One of the more commonly asked questions in cryptocurrency circles is, “What is your price prediction for [insert token name]?” It can be fun to speculate on how high (or low) your coins will go, though price predictions are most often based on hope over reason.
That’s not necessarily because people aren’t able to reason (😬), it’s often because there is simply not enough meaningful or historical information to base predictions on. New industries, new technologies, tokenomics — everything is new and there are so many unknown variables. That is not necessarily the case with Ultra.
Yes, Ultra utilises cutting edge blockchain technology, but they are also entering a massive and still rapidly growing industry, and selling a product that literally billions of people already enjoy. This means there is plenty of industry and consumer data available with which to build a basic predictive price model for Ultra’s UOS token. And that is exactly what we will be doing in this article!
Firstly, a brief introduction of the Ultra project and the UOS token:
The Ultra platform is a blockchain-based PC games distribution platform aiming to disrupt the current market monopoly held by Steam. Ultra is the first entertainment platform providing a variety of games industry services under a single roof, accessible through a single login: discover, buy, and play games, watch live-streaming feeds, interact with your favourite influencers, participate in contests, compete in tournaments and much more.
UOS is the native token and life blood of the Ultra blockchain, which is a heavily customised version of the EOSIO code base. 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 which will cause a constant demand for the tokens as the ecosystem grows.
Important: On Ultra, users can pay for games, digital items and much more using fiat (credit card etc) just as on any other platform. That fiat is seamlessly and invisibly converted to UOS on the back-end and paid instantly to the developers/sellers etc. More on this later.
If you want to learn more about the project or want to see the platform in action, check out the links below!
The basic methodology of the price model is as follows:
- Determine a rate of user base growth for the platform.
- Based on the number of users, calculate the expected daily volume of UOS being purchased on the exchanges through the various activities conducted on the platform. These activities include:
- Game purchases 🎮
- Mining ⛏️
- Advertising 📢
- Game reselling 🕹️
- Digital item purchases and trading ⚔️
- Exclusive game launches 💾
3. Calculate the expected daily price movement based on the quantity/value of UOS being purchased.
4. Chart the price movement over a 12 month period.
Determining user base Growth
There are very few blockchain-based projects that have managed to achieve a large mainstream user base. Ultra could be one of the first, with plans to aggressively grow its user base through partners such as AMD, which will be giving away free games with their GPUs that will be redeemable on Ultra, and even prompting users to install Ultra when they update their GPU drivers. Based on previous partnerships, it’s estimated that these promotional activities will bring Ultra an additional 1+ million users per month. Ultra also has an unannounced partnership with a Chinese gaming giant with a reported 75 million monthly active users (MAUs).
As for Ultra’s competitors, both Steam and Epic Game Store have enjoyed significant increases in their respective user base over the last few years. Steam has gone from 67 million (MAUs) in 2017 to over 120 million in 2020. Meanwhile, Epic games has gone from 32 million in 2019 to 56 million, largely through free game giveaways.
We are not going to try to predict what Ultra’s user base will be after 12 months, as that would be highly speculative. Instead we are going to explore a few different scenarios based on user base growth and what they would mean for UOS price growth.
- Scenario 1: Starting from zero users, Ultra grows linearly to 1% of Steam’s user base after 12 months (1.2 Million users).
- Scenario 2: Starting from zero users, Ultra grows linearly to 2% of Steam’s user base after 12 months (2.4 Million users), during which period Ultra has an exclusive game release.
- Scenario 3: Starting from zero users, Ultra grows linearly to 10% of Steam’s user base after 12 months (12 Million users), with two exclusive game releases.
Calculating daily UOS purchase
Now that we have established our user numbers based on the scenarios above, we need to calculate how much each user will spend, mine, and engage with advertising on the platform on an averaged daily basis.
Game purchases 🎮
To calculate the average daily game purchases from users on Ultra, we look to none other than Steam. In 2017, Steam reported $4.5 Billion in annual revenue from 67 million monthly active users, giving an average annual revenue per user of $64. Let’s round it down to $60 so we can imagine that each user buys three x $20 games per year.
