A four-part review of Ultra, a Next-Generation Blockchain powered PC Game Distribution Platform.
Welcome to part three of my four-part series on the Ultra platform. In part one I covered Ultra’s team, as well as their partnerships with Ubisoft, AMD, and the as yet unnamed Chinese “Operator”. In part two I covered Ultra’s approach to governance and block producers, their solutions to Steam’s various pain points, the network effects of the Ultra platform, and the new launch window and how it affects Ultra’s chances of success.
And if you haven’t already, you should immediately check out the video demos of the platform below!
So without further ado, here’s reason 9 and 10 of why Ultra is set to disrupt the gaming sector.
In 2020, it’s fair to say that gamers have mostly abandoned sources of traditional media. Youtubers, streamers, gaming websites and other content creators now have a massive influence over the purchasing and playing decisions of gamers. Word-of-mouth and referral based marketing is also one of the most trusted forms of marketing.
Ultra’s referral system provides a powerful financial incentive for these non-traditional sources of media, and even individuals to promote the platform to their audiences, whether that be an audience of millions, or one. As they are rewarded for each and every referral, the bigger their audience, the greater the revenue potential — and hence a stronger incentive to participate.
Referral systems are nothing new of course (although Steam doesn’t have one 😞). What makes Ultra’s system more compelling is that it is smart contract based, meaning every transaction is fully transparent and recorded on the blockchain, being paid instantly to the referrer in UOS tokens the moment the sale occurs.
The Ultra platform will actually have two separate referral programs: a user referral program, and an opt-in content specific referral program. Let’s look at how each of these programs will work, who can benefit from them, and how they will help to grow the Ultra platform’s user base.
Ultra’s Referral Systems
2-level User Referral Program:
This program enables any developer, gamer, or third party to refer other gamers to join the Ultra platform. As a reward the referrer will receive UOS coins every single time the referred user purchases content. If the referred user, in turn, refers someone else to the platform, the original referrer gets an additional cut. The graphic below explains the system in more detail:
Developers will be strongly incentivised through this program to direct their players to Ultra to purchase their games over competing platforms, and will be rewarded each time that player purchases not just their content, but the content of any other developer. It also incentivises the early adoption and promotion of Ultra among third parties such as influencers, streamers, and gaming websites (more on this later).
The UOS tokens for the user referral program will come out of Ultra’s 15% share of sales. This is just part of Ultra’s commitment to re-inject 50% of its revenue share back in to the platform in the form of rewards for players, developers, and influencers that brings new users to the platform.
Opt-In referral program: This program allows influencers, streamers, gaming websites or anybody else to promote content available on Ultra on behalf of developers and get a percentage of the revenue of each sale they direct to the platform. This feature is opt-in and customisable at the time developers list their games on the platform, meaning they choose whether or not they want to enable it and they choose what percentage of the sales revenue they will give up as an incentive. They can also create multiple revenue shares and have them limited to specific beneficiaries, such as a license or IP holder, or a localisation firm.
In the below screenshot, Amplitude Studio has enabled revenue share and set the revenue share percentage at 5% for promoters of the game.
Why it’s good for influencers
In recent years, countless gamers have started live streaming their game performances, with some garnering millions of followers. In 2018, gamers watched over 50 billion hours of gaming related content on Youtube alone. The impact of influencer marketing in the gaming space is already massive and continually on the rise. Influencers are always looking for new ways to leverage their ‘platform’, whether it be through merchandise sales or donations — and Ultra’s revenue share referral program presents what could be a lucrative new revenue stream for them.
When Ultra launches, influencers big and small will have access to a full catalogue of referral offers available that they are free to participate in. While influencers with large mainstream audiences stand to earn the most through these referrals, influencers with smaller, more niche audiences could also earn a significant income by creating content related to games from lesser known developers (that don’t have marketing departments), which may offer more significant revenue shares. It could also open the door for more influencers that want to produce niche content that would otherwise not hold any potential for financial reward. An influencer that streams content from, say, the roguelike genre, could find and review the best new releases within the genre that have referral offers. They may not make enough money to quit their day jobs, but it could amount to a significant additional revenue stream.
