Whitepaper: Reputation as Credit

Sharing Web3 game assets, permissionlessly.

Update: 3 May 2024.

Our whitepaper is currently outdated, given the recent developments at Echelon Foundation's Bonds. The whitepaper currently acts as a historical reference but the core tenet abstracted on this whitepaper still continues to elucidate the overall vision of what we're working towards.

Abstract

This whitepaper summarizes ParagonsDAO’s player management protocol—an innovative, permissionless solution that manages lending of our vast collection of playable Web3 game assets to the most deserving players.

It describes how playable assets will be loaned to players for free, prioritizing the most in-demand assets for those who build credit by proving they can productively use the assets. To illustrate how this works, the paper details the core elements of the protocol, which include i) assessing player outcomes, ii) a non-transferable identity NFT with a Level system, and iii) on-chain experience points as currency to borrow NFT assets.

Background

Free, permissionless access to Web3 game assets

Web3 games are designed in a way that allows players to earn game tokens (usually a cryptocurrency) as rewards, but they generally require players to use playable NFT assets—often at a substantial upfront cost to the player—to earn meaningful rewards.

We’ve acquired a significant inventory of top playable assets for several up-and-coming Web3 games with the intention of making them accessible at no cost to players. In return, players share earnings with ParagonsDAO, allowing players to optimize their earnings without needing to own all the NFTs, and ensuring our NFTs are being used productively.

The way most guilds are set up today requires centralized intervention to lend out game assets. We’re looking to create an objective solution that aligns lending of our assets to desired behavioural outcomes—prioritizing lending to players who show commitment, potential, skill, results and who put the assets to the most optimal use. We want to reward and recognize reputation and behavior.

Why reputation?

Reputation is one of peoples’ most valuable assets. From employment, to financial habits (e.g. credit score) and social media followers, reputation is core to human identity—and is an ongoing transaction.

Web3 provides unparalleled opportunity to build and track identity and reputation, given the public and immutable record of activities tied to addresses on the blockchain.

Using this technology, we’re building an on-chain solution to track players’ gaming outcomes, NFT borrowing activities, utilization and many additional factors (which can come from any verifiable data sources) to create a comprehensive picture of their reputation, rank, and overall gaming “credit score”.

Our player management system will be enabled by a non-transferable (”soul-bound”) composable NFT (ERC-721 standard) to represent overall reputation and credit score (referred to in this document as the ParagonsDAO Player NFT or PDP NFT), in addition to a soul-bound tokens (ERC-20 standard) to represent a player’s experience points (referred to in this document as ParagonsDAO Experience Points or PXP).

These elements will be fed by a Player Outcome Matrix that assigns weighting to specific gaming outcomes we want to see, influencing both the experience points a player receives and their overall reputation and credit.

The Player Management System

Paragons Score: Weighted Scoring through the Player Outcome Matrix

The Player Outcome Matrix is the method for taking data from relevant in-game actions, and feeding that through an algorithm that provides a weighted score ($W_s$) for gaming outcomes. A player’s weighted score for a game influences the credit they can earn (experience points/PXP) for playing with our assets.

Each game we lend assets for will have its own Player Outcome Matrix based on relevant metrics for that game.

The weighted score can be expressed using the following calculation:

$$W_s = 10*(\sum_{n=1}^N (\frac {G(n)}{G_{max}} *W_a)) - (\sum_{n=1}^N(W_a-\frac{1-O_{min}}{O(n)}*W_a))$$

The weighted score metrics only considers when a player borrows assets from ParagonsDAO. That is, it does not factor in a player’s overall gaming record when they play with their own (or another guild’s) assets.

In order to provide a reliable weighted score, there will be a minimum threshold of games played to create a fair and balanced assessment from the Player Outcome Matrix (for example, 50 games). For new players (and new games) in which a reliable weighted score cannot yet be calculated, there will be a more relaxed strategy in place as players build their weighted score.