While Steam is very well established and has thousands of games, it’s not unreasonable to predict a similar expenditure from users on Ultra. Particularly when you consider Ultra’s users will in theory have more money in their pockets through being able to resell their games and digital items, as well as earn via mining and opting in to view ads on the platform.
If a user buys a $20 game on Ultra, that does not mean $20 of UOS is purchased on the exchanges. So, how much does get purchased? There are a few additional variables which determine the amount of UOS and which we will have to set as part of the model. They are as follows:
- The percentage the developer wants to receive in UOS
On Ultra, developers receive an 85% share of game sales, a significantly higher share than on Steam. When a developer publishes a game on Ultra they decide how they want to be paid — 100% in fiat, 100% in UOS, or a combination of both. If they elect for 100% of their share to be paid in UOS, then that conversion will take place on one of Ultra’s exchange partners and they will receive their share 100% in UOS tokens. Conversely, if they elect to be paid 100% in fiat, then no conversion takes place, meaning no UOS will be purchased on exchanges (at least not for their share of the sale) and they will receive their share in their preferred fiat currency instead.
This is not a bad thing. No large developer would ever sign up to a platform that forced them to accept full payment in the form of a potentially volatile cryptocurrency (even if it’s value trended upwards 🤑). That would pose a completely unacceptable risk to them.
Fortunately, there are many incentives for developers to want to hold UOS, which will likely be amplified as the platform matures. Staking UOS for ‘Ultra Power’ (Ultra’s unique network resource that earn stakers transaction priority), advertising, minting NFT’s and more. Therefore, we set the percentage the developer wants to receive in UOS at 20%. That’s 20% of their 85% share.
In this case, a single purchase of a $20 game would trigger a $3.40 buy of UOS on the exchanges ( $20 x 85% x 20% ). I.e. $3.40 out of the $20 will be converted to UOS on the exchanges and paid to the developer.
2. The percentage Ultra wants to receive in UOS.
Ultra of course receives a 15% cut of every sale. They too can decide how much fiat or UOS they receive. Since Ultra is a company with 65+ employees to pay, they may elect to be paid predominantly in fiat. For the purpose of this exercise, I will conservatively say they will choose for 10% of their share to be paid in UOS.
In this case, a single purchase of a $20 game would trigger a 30c buy of UOS on the exchanges ( $20 x 15% x 10% ).
3. The percentage revenue share for promoters set by the developer.
When a developer publishes a game on Ultra they can enable revenue share, which gives a percentage of the sales revenue to promoters of the game. The revenue share can go to a specific entity, such as a publishing firm handling the marketing for the game, or it can be for anyone and everyone that wants to promote the game — think influencers, streamers, websites, content creators etc. Promoters are paid their share in UOS tokens.
This incredibly powerful feature essentially allows developers to crowd-source their marketing. Imagine an indie developer that has just finished a great game but they have zero expertise in marketing, and zero money left to pay a publisher to market their game. On Ultra they could enable a 60% promoter fee on the first 10,000 copies of the game and enjoy an explosion of coverage from promoters trying to cash in on the offer. By the time the offer expired there could be significant word-of-mouth effect to sustain strong sales.
It’s not uncommon for developers to pay in excess of 30% share to publishers to market their games. We hope this will be less on Ultra, but there will be competition among developers when it comes to attracting promoters. Still, in the spirit of wanting game devs to get a bigger piece of their own pie, we have set the average revenue share for promoters at 15%.
In this case, a single purchase of a $20 game would trigger a $3 buy of UOS on the exchanges (20$ x 15%).
4. The percentage referral fee.
On Ultra there is a also a two-tiered referral program which enables any developer, gamer, or third party to refer other users to join the Ultra platform. As a reward the referrer will receive a 2% share every single time that user purchases content on Ultra. If the referred user, in turn, refers someone else to the platform, the original referrer gets an additional 1% share. The referrers receive their payment fully in UOS tokens.
