Author | Frontier Lab

Xai is a decentralized gaming ecosystem focused on developing and publishing blockchain games and supporting their underlying infrastructure. Designed specifically for gaming, the blockchain aims to provide a simplified wallet and account experience for traditional gamers while providing developers with a convenient gaming blockchain solution. Xai has built a fully decentralized ecosystem dedicated to enabling innovation and development in the gaming industry.
 
Project Information

Team Strength

The Xai blockchain is initiated by several key entities, each with a different role.

Xai Foundation

The Xai Foundation is committed to promoting the development and innovation of the blockchain gaming ecosystem. The main responsibilities of the Xai Foundation include:

· Formulating strategic plans for blockchain networks, supporting blockchain games developed by Ex Populus, and ensuring network stability and security;

· Responsible for creating and distributing XAI tokens, overseeing token governance, and ensuring fair and transparent allocation;

· Focusing on community development and governance, cultivating a supportive and inclusive community, and enabling community participation in network governance to ensure collective involvement in major decisions.

Ex Populus

Ex Populus is a laboratory entity headquartered in the United States, focusing on research, development, and innovation in blockchain gaming. As a well-known game development studio, team members come from major companies such as Pixar, Ubisoft, Activision, Blizzard, and more. Ex Populus’ advantage lies in its leader, Tobias Batton, who is a top expert in the gaming industry. As CEO, Tobias Batton has extensive experience in digital products and marketing. Over the past 20 years, he has founded and successfully exited three companies.

· Before joining Ex Populus, Batton delivered nearly 1 billion app installations for top mobile game publishers through the loyalty and app-install platform released via Signal Zero.

· Leading IGN’s Indie Open House program, helping independent game developers publish their games.

· Designing and releasing multiple bestselling mobile and social games, with its game design framework “Variable Dopamine- Wavelength Mapping Theory” widely acclaimed.

Offchain Labs

Under the guidance of the Xai Foundation, Offchain Labs will be responsible for developing and serving the Xai blockchain. The Arbitrum blockchain created by Offchain Labs has become one of the most successful Ethereum Layer 2 solutions, enabling it to provide excellent technical support to Xai. At the same time, Offchain Labs has extensive track record of success and will provide ongoing marketing support for the Xai network and ecosystem, helping it continue to grow stronger.

Other Core Contributors

Currently, the main contributors include:

· Team Secret: Responsible for reviewing the games deployed on the Xai platform and deciding whether a game should go live.

· Thirdweb: Specializes in building custom account abstraction technology and payment systems tailored specifically for games and decentralized applications (dApps) deployed on the Xai platform.

· Paima Studios: Developing top-tier Web3 games for the Xai blockchain.

What makes the Xai project unique is that its growth is driven by several teams with extensive successful experience in their respective fields—an arrangement that is extremely rare in the blockchain industry. This provides strong assurance of the project’s success through its team strength, helping it stand out in the blockchain space.

Funding Strength

Xai has raised approximately USD 1 million through three rounds of financing. The price per XAI in each round was 0.01 USD, 0.032 USD, and 0.035 USD, respectively.

According to the list of institutional investors on Xai’s official website (xai.games), Xai has a strong lineup of institutional investors, including Animoca Brands, CMS Holdings LLC, Outlier Ventures, Fisher8 Capital, Asymmetric, and Akatsuki. Among them, Animoca Brands has the greatest influence. As a bellwether investor in the blockchain gaming sector, it has invested in 312 projects, with a primary focus on blockchain games, infrastructure, and decentralized finance.

The support Xai has attracted from these well-known investors indicates its substantial potential and appeal in the blockchain gaming industry.

Development Strength

According to the roadmap listed in the official Gitbook, its development plan mainly consists of the following three stages:



Based on the data shown in the chart, the Xai team demonstrates strong development capabilities, successfully completing all planned items in the roadmap on schedule. This indicates that Xai performs exceptionally well both in team capability and project execution.