Example

Let’s explore a potential a player outcome matrix for a contemporary Web3 trading card game (TCG).

First, we must define the metrics used in that game’s Player Outcome Matrix, in addition to to the assigned weighting of that metric ($W_a$). In this example, let’s use the following metrics:

In this example, we have two players with different participation rates, skill sets, earnings and average length of play.

To calculate each player’s weighted score, we apply the metrics above to this formula:

$$W_s = 10 *(\sum_{n=1}^N (\frac {G(n)}{G_{max}} *W_a)) - (\sum_{n=1}^N(W_a-\frac{1-O_{min}}{O(n)}*W_a))$$

Player 1

$$W_s = {10 * [(\frac{56}{125} * 0.3) + (\frac{0.59}{0.65} * 0.4) + (\frac{5}{5.6} * 0.3)] - ([(0.1 - \frac{1-190}{235}*0.1) + ((0.1 - \frac{1-180}{270}*0.1) + ((0.1 - \frac{1-95}{170}*0.1])}$$

$$W_s = 6.69$$

Player 2

$$W_s = {10 * [(\frac{125}{125} * 0.3) + (\frac{0.4}{0.65} * 0.4) + (\frac{2.9}{5.6} * 0.3)] - [((0.1 - \frac{1-190}{400}*0.1) + ((0.1 - \frac{1-180}{350}*0.1) + ((0.1 - \frac{1-95}{100}*0.1])}$$

$$W_s = 5.95$$

Player 1, who has played less games with Paragons’ assets overall, has a better win record, average game rewards, and shorter overall game times. His weighted score reflects his increased ability to play and earn productively using the assets he borrows from us.

PDP NFTs: On-chain player identity and history

The ParagonsDAO Player NFT (PDP NFT) serves as one’s on-chain player identity. It’s the central element to our player management system and a player’s key to using our assets. It’s a non-transferable (”soul-bound”) composable NFT that anybody can mint, with the potential to become tradeable following certain achievements.

It’s a showpiece, a practical access pass to borrow resources, and an immutable record of a player’s history, reputation and credits. It works hand-in-hand with experience points (PXP) and the Player Outcome Matrix.

The PDP NFT the central element of player identity. In addition to how a player is visually represented in the Paragons ecosystem, it’s also an immutable, soul-bound record that represents their entire player history—similar to a credit report.

Visually, it’ll contain some standard fields that will display for all users (e.g. avatar space, level, weighted score, current experience points) and several additional composable elements that a user can highlight (e.g. avatar, badges, achievements, earnings etc.)

It’ll be fed by metadata from several on and off-chain sources, including elements of our Player Management System (like PXP and the Player Outcome Matrix for each game they play), additional game-related statistics, badges and achievements, POAPs, game-token rewards, and more.

Level System

Players attempt to increase their Level (represented on their PDP NFT) to gain additional clout, access to better NFT assets and additional perks.

The benefits of increasing your level may include, among others:

• Access to different pools of assets (more unique and premium)

• PXP multipliers on wins (e.g. Level 1 earns 100%, Level 2 earns 150%, etc)

• Increase in rake return on P2E rewards with ParagonsDAO assets

• Access to special events, tournaments or prize pools

• Early access to future releases within ParagonsDAO

• Merchandise and pack drops of assets

• Additional token staking pools for P2E reward bonuses

• Ability to sell/transfer PDP NFT (e.g, a top professional player retires and sells their PDP NFT as a collector’s item)

Level upgrades will be available to players who reach certain performance criteria, such as PXP earned and weighted score. To upgrade their level, a player will spend a defined amount of PXP.

Each Level will have access to a different pool of NFT assets, where they can spend earned PXP to borrow assets. Each Level’s pool will use relative pricing strategies appropriate for the number, skill and outcomes of players in the Level. This might include different NFT utilization targets, Rental Rates for NFTs.