We have set the average percentage referral fee at 2%. In this case, a single purchase of a $20 game would trigger a 40c buy of UOS on the exchanges (20$ x 2%).
In total, using the variables outlined above, the purchase of a $20 game will trigger a $7.10 buy of UOS on exchanges.
Since we have our expected annual revenue per user of $60 we can easily calculate the expected average daily revenue to be around 16c. We are estimating that around 35% of that will be converted to UOS and paid to the various parties, giving us an average daily UOS purchase per user from game purchases of just under 6c. If we were to extrapolate this out to scale, for every one million users on the platform, roughly $58,000 in UOS will be bought on exchanges daily as a result of game purchases.
As mentioned above, Ultra will have a one click mining solution provided by CUDOS. Gamers around the globe will be able to use their idle computing power to easily generate income at the click of a button. The profits are automatically converted to UOS on the exchanges and delivered to the users wallet.
Using a crypto mining calculator, we find that mining Ethereum on a decent gaming machine will generate a daily revenue of $2.319. It’s worth noting that the profitability of mining on Ultra will be higher since the CUDOS miner automatically mines the most profitable alt-coins and also performs more profitable computational tasks in AI, video rendering, and other fields.
If we assume that, conservatively, just 15% of monthly active users will mine for 8 hours a day, that would represent a daily per user revenue of around 12c. If we were to extrapolate this out to scale, for every one million users on the platform, roughly $116,000 in UOS will be bought on exchanges daily as a result of mining on Ultra.
Advertising will also play a role on Ultra, but in a good way. Firstly it will be opt-in. If users don’t want to be subjected to advertising then they can opt-out. If they opt-in they will receive a 50% share of the advertising cost in instant UOS payments each time they view an advertisement. This could take the form of a banner ad on the storefront or a trailer playing before you launch a game, for example.
I reached out to the Ultra team and they provided me with some details on the types of advertising and ballpark numbers for pricing. Ultra uses CPM (cost per mile) pricing whereby advertisers are charged per thousand impressions. The cost of advertising on Ultra ranges between $15 and $20 (CPM).
If we imagine that only 50% of users will opt-in to advertising on Ultra, by setting some basic assumptions about how often users will be subjected to the various types of ads on Ultra, we can calculate a daily revenue per monthly active user of around 4c (user’s share only). This means for every one million users, roughly $39,000 in UOS will be bought on exchanges daily as a result of opt in advertising on Ultra.
At scale, Ultra will have an extremely attractive demographic of users for advertisers and could command even higher CPM rates like those of Microsoft’s Xbox.
Steam and other digital distribution platforms have eradicated the idea that you own the games you buy. Ultra is restoring true ownership of games by allowing users to resell their digital games.
The resell feature is an opt-in feature on the developer side but they are incentivised to do so by giving them the ability to control the conditions of the secondary market. For example, they will be able to set a minimum resell price, set a period during which it can’t be resold (e.g. one month after launch date), and most importantly they can set a percentage revenue share so they get a cut of every sale. Users can buy second-hand games with fiat or UOS, but it is always fully paid to the seller in UOS tokens.
In order to model the revenue for game resales, let’s make the following assumptions:
- 50% of developers opt to allow their games to be resold.
- Gamers sell 60% of their games.
- The games are sold for 50% of their original value.
- Every game that gets purchased gets resold twice.
With the above variables, we can calculate the total value of game resales with the following formula: Total game sales x 50% x 60% x 50% x 2. This gives us a daily revenue per user of over 5c. At scale, for every one million users roughly $51,000 in UOS will be purchased daily on exchanges from game resales on Ultra.
Ultra will feature an NFT marketplace not only for games but also for digital items, game accounts, community mods, and much more. We know from data available on popular games like FIFA that more revenue is generated from in-app purchases than sales of the game itself, and many of the biggest revenue generating games are free-to-play. The market for digital items has been growing rapidly for years and looks set to explode with the advent of NFT technology which provides true ownership and verifiable scarcity of digital assets.
