Capsules: The Alternative to Raffles

Ideas
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The raffle is an abstract form of yield farming, where the farmer assumes the risk of liquidity provision in exchange for exclusive and rare items. We’ve essentially been incentivizing liquidity by periodically inflating the number of NFTs in the game. The biggest issues that I perceive:

  1. the irregularity of raffles, with long gaps between “cash-out” opportunities, where tickets can be redeemed for the reward.

  2. supply-side problems with large stockpiles of “pending rewards” (tickets) waiting to be redeemed.

  3. the questionable sustainability of NFT inflation as a way of bringing in revenue from players and therefore yield, especially during periods of depressed market activity.

If I were to reimagine the raffle system, I would introduce variable rewards for which entries can be redeemed at any time, and I would gamify the entries themselves through a system of randomization.

Awhile back I was working on a gacha capsule/loot box system that I shelved, but I think it could be appropriate as a possible starting point.

The idea is that there would be fixed, low cost for capsules. Any number of capsules can be purchased in one transaction. That transaction would call VRF, and the player’s capsules would each individually be generated with a random, weighted rarity (common, uncommon, rare, legendary, mythic, and godlike). The player can then choose to hold the capsules, sell them on the open market, or open them.

Any number of capsules can be opened in one transaction. That transaction would call VRF, which would roll on each capsule’s rarity drop pool (common capsules draw from the common pool, uncommons from the uncommon pool, etc.) and provide the player with a random item from that pool. The base prize would be tiered “fragments” that are used to synthesize better things, so that progress is always being made toward a goal even if the player does not win anything of immediate value.

There’s a lot of flexibility in what the other prizes could be. There would be a rotating stock of basic prizes that are always available and have infinite supply, such as certain parcel decorations, or temporary buff items, and perhaps special wearables that have in-game effects but are not counted for rarity farming. In lieu of raffles, the pools would also be periodically stocked with exclusive, limited supply NFTs that capsules have a small chance of winning. Once the supply has run out, there is no more, just like the original raffle mechanism. To prevent frontrunning, there would be a 3-day entry period before a new drop of items, where players may stake as many capsules as they wish, and upon the moment of release all staked capsules will be opened at once, so everyone has a shot at winning.

Some further potential is contingent on what Pixelcraft/the DAO will allow in terms of crossover. Player-created wearables, potions, installations, and items important to the subeconomies of minigames all greatly increase the possibilities. Items and tokens from partner projects could also find their way into capsules.

The final question is how these capsules should be priced. I originally considered Alchemica as the means of purchase, and I wondered if, rather than a completely fixed price, if the exact composition of Alchemica required to create a capsule could be variable dependent on certain factors, such as the day, week, time of day, or even the weather, if weather effects are introduced into the Gotchiverse. There also could be “tiers” of purchase that net free capsules if a certain number of capsules are purchased in one transaction, to encourage bulk buys.

It could also be interesting if some of the Alchemica spent went into the capsule prize pools, where it could be drawn from a pull.

While I think pricing in Alchemica could work really well, this system would need to be part of a sequence of releases intended to progressively increase Alchemica demand. The unaddressed problem however is the original purpose of the raffle system: a way of incentivizing GHST and GHST pairs. If we swap from FRENS/GLTR raffles to an Alchemica-denominated gacha mechanism, spending GHST on land, gotchis, and on Alchemica (for structures) becomes the only means of accessing what was previously passive yield, which would bump Alchemica prices, but would give much less reason to hold naked GHST or provide liquidity for GHST pairs.

This comes with a host of problems, which is why it would probably be better for a system like this to be configured such that it incentivizes GHST and GHST pairs (through FRENS, GLTR, or some other mechanism) instead of using Alchemica, but I think there’s a lot of room for conversation about how exactly to price these.

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How would this fix issue number 3? Which to me is the most important, as I am 100% done with constant NFT inflation without demand for them.