In short, Ultra’s referral system could represent an irresistible new revenue stream for many influencers, and provide a new avenue for loyal fans to support their favourite streamers at no cost to themselves.
David (co-CEO) was recently asked about Ultra’s strategy when it comes to influencers and he shared these details:
Why it’s good for developers
Marketing video games is extremely expensive. It also requires a great deal of knowledge and experience to market them effectively, and in today’s overcrowded PC game market, effective marketing is more important than ever. Many smaller developers have no experience or expertise in marketing and no great desire to learn, since their passion lies in creating great gaming experiences, not selling them. Many will enlist the services of a publisher and sign over a large percentage of the revenue from their game in exchange for marketing and promotional support.
Ultra’s referral program presents developers with a new way to market their games that’s both simple, and highly flexible. Instead of going through a publisher, developers can crowd-source the marketing and promotion of their games by offering a highly attractive revenue share. It may not be uncommon to see developers offer a revenue share of 20% or more, since that is likely still much less than what a publisher would demand, and they will have more flexibility around their strategy. For example, the revenue share can be a limited offer, either time based, or until a certain number of units have sold.
This opens up the possibility of some new and very creative monetisation strategies. If a developer enabled a revenue share of 50%, but only for the first 1,000 units, this could potentially spark a number of influencers to aggressively promote the game in an attempt to capitalise on the limited time offer. By the time the offer had ended, there could be enough “buzz” generated by word-of-mouth to sustain sales of the game going forward.
Ultra is even going a step further and kick starting this program by offering an additional 1% of the commission from its token reserve, further sweetening the pot for early adopters. This powerful feature has the potential to create an army of third parties, developers, influencers and even gamers, all promoting the Ultra platform. Which leads us to:
Why it could lead to explosive growth of the platform — A Thought Experiment
The referral programs could be a massive factor in the adoption and exposure of the Ultra platform, and it goes beyond providing incentives for devs and third parties to promote games on Ultra. The Referral systems actually establish a symbiotic relationship between Ultra, developers, and the various third parties by permanently aligning their interests in a true win-win-win situation. I will outline why I believe the referral programs are such a big deal for the growth of the platform with the following thought experiment:
If you have been following the Ultra project (or read Part 1 of this series), you will know that Ultra has significant partnerships and connections in the gaming industry, including influencers. Prior to launch, Ultra will be engaging with many of the biggest influencers/websites/content creators in gaming, and giving them demonstrations of the platform. They will see first hand the strengths of the Ultra platform including the unique features it offers developers and gamers, and probably even some of its top secret features (see “Secret sauce”).
Let’s assume that the Ultra team is as successful at pitching the Ultra platform to these third parties as it has been with developers (150+ signed on, including many of the largest publishers in the world) — and after seeing the platform first hand and the vision of the team and partner’s such as AMD, these third parties also believe that Ultra could be a big player in the industry in the years to come. The most interesting part of the pitch then becomes how they can leverage their ‘platform’ and ‘influence’ in the gaming industry to share in the success of the Ultra platform. The opportunity for these third parties looks something like this:
There are 1.4 billion PC gamers in the world. Since the Ultra platform is yet to launch, aside from UOS holders and beta participants, none of those 1.4 billion gamers will have Ultra accounts. That’s 1.4 billion gamers that could potentially be signed up through the user referral program. For every user they successfully refer to the platform, they will receive a 2% share of the content they purchase on the platform — forever. And they will receive an additional 1% share from any users those initial users subsequently refer to the platform — forever.
For these third parties with audiences in the millions, signing up just 1 or 2% of their followers on Ultra could equate to passive income earnings in the millions of dollars per year (see math at the bottom of this section). The larger the audience, the larger the potential revenue and the greater the incentive to participate and aggressively promote Ultra to their audience.
