Investment Summary
- Star Sharks is a DAO-governed gaming ecosystem that will allow players to access multiple games using the same NFT character.
- The initial game on the platform, StarSharks.Warriors, is a card battling game, where players can participate in PvE and PvP battle modes, typically earning $40-50/day.
- With attractive in-game economics, StarSharks has grown rapidly since its launch in December last year and is ranked as one of the Top 5 games on the BNB Chain.
- Revenue is driven by players minting new NFT sharks, upgrading them, or purchasing sharks on the second-hand marketplace. Most of the platform revenue is paid out on a regular basis to SSS stakeholders.
- Projecting forward revenue numbers over the next six month, StarSharks could be annualising profits of over $150m. At an implied PE of just 6x, the market has yet to appreciate fully the economics of the first game, let alone the larger opportunity of the ecosystem.
Project Overview
Star Sharks is a blockchain gaming platform that allows players to enjoy multiple games using the same NFT character. Players can own, upgrade, and trade their NFT characters, while earning tokens as they play.
The ecosystem operates on the BNBChain. The development team has published a roadmap for future in-house games including a breeding and racing game. However, over time, the community and external developers will be able to access the SDKs and publish their own games on the platform.
Currently, the StarSharks platform consists of all the necessary building blocks for the future development of the metaverse:
StarSharks has already made it on to the Top 5 NFT Gamefi / Metaverse projects on the BNB Chain over the past couple of weeks.
The ecosystem operates on the BNBChain. The development team has published a roadmap for future in-house games including a breeding and racing game. However, over time, the community and external developers will be able to access the SDKs and publish their own games on the platform.
Currently, the StarSharks platform consists of all the necessary building blocks for the future development of the metaverse:
- A game system that can host multiple games backed by a single in-game currency and governance token.
- A marketplace where players can purchase new NFTs required to join the games, in addition to trading with existing players.
- A rental system that lowers the cost of entry for players and meets the needs of investors and guilds.
- A staking pool where governance token holders provide liquidity and share in 70% of the platform’s earnings.
StarSharks has already made it on to the Top 5 NFT Gamefi / Metaverse projects on the BNB Chain over the past couple of weeks.
StarSharks has already made it into the Top 5 NFT Gamesfi / Metaverse projects on BNB Chain
StarSharks.Warriors
The first game, StarSharks.Warriors, was launched in November last year. It is a turn-based card game where the goal is to eliminate all of your opponent’s sharks.
In order to play the game, each player is required to hold 3 shark NFTs, which currently cost around $500 each to buy. Sharks can be purchased directly (minted) by opening a mystery box or can be bought from other players in the game marketplace. There are six species of Shark with differing levels of power and they also have different attributes, which affect their health, speed and other battle characteristics.
The first game, StarSharks.Warriors, was launched in November last year. It is a turn-based card game where the goal is to eliminate all of your opponent’s sharks.
In order to play the game, each player is required to hold 3 shark NFTs, which currently cost around $500 each to buy. Sharks can be purchased directly (minted) by opening a mystery box or can be bought from other players in the game marketplace. There are six species of Shark with differing levels of power and they also have different attributes, which affect their health, speed and other battle characteristics.
Battles
Players can participate in PvE and PvP battle modes, where they have to complete tasks and enter battles. By completing daily tasks, a typical player can earn up to 40 SEA per day.
PvP battles are competitive and players are matched according to their rank. These battles are seasonal, with each season lasting for a month. Players gain PVP points during the season, which are reflected on the leaderboard and, at the end of every season, the top 500 players are rewarded from the SSS reward pool.
Shark Upgrades
The game allows players to upgrade their shark NFTs into a higher ranking/stronger shark by spending both SEA and SSS. The two lower level sharks are destroyed (burnt), resulting in fewer Sharks on the market and creating the need to mint new sharks. Players that wish to compete at higher levels and potentially earn more tokens will need to upgrade sharks. This is one of the strategies for sustaining the value of the Sharks and stabilising the price of the SEA token.