It’s a bit difficult to predict how the NFT space will grow over the next few years since we have barely scratched the surface of the possible applications of NFTs. But for the purpose of this exercise we will conservatively assume that for every $1 a user spends on games, that user spends 50c on NFTs.
Total game sales revenue x 50%. This gives us a daily revenue per user of over 8c. At scale, for every one million users, roughly $84,000 in UOS purchases will be generated daily from NFT purchases.
In total, for every one million users on Ultra, $348,000 in UOS purchases will be generated daily. Below we can see the contributions by type.
Even with our conservative inputs, mining provides the most significant contribution by some margin. Over time I believe we will see the NFTs contribution grow significantly, and as the user base grows and the platform becomes more attractive to advertisers, I would expect to see ads grow as well.
Game Exclusives 💾
A successful exclusive title could potentially bring millions of users to the Ultra platform and hence will be an important part of Ultra’s strategy to rapidly grow its user base. One exciting thing about exclusives on Ultra is they will most likely make extensive use of Ultra’s technology — which means a big focus on NFTs. The first Ultra exclusive could be the one of the best early examples of the new creative possibilities that exist for game developers on Ultra.
Because exclusive titles will have such a significant impact on user base and revenue, we would be remiss if we did not account for them in our price model. We used the following assumptions:
- Each game adds 2 million users.
- The users are added over the space of 10 days (1 million the first day, 500k the next, 250k the next, and so on for a total of 10 days.
- Each of the 2 million users makes a one-off purchase of a $20 game.
As mentioned above, we will be including exclusive game launches in Scenario 2 and 3 to see what the effect they may have on the token price.
Calculating the expected daily price movements
In order to model price movement, we need to calculate the expected price movements based on the value of UOS purchased. On Coingecko you can view the market depth for each token, by exchange. For example, if we look at Theta’s token, there is approximately $2 million of liquidity between the current price and the current price +2%. So a $2 million buy of Theta across exchanges would theoretically move the price +2%. So, how do we predict the market depth for UOS?
Current liquidity for the UOS token is quite low, which means large buy orders have a significant impact on token price. We will assume that by the time Ultra launches to the wider public, the liquidity situation will have improved to the extent that the ratio of market depth to market cap for UOS is similar to other mid-large cap projects, such as Theta. It is important we use a ratio since we would expect the market depth to increase alongside the marketcap. The ratio is simply market depth across all exchanges (+2%)/marketcap.
I sampled 10 mid to large cap crypto projects to find an average ratio of around 0.058%. That means when UOS has a market cap of $1 Billion, it will have a market depth (+2%) of $600,000, i.e. it would take $600k of UOS buys to move the price 2%.
Charting the price movement
Now that I have explained the methodology and described all the variables and assumptions required to create a working model, we can chart the price movement based on the three scenarios outlined above!
- Starting from zero users, Ultra grows linearly to 1% of Steam’s user base after 12 months (1.2 Million users).
- Starting token price $0.25
- Starting from zero users, Ultra grows linearly to 2% of Steam’s user base after 12 months (2.4 Million users).
- One exclusive game release at Day 120.
- Starting token price $0.25.
Analysis: We can see that the exclusive game launch has a significant impact on the price as a result of a huge increase in UOS buys. Because we assume the new users who join for the exclusive will also be mining, watching ads and purchasing NFTs at the same rate as any other users, the large influx of new users puts the chart on a steeper trajectory towards $22.75 at the end of 12 months.
- Starting from zero users, Ultra grows linearly to 10% of Steam’s user base after 12 months (12 Million users).
- Two exclusive game releases at Day 120 and Day 240
- Starting token price $0.25
Analysis: We can see that because the user base is more established, resulting in a greater marketcap and higher liquidity, the effect of the exclusives is less explosive as in scenario 2. Still, the long term effect is significant — with the price of the UOS reaching $67.45 after 12 months ($49.24 without the exclusives). Price hits $28 on Day 239.