Business Expansion Strength

Currently, the most impactful partnerships Xai has achieved in business expansion mainly include two:

· Team Secret: Team Secret is an esports club headquartered in Europe, with esports divisions such as (Dota 2), (League of Legends), (League of Legends: mobile), (VALORANT), (PlayerUnknown’s Battlegrounds), and others. Team Secret is responsible for reviewing the games deployed on the Xai platform and deciding whether a game should go live.

· 2024–3–20, Media Indie Exchange (MIX): A well-known trading platform in the independent game space. It mainly helps promote and market various games, so it has extensive connections in the gaming industry. The purpose of this collaboration is to help Xai procure a diverse range of independent games and enhance its publishing with blockchain technology.

Although these collaborations have some impact on Xai’s business expansion, it is currently not possible to clearly confirm that Xai possesses strong resources in this area. Therefore, its business expansion capability still needs further observation, which is also a key constraint on whether Xai can grow into a leading project in the Gamfi sector.

Project Information Analysis Conclusions

Overall analysis suggests that the XAI project is currently leading the industry in terms of team professional capabilities, funding strength, and technical development. This lays a solid foundation for its development in the Gmafi sector. However, the project’s business expansion capability has so far been insufficiently demonstrated. This capability has a decisive impact on whether the project can become an industry leader. Therefore, whether the Xai project will show substantial growth potential still requires ongoing attention to its business expansion capability.



Project Innovation

In the Gamefi space, from both the perspectives of players and developers, they face many issues in blockchain gaming.

Problems faced by players:

· Complexity of wallet operations: Blockchain games usually involve encrypted wallets and digital asset management, which can make the gaming experience more complicated and less friendly for ordinary players.

· Security and privacy: Players may be concerned about the security and privacy of digital assets, such as private key management and virtual currency storage, requiring additional security measures.

· Costs and barriers: Participating in blockchain games may require certain costs, such as purchasing cryptocurrencies and paying transaction fees.

· Game content and diversity: The blockchain gaming market is relatively new, so game content and diversity may be limited, leaving players with fewer choices.

Problems faced by game developers:

· Technical challenges: Developing blockchain games requires expertise in cryptography, smart contract development, and more, with a high technical barrier.

· Costs and funding: Developing blockchain games may require substantial investment in R&D, smart contract deployment, and marketing, leading to significant financial pressure.

To address the issues above, Xai has innovated in its technical solutions and operating model, allowing it to stand out in the current Gamfi landscape.

Innovation in the Solution

To address the problems faced by players and game developers in using blockchain technology, Xai adopts a “plug-in blockchain gaming backend + low-cost Gas chain” solution.

1、Gas fee reduction approach: To reduce Gas fees, Xai uses Anytrust technology on Arbitrum. This allows the use of DAC without submitting transaction data to the chain, resulting in a lower cost. In addition, XAI provides users with a subsidy for Gas fees, enabling users to pay the minimal Gas cost when using Xai.

2、Integrating wallets into the game backend (core competitiveness): Xai directly integrates cryptocurrency wallets into the game’s backend. This is XAI’s core competitive advantage in the Gamfi field, bringing significant convenience to both players and game developers:

3、For players: It helps Gamefi users manage their wallets so they can easily trade items without frequently operating the wallet, significantly improving users’ gaming experience and playability.

4、For game developers: This design also saves developers the tedious work and development costs of building a separate wallet integration system, while freeing up a large amount of development time.

Innovation in the Operating Model

To solve the limited issue of blockchain game content and diversity, Xai adopts a strategy of “in-house development + acquiring Web2 games.” At the same time, to ensure the quality of games before launch, Xai works with Team Secret so that professional esports players review the games’ playability, ensuring the quality of the games that go live.