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It’s an interesting idea for sure, I think there should be multiple ways of producing NFTs from FRENS. To my understanding, FRENS is meant to be illiquid, combining it with any token that can be cashed out makes it another token that will drag down the price of GHST. Think of them as separate, but can be used together. GLTR is meant to be burned, or used I guess. You could have a combination of FRENS and GLTR for capsules, but would have to be a utility. Like on the altars you burn GLTR to make them upgrade faster, GLTR should affect the scale of a utility, in this case maybe luck? If GHST is stable at $1.3, and FRENS represents money from staking 1 GHST for 1 day, then how much is it actually worth? Take the amount of days and that’s how many FRENS an NFT is worth, then use GLTR for luck, the burn rate could just be the same price as well. So then you would be burning FRENS (which is easy to get by staking GHST and has no value outside of NFT purchasing anyways), and burning GLTR (which is easy to get by staking anything) at the same value of the NFT. So you’re buying the NFT with FRENS but burning the same amount in GLTR when you want a 100% chance of getting the item.

The price action would be GLTR price rising, but I’m unsure of how GLTR is structured.

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Therein lies the rub… we have a staking incentive system where a large portion of owners don’t want the rewards to exist but also don’t have a problem selling the way to get the rewards, to other people. It’s not a healthy dynamic.

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Good question. The raffle system in its current implementation releases new valuable wearables (and, more rarely, land and gotchis) at irregular intervals, and that’s it. For the purpose of differentation I’ll call these BRSWearables.

Most capsule rewards would be things with aesthetic value (decorations and vanity items), temporary value (buff items), or which would increase competitiveness in the gotchiverse proper (performance-boosting or ability-granting wearables and installations) without affecting things like rarity farming or alchemica production. We could also shift inflation away from existing NFTs to new classes of NFTs (such as lickquidator-specific items, crafting items, socket items, etc). The idea would be to preserve the passive yield generation that currently incentivizes GHST and GHST pairs, without relying on inflation that dilutes the most valuable NFTs in the ecosystem.

The new market would be in selling capsules, fragments, and unusual aesthetic/utility rewards, rather than directly increasing the number of BRSWearables in the game every time we try to reward liquidity providers.

There is still the option of running raffle-like games with exclusive item drops, whether from Pixelcraft or from partner projects, but they would no longer be required for the system to work. Such items could also be seeded into the pools progressively, with very low drop rates, or accessible only through fragments, as we experiment with new ways of releasing wearables (and their parameters) into the game.

I agree that NFT inflation is a problem and I’ve wondered if we can radically rethink how future parcels and gotchis get released.

I think a hybrid payment model has potential, my concern would be in the difficulty of balancing and in complexity for the user, but I really like the idea of attributing different benefits to paying with different kinds of tokens. Paying GLTR to affect the luck of a roll, provide insurance, or perform some other kind of secondary function could be a way of pulling that token into the system, while using Alchemica, FRENS, or GHST to actually buy the capsule itself. I think that’s pretty thematic for GLTR, as it shortens the time a player will have to spend gacha-ing to get the item they want. I’ll have to think about this one.

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I would not have more items before there is the need for more gotchies. More players (most important) that can be brought only by making the game playable and worth the time from a fun to play perspective, not play to earn one, more gotchies and more lands, then more items. Otherwise it’s just endless dilution. I like the current rugs / grass and installations that do have an aesthetic effect only. Currently, there is a future land release that was postponed, that can eat all the current tickets or future frens / tickets. No more items, please.

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I like the idea of craftable consumable VRF rolls. The in game consumables should be like this… you never know how strong your potions will be, or if you might get a godlike roll, and yes, if we need glitter for the vrf roll, we have created a very adequate reward system for staking.

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I like the idea of shifting inflation to other NFT classes, but would that not eventually catch up to those assets also? Unless we make it very clear that with the new capsule raffle, you will get very inflationary assets and it is not recommended in holding them for profit. If we do not make that clear, I fear eventually we will run in the same problem again. Maybe some of these items can even be temporary items that you win, like consumables, strong temporary weapons etc yes.

I like a hybrid payment model also, but it would need to be well balanced indeed. If you can easily get a temporary godlike weapon for example by paying a GLTR fee, it could ruin the price of godlike items.