Leasing system
Given the significant upfront costs of purchasing 3 sharks to play the game, Star Sharks has designed a leasing system that lowers the entry barrier for new players. Rather than shelling out over $1,500 to join the game, prospective users can try the game by renting idle sharks from other players. At the current time, it would cost around 42 SEA to rent sharks on the marketplace. Renters are thus able to enjoy the game and hopefully build up some SEA savings, which they can use to purchase their own sharks.
Players can participate in PvE and PvP battle modes, where they have to complete tasks and enter battles. By completing daily tasks, a typical player can earn up to 40 SEA per day.
PvP battles are competitive and players are matched according to their rank. These battles are seasonal, with each season lasting for a month. Players gain PVP points during the season, which are reflected on the leaderboard and, at the end of every season, the top 500 players are rewarded from the SSS reward pool.
Shark Upgrades
The game allows players to upgrade their shark NFTs into a higher ranking/stronger shark by spending both SEA and SSS. The two lower level sharks are destroyed (burnt), resulting in fewer Sharks on the market and creating the need to mint new sharks. Players that wish to compete at higher levels and potentially earn more tokens will need to upgrade sharks. This is one of the strategies for sustaining the value of the Sharks and stabilising the price of the SEA token.
Leasing system
Given the significant upfront costs of purchasing 3 sharks to play the game, Star Sharks has designed a leasing system that lowers the entry barrier for new players. Rather than shelling out over $1,500 to join the game, prospective users can try the game by renting idle sharks from other players. At the current time, it would cost around 42 SEA to rent sharks on the marketplace. Renters are thus able to enjoy the game and hopefully build up some SEA savings, which they can use to purchase their own sharks.
Tokenomics
SEA
SEA is the in-game token issued on the Binance blockchain. SEA’s issuance is theoretically unlimited, but the initial issuance was limited to 100 million tokens. Subsequently, SEA is only minted to reward players who battle their sharks by playing the game.
The stability of the token depends on the interaction between the production and consumption of SEA (or the mint/burn ratio). The daily mint level is driven by the number of DAUs, while its burn rate is driven by the number of new players entering the game. As each new player builds his team of 3 sharks to play the game, he must purchase mystery boxes from the marketplace. Apart from a small platform fee, 90% of SEA from this transaction is burnt.
SSS
The SSS token is the governance token of the SharSharks ecosystem. It allows token holders to share in the value of the StarSharks metaverse and participate in governance through the DAO. In this respect, SSS behaves more like equity and SSS holders who stake their tokens can share the platform earnings.
The StarSharks DAO currently generates revenue through marketplace transactions and upgrade fees. A 4.25% fee is charged for every transaction in the marketplace. Marketplace transactions are settled in BNB, which are then distributed to SSS token holders as dividends on a weekly basis.
The total supply of SSS is capped at 100m. Investors and the management team both own 15% of the total supply. The majority of tokens, 61% of the total supply, will be distributed to the community as rewards for encouraging others to join the ecosystem and participating in the game.
SSS Release
In order to ensure a steady and sustainable supply of SSS to the community, the release mechanism is linked to the monthly revenue of the platform. The number of tokens released also declines every year going forward to ensure there are sufficient tokens to fund the bonus pool over many years.
The release quantity is adjusted annually, with up to 780,000 tokens released per month in the first year. After which the release quantity will be reduced with a decay coefficient of (9% + n%) starting from the second year. According to the mathematical model, the annual release quantity will be up to 5,484,900 in the fifth year, and the annual release quantity shall be maintained at 2,158,900 in the tenth year.
SSS Beneficiaries
As we have seen, the main beneficiaries of the monthly SSS issuance are those that participate in the growth of the community and ecosystem. The monthly reward pool is therefore directed towards:
PVP reward pool (80% of the pool)
The top 500 individual ranks are eligible to get rewards in the game according to the games’ monthly PvP ranking. The rewards system of the PvP ranking is based on the monthly trading volume. It is composed of Monthly C2C trading volume (BNB) + Monthly trading volume of using SEA to purchase the mystery boxes in StarSharks‘ official marketplace.