The core operational philosophy of the Xai project is “continuously expanding the team composition, with professional domains handled by professional teams.” Compared with traditional blockchain startup teams, Xai organizes its team with clear division of responsibilities across the various stages of the game development process, enabling each sub-team to own its expertise and thereby significantly accelerating the project’s development speed.



By implementing solution innovation and operating model innovation, Xai has strengthened its competitive position in the Gamfi sector.

XAI Token Model

In terms of token adoption, Xai uses the XAI and esXAI model. esXAI represents another blockchain state that exists for XAI, with a 1:1 correspondence. Therefore, the sum of the circulating quantities of the two equals the real circulating supply of XAI. The current total circulating supply of XAI is 277 million tokens, and the circulating supply of esXAI is 64 million tokens (according to official Staking data). Thus, the total sum is the real circulating supply of 340 million tokens of XAI.

Token Allocation

The total supply of XAI tokens is 2.5 billion tokens. The specific allocation is shown in Figure 3–1:



According to data published in Binance’s official report, the first large-scale unlock will occur in July 2024. Token circulation will increase by 8%, i.e., 200 million tokens. The unlock time and quantity statistics for each token holder category are shown in Figure 3–2.



Token Utility

XAI is the token of the Xai blockchain. XAI is the Gas fee token on Xai L3. It can also be destroyed and exchanged 1:1 for esXAI, which can then be staked to earn staking rewards.

esXAI is a token that is neither tradable nor transferable. Its primary purpose is to be staked to obtain various benefits within the Xai ecosystem. The main rights include:

· Participating in staking mining pools to earn esXAI rewards;

· Ecosystem rewards: esXAI holders can experience all games in the Xai ecosystem first and receive rewards such as token air drops from game projects;

· Governance: esXAI holders will be able to vote on governance proposals.

By comparing the utility of the two, it can be seen that the Xai Foundation tends to encourage users to hold esXAI tokens. This helps stabilize token prices and provides additional rights within the ecosystem.

The cleverness of the staking mechanism

The unique Sentry Key

In Xai’s staking mechanism, the Sentry Key is an innovative design:

· The Sentry Key is not transferable or tradable, and is used only for staking to obtain esXAI rewards. This non-tradable characteristic avoids value fluctuations in the Sentry Key, preventing negative impacts on buyers’ holding behavior, and thereby ensuring stability of the Xai network;

· Only users who hold the Sentry Key can create mining pools. Users who only hold esXAI stake through these mining pools, and mining pool creators can decide the reward allocation ratio;

· The Xai Foundation has obtained 13,000 ETH through the sale of Sentry Key. The substantial sales profit reduces the team’s motivation to sell after token unlocks;

Through the issuance of Sentry Key, the Xai Foundation not only creates substantial revenue, but also ensures the stability of stable network nodes.

Asymmetric esXAI

Users can exchange XAI for esXAI at any time for token staking. However, exchanging esXAI back to XAI requires an unlock period, which users can choose independently. The exchange ratio increases as the lock period is extended:

· 15-day unlock period: after the term ends, the exchange ratio is 0.25. For example, if a user applies to unlock 100 esXAI, with a 15-day cycle, then after the due date the user will receive 100*0.25=25 XAI. At the same time, the 100 esXAI are completely burned (and the same applies to the rest);

· 3-month unlock period: exchange ratio is 0.625;

· 6-month unlock period: exchange ratio is 1 (the common choice of users);

During the unlock period, users can retrieve all esXAI, which is considered to be canceling the staking action. For esXAI with 15-day and 3-month unlock periods, the official has the right to reallocate 50% of the amount of eaXAI that would otherwise be burned to all stakers. Since an unlock period is set, the esXAI rewards earned from staking are not released to the market immediately. This means these rewards will only convert to XAI after six months and may be sold. According to data statistics (Figure 3–3), the start time of esXAI rewards was December 2023. After entering June 2024, each day will see a large amount of esXAI converted into XAI, so the pressure from staking rewards on prices will also become apparent starting in June 2024.