Another thing, since we now have GLTR as an incentive for GHST, we do not really need the frens incentive as much anymore for providing liquidity.
I know a while back, Yanik was really in favor of giving the NFT asset class a frens yield. At the time I was against it since it was still unknown how the gotchiverse was going to give yield and there was no other incentive to holding GHST or providing liquidity. Right now with the addition of GLTR, I think it would make more sense. NFT asset holders are the players and land owners in the gotchiverse, so it would make sense they would be the ones to receive new decorations, socket items, temporary items, comsumables etc. We can still keep the frens yield to GHST if that is what people want, but also give asset holders a frens yield.

I really am just in favor of providing the actual asset holders with value as they are the ones who have been paying for everything and getting inflated in the process. People just staking GHST are the ones that benefit the most from any raffle currently, at the cost of NFT holders. And people buying tickets from them.

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Keep in mind how much a godlike item would cost with GHST, then convert it to GLTR, it’ll be a massive amount. People that are paying for godlike capsules would already know what they’re getting themselves into, possibly a whale. They would be paying double for an NFT, one half is then burned. The protocol benefits, but also the rate can be lowered. I’m assuming the FRENS put forth are worth the NFT. You have to have a lot of GLTR to use it the way it was intended. Like spending 1,000,000 GLTR to upgrade your altar, but it doesn’t go anywhere it’s just burnt.

Naw, unless you’re talking about whales. I’m new to this game, but I’m pretty sure this post was made because raffles suck. I’ve seen the odds, they’re terrible. This post just points to there needs to be a new way to obtain NFTs through chance.

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Inflation is explicit to the economic design of Aavegotchi. Without NFT inflation - the idea of future reward, whether in NFTs themselves or the speed at which they are obtained (GLTR) - there is no reason to hold GHST.

This leads into our problem of GHST. GHST exists to keep money circulating in the system instead of exiting, and yield is the only reason GHST is able to exist at all. Yield is the biggest driver of GHST demand, from tickets (and therefore wearables), from GLTR, and from the Vault’s efforts with Qi. Every GHST that ends up in the DAO treasury is taken out of circulation, pending a vote. For every GHST that sits there or in a staking contract, there is some underlying DAI that isn’t getting arbitraged out of the bonding curve and out of the ecosystem.

When we take away yield from GHST and GHST pairs, there is simply less incentive to hold GHST. When we reduce GHST liquidity, it becomes harder to sustain the price floors we’ve come to expect for our NFTs, as inability to easily cash in or out makes them unattractive. We could denominate our NFTs in common tokens, such as a stables, MATIC, ETH, etc, but that would entirely destroy the use case for GHST, which I assume many would find undesirable.

Which means that we need to incentivize GHST, and raffles have served as an imperfect but functional means of doing so. Could rewards for single-staked GHST be reduced, or useful pairs incentivized more? Absolutely. But single staked GHST isn’t entirely useless, since the point of GHST is that it earns yield.

While the addition of GLTR farming is welcome, I don’t think it will be enough to fund our liquidity, especially given that the GHST/GLTR pair will be eating heavy losses. The problem with traditional yield farming is that it is never sustainable unless market demand exceeds emissions, which is very rare, especially in conditions like the market is currently facing. It’s not prudent to rely solely on GLTR incentives, when it is highly inflationary and has no established demand.

What worked well about the raffle was its abstracted yield through random distribution of rewards: not everyone wins, but there are enough winners that it’s worth participating, by staking and earning FRENS. One of the biggest benefits I see in the capsule system comes from fragments, the base reward, which allow everyone to make some kind of progress even when they “lose” a pull, rather than walking away with nothing.

It also allows players to roll for their in-game reward right away if they wish to do so, instead of being bound to an irregular raffle schedule. Certain aesthetic/utility items would also have infinite supply (but low drop rates, and stock will rotate periodically), so the chance of coming away with something useful is higher than the chance of trying to win a BRSWearable with a single ticket.

