It’s been 4-5 days since the Gas Hero (GH) launch and I now feel comfortable putting this out as reality matches my model – I believe $GMT is reversing its historically poor emission dynamic into net-sink immediately. And if Gas Hero were to trod the path towards 100k+ users + maintain current set of GH asset prices, then the FSL ecosystem may be set to hit 15 mm GMT locked per day + relive the craze circa Mar-May 2022 once again. High hopes for this new title and personally think the token can get back to top 25-75 again within 2-3 months. Short-term target set at 1 dollar per GMT (3x from here).

Current GMT selling dynamic:

• We estimate that prior to GH, GMT emission is about 115 mm stepping down to 109 mm per month starting in December; whereby it’s split 1/3 to investors & advisors, 1/3 to team & treasury, and 1/3 to M2E rewards. Team isn’t selling, advisory emission is small, and treasury emission is controllable; so the big jeet are mostly M2E (1 mm / day assuming 80% sale, but about half of it is burned within Stepn, so really 300k / day net sold) and investor sale.

• Prior to Oct 23, ~75% of GMT gets jeeted right when private investors get them. So close to 1-1.1 mm / day if we include advisory sale as well.

• So net-net we have about 1.5-1.6 mm of GMT selling pressure per day almost ever since March 2023. Almost half a million dollars daily. No wonder the ratio of GMT is down-only in USD and vs. BTC / ETH terms.

• The recent events had marked impacts on the GMT/Beta ratio:

  • This investor selling pace slowed since the mini-bull started in Oct and the insta-jeet went to ~40% (from 75% before). So daily selling went from 1.6 mm to 1.1 mm. Along with alts liquidity this had an immediate positive impact to the ratio.

  • Also note 20 mm GMT was sent from FTX to Wintermute around Dec 1st; all of which jeeted by Dec 15th. This added about 1 mm / day of selling pressure that’s now done. The ratio took a very marked hit during this period and started reverting up once FTX is done.

• If we assume only 40% of investors portion are jeeted for the next couple of months, we are looking at ~1 mm of GMT being dumped daily; but let’s assume it’s 1-1.5 mm jeet daily.

• This all changed when FSL launched its Gas Hero game on Jan 3rd, 2024.

How GH works

• In simplified terms, a player needs to buy a BCV truck + heros to start mining resources (whereby the mined resources are NFTs and not tokens). Heroes can carry weapons + pets (buff attributes), all of which need to be soul-bound to go into battle (and can’t be resold once bound), and die after 20-60 days of usage (except for genesis heroes, btw there are only 2084 of them). All resources can be traded in the in-game marketplace. The 3 ways to acquire resources would be to either farm them (in battle), bid in auction (effectively buying *primary* from the system), and buy in marketplace (effectively buying*P2P* from other players).

• $GMT as the base currency will be used for key functions (breed, level up, etc) and denominate transactions (marketplace, auction, prize pools). Importantly, 50% of $GMT functional usage is burnt (rest goes to FSL), 2% of marketplace royalty goes to FSL, and 50% of auction proceeds is split in half between FSL and burn. This in-app taxation along with the supply sink to prize pool for the 1st cycle should drive material $GMT lock-up shortly after the game launches.

• While the typical low-end users play for ROI (i.e. recycle heros & dump resources into marketplace), the big players are mainly competing for the prize-pool – which is distributed either to PVP winners or area officials. Winning in PVP battles effectively requires spending $ really decking out the hero line-up, while becoming officials would require similar hero-line-ups for smaller areas but increasingly donation / voting-based elections for larger areas. The prize pool = the tax base of the Gas Hero ecosystem (i.e. marketplace & auction house royalty) – importantly, no additional $GMT inflation is emitted in GH; the game is net-burn only.