Potential Deflation

In XAI’s economic model design, the following mechanisms may lead to a deflationary effect for XAI:

· All Gas fees will be destroyed 100%, becoming the main source of deflation;

· The Xai Foundation provides high staking rewards to esXAI stakers and the esXAI unlock mechanism indirectly reduces XAI’s circulating supply in the market.

Therefore, the evaluation formula for XAI’s deflationary state can be expressed as: the amount of esXAI that can be converted back to XAI ÷ the amount of XAI represented by esXAI converted on the same day + the amount of XAI destroyed through Gas fees on the same day; thus, deflation may occur. If, in the future, one or more popular games appear on the Xai chain and lead to a significant increase in Gas consumption, then XAI could enter a deflationary state, which would drive up the token price.

Value Capture Mechanism

Based on the analysis above, the investment stage of the XAI token can be divided into two:

April 2024 to August 2024: the game deployment phase, suitable for investors with a higher risk appetite.
The investment appeal of the XAI token comes from its expected circulation deflation. Since the project is currently in the game deployment phase, according to official expectations, results will only become apparent after the end of this phase, i.e., in August 2024. Therefore, the best investment strategy for investors with different budgets is as follows:

· For investors with limited budgets: Buy XAI tokens and convert them to esXAI for staking to obtain staking rewards.

· For investors with medium budgets: Buy Sentry Key to create a personal mining pool, thereby enjoying staking rewards and potential ecosystem rewards.

· For investors with larger budgets: Buy Sentry Key to create a personal mining pool, and also buy XAI tokens and convert them to esXAI. This not only helps increase the mining pool level, but also attracts other investors to stake their esXAI, while allowing you to earn a larger share of the staking reward distribution.

· After August 2024: once game large-scale deployment is completed, it is suitable for risk-averse investors.

After the game deployment phase ends, closely monitor circulation data to identify signs of deflation. As soon as a deflationary signal is confirmed, execute a buy immediately.

Project Risks

Sentry Key staking weight may be too high: In the current staking system, the independent staking of Sentry Key potentially offers high returns. If rich rewards can be obtained by staking Sentry Key alone, it will increase the amount of esXAI converted back into XAI each day, thereby putting downward pressure on the market price of XAI.
Limitations in business expansion capabilities: If, during the game deployment phase, the Xai chain fails to attract more successful deployments of games, reducing the likelihood of hit titles, it will directly affect XAI’s investment attractiveness and long-term growth potential.
A sell-off spiral caused by inflation: If XAI fails to achieve deflation, and with the accumulation of the amount of esXAI unlocked, the market may enter a “sell-off spiral.” In this situation, the esXAI rewards received by Sentry Key holders will continue to be converted into XAI and released to the market, creating persistent downward pressure on XAI’s price.

Conclusion

In the Gamefi sector, many projects compete to launch, but the success of a game is not determined solely by the reasonableness of its economic model and its playability. It is also constrained by external factors such as marketing strategy and market conditions. The probability of any single game project succeeding is relatively low and is influenced by many variables. By contrast, choosing a blockchain platform that supports multiple games—if it can effectively solve users’ real problems and launch many games—will significantly increase the likelihood of nurturing hit games. In addition, hit games on a platform chain can greatly enhance the market appeal of that chain.

The Xai project shows industry-leading advantages in professional team capabilities, financial strength, and technical development. These factors together provide a solid foundation for its development in the Gamefi space. However, whether its business expansion capability is sufficient to support its rise as an industry leader needs to be continuously monitored. At the same time, XAI’s economic model includes potential deflationary trigger mechanisms; if on-chain game activity increases, it may promote deflation and increase token value. However, it should be noted that improper staking weight settings, challenges in business expansion, and potential inflation risks may lead to negative market reactions toward XAI. These factors must be considered as important elements in assessing XAI’s long-term investment value.