It doesn’t take much imagination to see there could be an explosion of positive coverage of Ultra at launch by streamers, websites, and other content creators touting (honestly) the strengths of the platform, as they race to refer as much of their audience as possible to the platform as soon as possible (before they sign up on their own, or through someone else’s referral link). The resulting flood of users to Ultra will certainly be great for the ecosystem, and will likely generate even more positive publicity. This will however have a more powerful and enduring effect, the significance of which is difficult to overstate, which is:
All of the developers/influencers/websites/content creators that have referred a percentage of their audience to Ultra now have a powerful financial incentive to make sure their audience is spending their money on the Ultra platform and nowhere else — they will become permanent evangelists of the Ultra platform.
There’s another factor that could play in to this and make their promotion of the Ultra platform all the more effective. We know that many games that launch on Ultra will also launch on Steam. We also know that games on Ultra may have unique features (enabled by blockchain) that are unavailable on Steam and other platforms. If these unique features make for a more compelling gaming experience, it gives evangelists of the ultra platform ammunition to make a compelling pitch to their audiences. There will be a significant financial incentive for them to make a strong case to their audiences why the Ultra version of the game is better. From a gamer’s perspective, if your favourite streamer tells you they bought the Ultra version of the game because it has features ‘x’, ‘y’, and ‘z’ that aren’t available on Steam, there’s a very high probability you will also buy the Ultra version based purely on that recommendation.
There’s more, though. Developers have an even greater incentive to push their audiences to purchase their games on Ultra. Not only will they receive the passive income from the users they have referred to the platform, they also receive 21% more revenue per sale than they do on Steam, and they receive sales revenue instantly at the time of sale. It would therefore be in their best interest to make the Ultra version of their game more compelling to gamers by adding unique features courtesy of Ultra’s NFT functionality. This would not only give more ammunition to those that already want to promote the platform, it could force game reviewers to discuss the differences in the different versions of the game, even if the reviewer does not have a financial incentive to push its audience towards Ultra.
Incidentally, part of the Ultra team’s reserve of UOS tokens will be used to sponsor developers that wish to take advantage of Ultra’s unique functionality, such as the crafting of digital item NFTs.
The benefits to the ecosystem to have so many third parties with so much vested interest in the success of the platform would be difficult to calculate, and that’s just the user referral program. Add to that the effect of these same third parties being able to earn 5%, 10%, 25% (depending on the offer) on every sale they refer to the platform, since it will stack with the user referral share — things could get very interesting.
Influencer ‘X’ has 5 million followers. He manages to sign up 2% of his followers through his referral link (100,000 users). Those users in turn refer one friend to the platform (100,000 additional users). Influencer ‘X’ receives 2% share of all game purchases from the first 100,000 users, and a further 1% share from the second 100,000 users. According to studies, the average PC gamer in the US spends about $60–72 per month on games and game subscriptions. Since gamers typically buy games on multiple platforms, let’s assume the average user spends just $40 on the Ultra platform per month.
A common question asked by people researching Ultra is: “what will cause price appreciation of the UOS token?”. UOS is a utility token tied to the usage of the platform. All purchases of games, virtual items and services within the ecosystem requires the use of UOS tokens. This includes features such as the referral programs, advertisements, trading of digital goods and so on. All transactions are completed on the blockchain with UOS which will cause a constant demand for Ultra tokens as the ecosystem grows. Here I’ll detail a few of the mechanisms that will create the most demand for the UOS token, as well as the various incentives for different users to retain UOS on the platform (not sell it) and hence create a disequilibrium between supply and demand on exchanges.
Game purchases: Every game, DLC, and game subscription purchased in fiat e.g. USD, will be seamlessly converted to UOS on the back-end, meaning the equivalent amount of UOS will be purchased through one of Ultra’s exchange partners . Ultra is expected to achieve millions of users — their Chinese operator has 75 million monthly active users alone, and AMD is conservatively expected to bring 1–1.5 million new users to the platform per month. Millions of users, even on the low end, will mean 10’s to 100’s of millions of dollars worth of UOS tokens being bought on the exchanges per month — significant buy pressure driven purely by utility of the platform. There is a maximum supply of UOS tokens of 1 billion (with minimal inflation), most of which are still locked and will be vested over the months post launch.