In Season 2, which ended in January, the total PVP reward pool amounted to SSS 93,450 (approximately $850k). The number one gamer was able to enjoy a reward of SSS 2,700 ($24k), while the 500th settled for SSS 90 ($800).
In order to ensure a steady and sustainable supply of SSS to the community, the release mechanism is linked to the monthly revenue of the platform. The number of tokens released also declines every year going forward to ensure there are sufficient tokens to fund the bonus pool over many years.
The release quantity is adjusted annually, with up to 780,000 tokens released per month in the first year. After which the release quantity will be reduced with a decay coefficient of (9% + n%) starting from the second year. According to the mathematical model, the annual release quantity will be up to 5,484,900 in the fifth year, and the annual release quantity shall be maintained at 2,158,900 in the tenth year.
SSS Beneficiaries
As we have seen, the main beneficiaries of the monthly SSS issuance are those that participate in the growth of the community and ecosystem. The monthly reward pool is therefore directed towards:
- PVP rewards
- referral bonus
PVP reward pool (80% of the pool)
The top 500 individual ranks are eligible to get rewards in the game according to the games’ monthly PvP ranking. The rewards system of the PvP ranking is based on the monthly trading volume. It is composed of Monthly C2C trading volume (BNB) + Monthly trading volume of using SEA to purchase the mystery boxes in StarSharks‘ official marketplace.
In Season 2, which ended in January, the total PVP reward pool amounted to SSS 93,450 (approximately $850k). The number one gamer was able to enjoy a reward of SSS 2,700 ($24k), while the 500th settled for SSS 90 ($800).
Referral Bonus (20% of pool)
The remaining 20% of the monthly $SSS Tokens emission is allocated to the referral bonus pool. When a referee buys a mystery box in the marketplace using SEA tokens, 5.75% of the total transaction amount, as well as 7% of the platform fee (4.25%) charged by the platform, will be given to the referrer. For example: If a referee spends 1500 SEA to purchase three mystery boxes, then his/her referrer can get: 1500*5.75%+1500*4.25%*7% = 90 SEA
The top 500 referrers ranked by the total number of promotion points during the season will be rewarded a SSS referrer bonus. In the January season, the top referrer was able to enjoy a reward of SSS 1,200 ($10,800), while the 500th ranked referrer took home SSS15 ($135).
The remaining 20% of the monthly $SSS Tokens emission is allocated to the referral bonus pool. When a referee buys a mystery box in the marketplace using SEA tokens, 5.75% of the total transaction amount, as well as 7% of the platform fee (4.25%) charged by the platform, will be given to the referrer. For example: If a referee spends 1500 SEA to purchase three mystery boxes, then his/her referrer can get: 1500*5.75%+1500*4.25%*7% = 90 SEA
The top 500 referrers ranked by the total number of promotion points during the season will be rewarded a SSS referrer bonus. In the January season, the top referrer was able to enjoy a reward of SSS 1,200 ($10,800), while the 500th ranked referrer took home SSS15 ($135).
Staking and Governance
Stakers will share the majority of the platform’s earnings, which are from the following sources:
Users can obtain SSS either through buying from exchanges, through PvP ranking or referral ranking rewards.
Stakers can lock up their SSS tokens in the DAO via the official StarSharks website. The locked SSS tokens are called veSSS and stakers can choose between various lock-up periods, from one month to four years.
In addition, to earning platform rewards, the governance of the DAO has recently gone live on the StarSharks website. Stakers are entitled to corresponding voting rights according to the amount of veSSS that they hold and the remaining locked time. As a community driven project, StarSharks future direction and will in a large part be driven by veSSS holders.
Stakers will share the majority of the platform’s earnings, which are from the following sources:
- Purchase of mystery box (SEA)
- C2C transaction on marketplace (BNB)
- NFT Upgrades (SSS)
Users can obtain SSS either through buying from exchanges, through PvP ranking or referral ranking rewards.