Level Multiplier

Each Level will have a different PXP multiplier applied to wins, meaning players in higher levels will earn more PXP for a win relative to players with similar stats in a lower Level.

The Level Multiplier drives the ability to reach the milestones needed to continue to Level up. It also helps define any additional PXP cost to borrow NFTs that may be available in more than one Level/ pool.

For example, if Level 1 has a 100% multiplier and Level 2 has a 150% multiplier, a player in Level 2 will earn 50% more PXP for a win than a player in Level 1, and may need to pay 50% more PXP to borrow an NFT available to both levels. However, the multiplier will put the player on Level 2 on a faster track to earning the PXP required to Level Up to Level 3.

PXP: Experience Points (XP) through an ERC-20 Token

PXP is a player’s on-chain currency of reputation—credits that an individual can earn from gameplay, and spend within the player management ecosystem.

It’s a non-transferable (soul-bound) ERC-20 token primarily earned by winning games (though a minimum threshold is maintained/replenished for those who don’t win). PXP can only be used to spend (i.e. burn tokens) for access to pools of NFTs. It cannot be traded and therefore will not have a market value.

We are exploring several options to minimize transaction fees related to earning and spending PXP.

Earning PXP

There are two ways to earn PXP - through winning games and through replenishment.

Winning Games

Winning games is the best way for players to earn PXP, which can then be spent to borrow playable NFTs.

PXP will be distributed to players each day, assuming they’ve won games that day. The daily PXP distributed will be calculated by multiplying a player’s Daily Wins (Dw) in a given game with their Weighted Score (W_s) and their Level Multiplier (Lm)

$$PXP \space per \space day \space = Dw*W_s*Lm$$

Level Multiplier (Lm) is further described in the Level System section.

Replenishment

Our replenishment model grants players who aren’t performing well limited access to playable assets in order to play, learn and grow, while still prioritizing utilization of the assets for those who are performing and therefore can spend more PXP to borrow top assets for longer periods.

Access to NFT rentals requires players to spend their PXP. As such, there will be cases where players’ PXP balance falls below the threshold required to rent the assets within their Level’s pool of NFTs (particular in the case where they aren’t winning games).

When this happens, players will receive PXP replenishments until they hit the minimum threshold of PXP required to rent the basic required assets for 1 hour, in that Level’s NFT pool, twice (based on the average rental cost in the past 24 hours).

Players under the threshold (2x average rental cost in past 24 hours) will receive replenishments up to this threshold, with amounts awarded per second until the threshold is met. Once a player is at or above the threshold, they can only earn PXP by winning games.

For example: If a player only has 5 PXP and the average rental cost in the past 24 hours was 10 PXP, they’ll receive replenishments until they have 20 PXP (at a rate of 20 PXP/24 hours, released per second). Given they already have 25% of the PXP threshold, they can expect their PXP to be fully replenished to the minimum threshold in 75% of the time, or within 18 hours.

Spending PXP

The purpose of PXP is to spend it (technically, burn it) in exchange for access to borrow from pools of playable NFTs.

The PXP cost of borrowing these NFTs (Rental Rate) is dynamic and based on their utilization rates. In short, in periods of higher demand, it will cost more PXP to borrow assets (and vice versa).

Players will also be able to spend PXP to increase their Level, enter tournaments and more.

The PXP we charge for players to borrow NFTs must be fair for all players with access to a given NFT pool, and provide the opportunity to increase their PXP. Given our playable NFTs are finite, we also need to consider their utilization rates in the PXP cost to borrow (e.g. higher utilization = more demand = higher cost).

To calculate a player’s PXP cost to borrow NFT assets for 1 hour (known as Rental Rate ($R_r$), we use the following formula:

$$R_r = \frac{Total \space PXP \space earned\space in \space pool \space (24h)}{Total \space players \space in \space pool}*R_p*Lm$$

The Rental Rate formula and examples in the section consider the cost for a player to access an entire pool of playable NFTs and borrow what they need for 1 hour. We’re also exploring utilization rates for players who want to combine their own assets with some borrowed assets, pricing the Rental Rates accordingly for individual cards. This may not be available at initial release.