Advertising: Game developers, brands and service providers can advertise their games as well as products and services to players throughout the platform using Ultra’s Ad platform. Advertisers can get Ad credits by using UOS tokens purchased on exchanges or from the Ad-platform.
As previously mentioned, gamers are a notoriously difficult demographic to reach through traditional methods of advertising. If Ultra achieves its growth targets (or just a fraction of them), it will be a very attractive platform to advertisers, particularly considering that Ultra’s marketing toolbox allows them to conduct targeted advertising based on user data. It’s difficult to estimate the sort of advertising expenditure we could see on Ultra, but it will undoubtedly have a considerable weight on the ecosystem adding heavily to token demand.
It’s important to note that Ad’s on the Ultra platform will be Opt-In, meaning gamers can choose whether or not they want to be subjected to advertising. If they do opt-in they will be rewarded in UOS every time they watch an ad on the platform.
Ultra Miner: The Ultra platform will feature a one-click miner that mines the most profitable alt-coins for your system configuration and then automatically sells the mined coins and purchases the equivalent amount of UOS on exchanges.
It’s difficult to say at this stage how much demand for the UOS token the miner will create since there are so many unknown variables, such as what percentage of users will mine, profitability and market conditions, as well as machine specifications of users.
Current messaging suggest the Ultra miner is going to be more profitable than many other miners, particularly if you have an AMD GPU!
Just for fun: Assuming just 1 million users on Ultra, 10% of which mine overnight (8 hours), at $2 revenue per 24 hours — total UOS bought (in terms of USD) on exchanges would be around $2 million per month. Based on Ultra’s growth estimates that is a low-end estimate. If we see 10 million users in China alone mining on Ultra, that amount would be orders of magnitude larger.
Incentives for Retention
If Ultra achieves even a moderate level of success, we would likely see many hundreds of millions of dollars worth of demand for the UOS token on exchanges each year from games purchases, advertising expenditure, and use of the Ultra miner. How this will affect the price of UOS will depend largely on how much UOS is retained on the platform and not just converted back in to fiat on the exchanges. The Ultra team has estimated that for every dollar injected in to the ecosystem, at least 40c will be retained on the platform.
When it comes to the role of the UOS token, a key aspect of the philosophy and design of the Ultra platform is that it must be friction-less for users, and corporate ready for developers and third parties. What that means in relation to the average user is that they will be unencumbered by any of the usual hoops associated with blockchain applications, and crypto more generally (they won’t need a Binance account or have to memorise 24 seed words). The platform will work like any other modern user-friendly application without the user knowing that it’s blockchain based and powered by the UOS token. What it means for developers and third parties is that they will not be subjected to any level of risk related to price volatility of the UOS token that they are not comfortable with.
Developers can set the proportion of fiat and UOS they receive for each game sale — 100% fiat, 100% UOS or anywhere in between. Developers decide the level of exposure they will have to the UOS token.
Developers are also able to convert whatever UOS they are holding in to fiat at any time, if they wish to de-risk from potential price volatility. Incidentally, regular users will not have access to this conversion feature, although they are free to withdraw their UOS to a cryptocurrency exchange and sell there.
The fact that it’s possible for a developer to sell games on the platform with little or no ‘exposure’ to the UOS token could be interpreted as bad news for the UOS token. On the contrary, I think it’s emblematic of Ultra’s pragmatic and business focused approach and one of the many reasons developers are signing up en masse. Rather than create artificial demand for the token by forcing developers to receive UOS for game sales, their focus is to instead incentivise adoption of UOS through utility and stake based rewards.
Ultra has various incentives in place for each type of user to either stake or use their tokens through different channels adapted to their particular needs. Let’s look at the most significant incentives, token use cases, and other features that will have the biggest contribution to retention of the UOS token.