• The elegance of the economic design should be immediately obvious – In the short-run, entry of new users + reinvestment of existing users guarantee the ROI; but over-time, the big players’ spending aiming to win the prize pool = buying demand for resources = ROI for smaller players. And effectively sunk cost of many & recurring losers in the prize pool competition become the “consumption” that pays for everyone’s ROI. The key to GH’s success imo would be to (a) accrue sizable prize pools, hopefully in millions of dollars and (b) consistently attract (new) whale players who continuously spend and compete. To the extent that GH does become a 100k – 1 mm DAU game (where all players share the same global state + GH being inherently social), the triple satisfaction of global recognition (fame), control over one’s faction (power), and sizable monetary reward (wealth) should drive tremendous dopamine hit beyond any SLG we’ve witnessed so far.

• The positive flywheel goes like this: initial fomo (we are here) -> more new users and reinvestments -> more transactions and thus royalty taxes -> bigger prize pool -> more competition on investing for PvP and donations + more attention on the game -> more new users and reinvestments (and the loop goes on).

• Additionally, the existence of asset lifespan + the option to restart economic cycles by the elders allow for constant destruction of excess production capacity. Assuming relatively stable user attention + wallet share via clever GTM, oversupply of assets + declining ROI can be resolved by sheer passage of time (oversupply -> lower ROI & prices -> letting heroes die -> less production of NFTs -> higher prices if demand stays constant). New seasons mean rule adjustment – which gives new hope & incentives for player reinvestment.

• With GH soon hitting 10k users (6.5 currently) + internal testing data + the current slate of prices (all of which observable on Mooar), we believe that the prize for being the global champion could be easily 200-400k USD, whereby 0.5 mm GMT can be burnt / day + 1 mm GMT being locked with FSL / day. This is around 1.5 mm of GMT going out of circulation on a daily basis. Current Dune analytics is supportive of our estimates. The 1st batch of supply via prize pools won’t be hitting the market for at least 14 days; and after that the meta-game (PVP + common Hero death by day 20) should add more to the burn.

Where we are going:

• So the GMT Supply / demand will flip from 1-1.5 mm daily sale to net-sink right from the start. The marked reversal will only accelerate as GH accrue more users – and if we get a craze like Stepn in the early days of March – May of 2022, I expect the GMT burn to kick into hyperdrive where we get more users in GH = more burn = GMT up = more attention = more users in GH. The added benefit is even Stepn + Mooar may accrue more DAUs in the process and add fuel to the GMT sink.

• I believe western crypto funds are materially underexposed to GMT. The name doesn’t show up on any alleged “gaming beta” threads I read on CT. It’s also very clear to me from speaking to most of these private investors of Stepn (especially those who are jeeting currently) that none of them spend any time on this name anymore, some of them don’t even know what Gas Hero is. You can’t ask for a better uninformed, DPI-driven seller base that are on “autopilot dumping” mode. Once the thesis gets recognized by allocators + more western players find out about GH I expect the flywheel to spin even faster.

• The fun really starts when say we hit 50k DAU + GMT price is high enough where the prize pool for the top-dog winner goes into millions of dollars. No SLG game in the Web2 world had ever seen something like this (i.e. no one actually makes money from SLG games except for the game company). If the FSL team markets this aspect well, I expect the game to have significant pull from the traditional Web2 SLG community + become the 1st megahit title from Web3 in 2024. • At $0.35 today and ~1.6 Bn circulating, GMT is effectively 1/6 of IMX and <1/2 of AXS / SAND / MANA / BEAM. It didn’t get much love at all from the “gaming beta” trade and is due for a catch-up (and in my opinion the best public gaming beta today for Asia, we work with FSL very closely on multiple other gaming / app investments in the region). The GH launch provides both the narrative and the fundamentals for this catchup to occur (and perhaps somewhat quickly) – with the added kicker of westerners recognizing the story (much like Chinese buying Solana coins, or westerners buying ordinals).

FD (but I think everyone knows already): Folius owns a material position in $GMT tokens and the founder serves as an advisor to FSL the company.

FTX info on GMT: https://etherscan.io/advanced-filter?fadd=0xdbf5e9c5206d0db70a90108bf936da60221dc080&tadd=0xdbf5e9c5206d0db70a90108bf936da60221dc080&tkn=0xe3c408BD53c31C085a1746AF401A4042954ff740