What the model doesn’t take into account
The main purpose of the model is to show how user adoption produces buy pressure for UOS on exchanges and so there are a few things it doesn’t take in to account. For one, the model assumes games and NFTs etc are purchased 100% in fiat, it doesn’t account for users purchasing either fully or partially in UOS. As the ecosystem matures, we might expect users to become more UOS-rich and the percentage of UOS used to pay for games and NFTs etc will increase. The price rises when the amount of fiat being converted to UOS exceeds the amount of UOS being sold, therefore, as less fiat is used we could eventually see a leveling off of the price of UOS.
However, that could very well be counterbalanced by the effect of a gradual reduction in the supply of UOS, which is another thing the model does not take in to account. The circulating supply of UOS is expected to drop over time as a result of various factors such as staking, NFTs, the game acquisition war chest, and idle UOS. Let’s have a look at them:
Staking — Developers who require a lot of network resources will need to stake for ‘Ultra Power’, which grants transaction priority, in order to ensure their games and applications run smoothly. Users can also stake and grant their ‘Power’ to their favourite developers and be rewarded in UOS and other perks. We can expect a large percentage of UOS to be staked (depending on the staking ROI).
NFTs — Every NFT minted on Ultra requires a small amount of UOS to cover the RAM cost (and prevent spam). Additional UOS can also be ‘locked’ in NFTs, giving them more value. Users can ‘break’ NFTs to retrieve the locked UOS. Over time we would expect a significant amount of UOS to be locked in NFTs.
Game Dev and Acquisition War Chest — Ultra will lock 1% of their share of the revenue away (in UOS) to fund exclusive games and/or bring new services to the platform. For the three scenarios above I calculated the total value in UOS that will be amassed by the end of the 12 months. They were as follows:
- Scenario 1: $308,971 (60,774 in UOS)
- Scenario 2: $2,549,051 (112,062 in UOS)
- Scenario 3: $7,290,473 (108,090 UOS)
We can see what a significant effect exclusive games have on the war chest value (scenario 2 and 3). The positive feedback loop of the war chest bringing more and better exclusives to Ultra, further growing the war chest, could be quite incredible.
Idle UOS — Typical users on Ultra will not be able to convert their UOS to fiat on the platform. They would have to withdraw it to a cryptocurrency exchange to do that and we can assume the vast majority would not. That means that the UOS users earn from watching Ads, mining, selling NFTs etc is essentially taken out of the circulating supply until the user spends them on his/her next game or NFT. This is analogous to the small amounts of Ether that sit in millions of ERC20 wallets. Of course we shouldn’t assume all users will spend their UOS at the next available opportunity. Some will surely notice that the purchasing power of their UOS keeps going up and decide to hold on to it, or even try to get their hands on more!
As the development of Ultra continues we can expect to see more and more use cases for UOS that would have further implications for the circulating supply.
Lastly, it doesn’t take in to account general selling of UOS by non-typical users. For example, power users such as big influencers most likely will have the ability to cash out their UOS on the platform, as they should. This will likely balance some of the buy pressure we have modelled above.
The primary goal of this article is to illustrate the potential for organic appreciation of UOS token value with increasing platform usage and adoption. There are many other variables that will come in to play over time, so the above calculations should serve as a rough guide only.
One final and important aspect to recognise here is that the predicted price movements we see in the above scenarios are a representation of organic price growth as a direct result of the revenue generated from user adoption of Ultra. They do not in any way account for any increase in the perceived speculative value of UOS as a result of that adoption. Because let’s be real, if Ultra does manage to achieve just 1% of Steam’s user base and hits 1+ million monthly active users, Ultra would become one of the most recognised projects in the space — presumably the speculative interest in UOS would follow suit.
I hope you have enjoyed this article!
If you want to sign up to Ultra, the wallet only client is now available which will automatically update to the full client when it becomes available, so secure your preferred username now!
You can also read our 4-part in-depth review of Ultra here.
Disclaimer: We are not affiliated with Ultra in any way, though we are enthusiastic about the project. We own some UOS tokens. None of the above constitutes financial advice.