Stakers can lock up their SSS tokens in the DAO via the official StarSharks website. The locked SSS tokens are called veSSS and stakers can choose between various lock-up periods, from one month to four years.
In addition, to earning platform rewards, the governance of the DAO has recently gone live on the StarSharks website. Stakers are entitled to corresponding voting rights according to the amount of veSSS that they hold and the remaining locked time. As a community driven project, StarSharks future direction and will in a large part be driven by veSSS holders.
veSSS is awarded depending on the lock-in period chosen by the user. Users staking for the longest time frame (four years) receive one veSSS per SSS, while those staking for the shortest period (one month) receive 0.02 veSSS per SSS. The current APR, a function of the amount of veSSS locked-up (754k veSSS) and recent platform earnings stands at for each lock up period:
VeSSS holders are able to withdraw dividends from the platform at any time. The dividend amount is determined by the quantity of veSSS held by the user and the platform’s earnings. Accumulated rewards from the previous day are added to the staking reward pool on a daily basis. The average daily staking rewards can be seen live on the Reward Tracker:
Revenue Model
We have projected the current trends for the StarSharks platform over the next six months. We believe that StarSharks.Warriors will end February with around 35,000 DAUs (Daily Average Users), up around 133% MoM. So far, StarSharks has been relatively quiet on marketing activities and we expect the user numbers to continue to grow sharply going forward.
The DAU is the key metric that drives the platform revenue. We assume that StarSharks can increase the number of players on a monthly basis and we think we are being relatively conservative by assuming 320k users over the next six months.
We see five key drivers of DAU growth:
The are two key revenue drivers for StarSharks.Warriors:
The DAU is the key metric that drives the platform revenue. We assume that StarSharks can increase the number of players on a monthly basis and we think we are being relatively conservative by assuming 320k users over the next six months.
We see five key drivers of DAU growth:
- P2E mechanics - the average player can earn around $40-50 / day playing the game making it one of the most financially rewarding P2E games on the market
- Leasing system - lowers the cost of entry for new players, who can rent sharks to play
- Referral bonus system - players can refer their friends and get rewarded
- Leading players can enjoy a generous monthly bonus, paid in SSS governance token
- Guild system - makes it relatively easy for guilds to manage and reward players
The are two key revenue drivers for StarSharks.Warriors:
- The sale of mystery boxes, which contain newly minted sharks. Although 90% of the SEA from purchases are burnt, the platform collects a 4.25% fee for each transaction. We estimate that this will account for $2.5m platform revenue in February
- C2C transactions. There is an active second hand market where players can buy and sell their sharks. Sharks on the market are priced in BNB and again the platform takes a 4.25% share on each transaction. We estimate that marketplace transactions will generate $350k in platform revenue in February.
We project the revenue for the coming six months and by the end of the period, we believe that the community treasury will be worth over $60m at today’s prices. The platform revenue that accrues to the Treasury is paid out to SSS stakers.
Using the last month of our projected earnings forecast, we believe that the annualized platform earnings could reach $150m. At the current, fully diluted SSS market cap of $945m, the implied P/E currently stands at around 6x. Given that this represents the earnings of just StarSharks.Warriors and ignores the potential value in future games that will be released on the platform, we believe that SSS is significantly undervalued.
Using the last month of our projected earnings forecast, we believe that the annualized platform earnings could reach $150m. At the current, fully diluted SSS market cap of $945m, the implied P/E currently stands at around 6x. Given that this represents the earnings of just StarSharks.Warriors and ignores the potential value in future games that will be released on the platform, we believe that SSS is significantly undervalued.
Useful Links
https://starsharks.com/
https://static.starsharks.com/whitepaper/StarSharks_WhitePaper_2021.pdf
https://starsharks.com/
https://static.starsharks.com/whitepaper/StarSharks_WhitePaper_2021.pdf
Disclosure: 3Commas Capital members may hold Star Sharks (SSS) and/or hold advisory roles. This statement is intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase any token. This content is for informational purposes only, and you should not make decisions based solely on it. This is not investment advice.
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