Very much agree that it all needs to be carefully balanced and considered. For newer classes of NFTs, I think we have some leeway to inflate since there are no expectations about their value, but in the future it could be wise to at some point implement a recycling option to process loads of junk. I don’t think this capsule solution will be particularly quick to implement, but it could be developed out in stages, and continually embellished on as new features are added to the game.

Yes, and also I want us to think about ways to make the Aavegotchi economy more sustainable, less fragile, less reliant on dilution of yield-bearing NFT assets, more focused on incentives driven by gameplay and the implicit reward of player vs player competition. I think raffles have served their purpose but are now a liability for several reasons, and while we should preserve GHST’s passive yield to the best of our ability, I think it’s time to consider options that will evolve the current model.

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I ha d come up with a similar idea… scratch offs. Instead of having raffles you wait for, you just buy appropriately sized scratch offs and play the VRF and see if you won anything. The odds can be terrible and people will play anyways. There is definitely a point where the odds are set correctly, and we have more token deflation than asset dilution. There’s plenty of things that could be done in smol ultrarare batches. Face items could be trickled out for a very very long time, and not really dilute, as there is only two per rarity and they do not cover all use cases even if you use face items from two rarity bands.

Also, this gets rid of “wen raffle” because like pull tabs, its a box you have to get last winner from, or no new box.

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I was trying to think of something better for NFTs as well, like the capsule machine from super smash brothers melee, but something interesting came up. The option to get an NFT that you don’t own yet. Also pin the idea of using GLTR for paying for boosted utilities. For example, the option to get an NFT you don’t own, and the option to increase your chances of getting a winning scratch off, should multiply the GLTR payment required. However, the base layer payment should be FRENS.

It really begs the question: If 1 GHST is staked for X amount of days, what is X when the staked 1 GHST and rewarded FRENS are equivalent and have the summed value of 2 GHST?

There are two models of NFT minting, and the one they will probably use will be broken easily. If you minted 100 of the same NFT and said they’ll cost whatever, then if enough people did 100% chance 100 times and collected those tickets, then the rest of the tickets are technically worthless. People will buy and scratch no winnings for the rest of the ticket pool.

It’s better to do an individual ticket-by-ticket system and allow for straight minting with a 100% chance of winning ticket. If you do a 100% chance ticket you’ll spend a lot of GLTR but it’s guaranteed, if you bought a 50% chance ticket and lose, well you just lose. It’s a scratch off, it’s a raffle, if you lose you lose and get nothing. Spend more GLTR next time.

This system could allow for straight minting, reducing the scarcity but keeping the GHST valuation underlying the NFT so I’m unsure how this would affect the market. There could be a scarcity lock depending on the rarities, like Common won’t have any and will be a good testing ground. Godlike might have a scarcity bottom of 46.67 currently (or at least that’s the lowest Godlike scarcity currently), but keep in mind that scarcity could be adjusted to generate revenue, but you’re essentially burning players that first obtained the NFT. However, the driving force of obtaining an NFT is using it in the Metaverse. Different builds will get different gains, but keeping scarcity locked under checks and balances is important. Perhaps it could be used to drive player retention if an incoming wave of new players is happening.

The last part is with the second model it’s a great opportunity for price control. Want to burn GLTR? Want to make some FRENS illiquid indefinitely? Want to make some GHST illiquid indefinitely? This is the opportunity to implement what you want to be staked, burned, or some combination of both.

I kind of ranted and went down the rabbit hole here. These are great ideas though guys, plenty of unique ways to tackle this challenge.

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I agree there is room for improvement with the raffle system (inflation/irregularity), but I am concerned about abandoning frens. The GHST token sustains our ecosystem and is listed on many exchanges which is invaluable marketing. Nuking the yield from holding GHST will depress price and make our project less attractive to new investors. I don’t have it all figured out, but just wanted to raise this issue for discussion before we pull the trigger on getting rid of frens.

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Glitter is the yield now, and if you move the rewards from frens to glitter, you’ve simply made a nice combo of predictable reward(glitter) and the intermittent reward(raffles with glitter for tickets).

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