There will be staking on the Ultra platform, although it will take a different form to most other cryptocurrency projects. All types of users will be able to stake UOS on the platform, but instead of being rewarded in tokens, they receive rewards in the form of additional benefits, access, and giveaways that enrich their experience and usage of the platform, and that are tailored to the type of user.
Gamers and other regular users can stake UOS to earn rewards in the form of digital items, free games, beta access to games and other bonuses. The probability for rewards is calculated by various staking and participation metrics (listed below). In addition to that, players are incentivised to retain their UOS to get discounted games and to spend on digital goods etc.
As mentioned, advertising will play a huge role on the platform and is a major use case of the UOS token. Developers and third parties are incentivised to stake UOS in order to earn marketing credits that will grant their games greater visibility on the platform. David explains it here:
In addition to that, developers and other business users that will have a high degree of usage of the network will need to stake UOS in order to secure network resources. Staking UOS will grant a user ‘Power’, Ultra’s unique network resource that combines CPU/NET (as in other EOSIO implementations) into a single resource. In the event of network congestion, Ultra executes transactions from users with the highest remaining Power quota first, to the lowest ones, including transactions from users with 0 and negative quotas.
As the network grows in popularity and network congestion becomes more prevalent, one could imagine a large percentage of the total supply of UOS being staked by developers of applications and blockchain based games to ensure their businesses don’t suffer during such times.
Since many smaller developers may lack the resources to stake significant quantities of UOS, Ultra has designed a system whereby any user can stake resources for their favorite services on Ultra such as games, apps, etc, and be rewarded for doing so.
You can read more about Ultra’s resource model here.
Like many other things, we don’t have the full picture yet on staking rewards since we are still a few months away from the launch of the platform. Even post launch we can expect the staking rewards to be something that evolves over time as new platform features emerge (including the secret tech that Ultra is working on), and the Ultra team starts getting data back on how users are utilising the platform, and what they find most valuable and/or useful.
The possibilities remain very open and we could see some really creative ways of rewarding users that provide a strong incentive for them to want to hold on to their UOS.
Digital Item NFT Crafting
For developers another major use case for UOS is in the crafting of digital item NFTs. Every digital item created on Ultra will be fused with some UOS, which will be ‘locked’ within the item. With millions (to billions) of NFTs likely to be crafted, this use case for the token has the potential to lock up a significant percentage of the total supply of UOS. NFTs are such a huge topic when it comes to the Ultra platform that I will cover it separately in Part 4.
Game Development and Acquisition War Chest
Last, but not least, there is Ultra’s “Game Development and Acquisition War Chest”. This feature has 5% of the profit Ultra generates (in UOS) locked in reserve for 2 years to fund exclusive games. This reserve enables Ultra to continually build out the games portfolio which is valuable to all actors in the ecosystem. The locked tokens will come back into circulation at a later time, but when Ultra achieves constant traction on the platform with a healthy growth rate, this feature will ensure there will never be a stage of equilibrium for supply and demand.
Ultra has already demonstrated an impressive list of use cases for UOS and more will undoubtedly emerge. The demand for UOS is inextricably tied to the usage of the platform. If the platform succeeds and millions of gamers are using the platform, demand for UOS token will be huge. If the retention rate of UOS on the platform is 40c out of every dollar, as the team has estimated, and with a limited supply, it’s anyone’s guess what the value of the UOS token might organically climb to. In addition to that, the success of the platform as the first mass market adoption of blockchain will likely make it the most talked about project in the crypto space, which could create a significant amount of speculative interest. For the UOS token, the future looks very bright indeed. 😎
That’s it for part 3, keep an eye out for Part 4 of this series where i’ll cover NFTs as well as Ultra’s much teased and speculated on “Secret Sauce”.
Part 4 is found HERE.
Meanwhile, come join the conversation in the Ultra telegram. https://t.me/ultra_io
Or check out some of Ultra’s other resources:
Thanks for reading!!
Investment Disclosure: I own some UOS tokens.