with the primary way being direct sales of game passes, in-game items or digital assets. Players have the option to buy these items using a credit card or $L7L. LE7EL offers in-app purchases charging 20% of all such transactions if it’s done with fiat using a credit card, including 2–3 % card processing fees and 5 % Epic Games license fees. If the purchase is done using $L7L, the LE7EL network charges only 10 %, where 5 % is deployed into the rewards pools (explained in detail under “Network incentives” below), and 5 % is converted to fiat and spent to cover license fees. Creators can also use $L7L to buy and sell native ads in form of in-game portals that send and receive Player traffic between their games.
All prices are in US dollars and can be paid with $L7L at the current market rate. $L7L comes in two forms: tokens and points. Tokens are stored in the Player’s digital wallet and are fully controlled by the Player. Points can be converted to tokens but can also be used for purchases as-is.
LE7EL allows Creators to convert their games into on-chain domains. An on-chain domain is the equivalent of an ownership title for a game and can be sold, lent, rented, divided, or even transferred to a community using DAO ownership and tokenization. When doing such a conversion, the game Creator legally transfers all the intellectual property for the game to the holder of the domain- usually the Creator himself. Holders of such domains pay a fixed yearly fee as a lease to the LE7EL network. Such a conversion is optional, but required to start receiving $L7L rewards.
Players can convert their avatars to on-chain domains as well, enjoying being able to sell, lend, and rent their avatars. Other than obvious monetary benefits, it offers significant flexibility. Retired Players can gift or sell their avatars to their guild, or multiple Players can develop the same avatar in a secure manner. Domain holders pay a fixed yearly fee as a lease to the LE7EL network — and it’s required to start receiving $L7L rewards.
Contributors develop and market the tools that the network utilizes to produce value, and receives $L7L rewards in return that are spent to cover development costs. Contributors need to bond a certain amount of $L7L to stay whitelisted as a Contributor, as well as mint an on-chain domain and pay a fixed yearly fee as a lease to the LE7EL network to start receiving rewards.
Operators participate in this economy indirectly by providing server infrastructure to Players and Creators, bearing the ongoing cost of network maintenance. While we start with a single Operator, decentralizing this part of the LE7EL network is crucial to keep the costs minimal compared to maintaining corporate data centers across the globe or using cloud providers. Rewards are distributed pro-rata based on Operator hardware utilization by Players and Creators, with 10% of the reward amount allocated for participation, regardless of usage, if the minimum performance and uptime threshold is honored. Operators can bond $L7L to increase the chance of hardware utilization when the network load is small, with a minimum bond of a certain amount of $L7L being mandatory for all Operators to prevent fraud. To receive rewards Operators also need to mint an on-chain domain and pay a fixed yearly fee as a lease to the LE7EL network.
The on-chain domains embody a concept called “levels” which essentially is the domain owner’s on-chain reputation, based on tracked or performed on-chain actions that are considered valuable by the network, such as transactional volume or hardware utilization. These levels are ultimately utilized for distributing rewards fairly among all network participants, and they all base themselves on metrics that the network has reached consensus on.
While LE7EL commits to being chain-agnostic, the LE7EL network may eventually add its chain layer with $L7L as a gas coin and proof of stake consensus to ensure its security. That would simplify onboarding, as most Players and Creators will own $L7L one way or another, and Web3-powered games are ever-hungry for more cheap block space to store their transaction data.
Network incentives
$L7L earned from domain lease fees, the 5 % network fee on in-app purchases, and a 5 % yearly $L7L network inflation, will continuously pour into four reward pools split evenly between Players, Contributors, Creators, and Operators.
These stakeholders will get their share of rewards pro-rata based on their domain level.
These core principles will apply to future sources of transactional income as well. For instance, if LE7EL launches a secondary marketplace for digital assets or its own chain, trading commissions and gas fees will pour $L7L back into the reward pools.
Liquidity
For a payment medium to be efficient, liquidity is important. To ensure sufficient liquidity, half of the lease fees from avatar and XR domains will early on be deployed into a liquidity pool on decentralized exchanges (DEXes).
Supply, demand, and utility
To summarize, the main demand side of $L7L is driven by the following factors:
- Players spend $L7L to pay for game passes or in-game items;
- Creators spend $L7L to pay for portals placed in other games to attract traffic to their game;
- Contributors bond $L7L to stay whitelisted as a contributor;
- Operators bond $L7L to run network infrastructure;
- Network buys $L7L with lease fees to fund reward pool.
The supply side of $L7L is based on the following:
- Creators get rewards for making games and charging players for in-game items in $L7L;
- Players get rewards for playing games and spending $L7L for in-game items;
- Contributors get rewards for making software and business development contributions;
- Operators get rewards for running network infrastructure.
The core utility of $L7L is being a payment medium that distributes value among the core stakeholders of the LE7EL network. Eventually, it may also become a gas coin for the LE7EL chain, reducing or eliminating the need for network inflation.
Governance
LE7EL Labs is early on the governing entity for the network. When the network is ready for decentralized governance, LE7EL will likely avoid classic token voting, using a four-chamber parliament instead. Stakeholders vote with their domains — the higher the level of their domain, the more impactful their vote will be. The proposal requires approval from at least three chambers to be binding.
The goal is to use formal governance only to tune the network's economic parameters and align the whole LE7EL community on its vision and strategy.
Join the LE7EL network?
If you have any questions or input, or looking to join the network as a Player, Creator, Contributor or Operator, please reach out to us in our Discord server: https://discord.gg/HGZaSyJqbs
Thanks for reading this article about LE7EL tokenomics and stay tuned for official network launch!
— The LE7EL team