The Rental Rate is determined by the average earnings of the group’s performance from the previous 24h—though over time, we may adjust this to capture a longer time period. This formula is applied against each pool of NFTs, aligning to the Level a player has achieved—keeping the Rental Rate relative to the skill base and PXP earnings of each Level’s player pool.

It’s multiplied by the Rental Premium ($R_p$) outlined below, and the Level Multiplier ($Lm$) described previously.

Rental Premium

Where utilization ($U_t$) is below the optimal rate, the rental rate follows a shallow price curve ($R_{slope1}$) leading up to the optimal utilization rate.

$$if \space U_t < U_{optimal} : R_p = R_0 + \frac{U_t}{U_{optimal}}R_{slope1 }$$

Where utilization is above the optimal rate, the rental rate follows a steep price curve ($R_{slope2}$), meaning the PXP cost to borrow assets will be much greater the closer its utilization is to 100%.

$$if \space U_t ≥ U_{optimal} : R_p = R_0 + R_{slope1} + \frac{U_t-U_{optimal}}{1-U_{optimal}}R_{slope2}$$

If the optimal utilization rate for an asset was 90%, here’s how you might expect the price curve to look if the curve leading up to optimal utilization (R_{slope1}) was 30%, and the price curve above optimal utilization (R_{slope2}) was 80%.

Example

Now that we can find the Rental Premium ($R_p$), let’s apply that to find the Rental Rate ($R_r$) of an NFT. As a reminder, the formula is:

$$R_r = \frac{Total \space PXP \space earned\space in \space pool \space (24h)}{Total \space players \space in \space pool}*R_p*Lm$$

Assumptions:

• Total players in pool = 7

• Total PXP earned in pool (24h) = 227.15

• Average PXP earned in pool (24h) = 32.45

• Rental Premium ($R_p$) at 45% utilization = 15%
• Rental Premium ($R_p$) at 95% utilization = 70%
• Level Multiplier ($Lm$) at 100%

If NFT Utilization in the pool ($U$) was 45% (creating a 15% Rental Premium ($R_p$), the Rental Rate for 1 hour of borrowing would be 4.87 PXP. This is a relatively insignificant percentage of the average earnings from the past 24 hours.

$$R_r = \frac{227.15}{7}*0.15*1 = 4.87 \space PXP$$

If Utilization was 95% (with a 70% Rental Premium), the Rental Rate would be 22.72 PXP—a large percentage of the average PXP earnings from the past 24 hours.

$$R_r = \frac{227.15}{7}*0.7*1 = 22.72 \space PXP$$

This would encourage players who cannot easily recoup the PXP through wins to wait until Utilization on that asset is lower before borrowing it, saving high demand assets at peak times for the top players in that pool (who can spend more PXP and are more likely to recoup the cost).

Conclusion

Our Player Management System provides a unique, permissionless solution to lending our vast collection of playable NFT assets to any player with no up-front cost to earning meaningful rewards from the games we’re involved in.

When players create their PDP NFT, they’ll immediately be able to borrow from a pool of NFTs that can become more expansive and profitable as they prove their potential. This naturally creates an ecosystem where players who’ve built the most positive reputation (similar to credit history) have greater access to the highest-demand assets that are more likely to yield greater revenue.

Players only need reputation as a currency to win with us. This opens the doors of profitable Web3 gaming to countless individuals—from casual gamers who can’t commit to a whole collection of playable NFTs, to the next top professional in a developing country who just doesn’t have the money.

Through a unique combination of the soul-bound PDP NFT and PXP (fed by the Player Outcome Matrix), players self-manage how they borrow and play-and-earn with ParagonsDAO. We believe this system will maximize utilization of our NFT assets, financially benefitting the DAO along with the thousands of players our assets will support.