As someone who grew up in the ‘90s, Pokémon brings back true nostalgia (Pokémon Red, Bulbasaur starter for life). It’s success and appeal are undeniable — not only is it the highest-grossing media franchise of all time, but countless subsequent titles drew inspiration from it, including Axie Infinity. The formula works, which is why I’m forced to look more closely into one upcoming Web3 gaming title in particular that has a love-hate relationship within the NFT world — Pixelmon.
What follows is an analysis and general overview for those like me wanting to catch up on recent developments as well as have a look at future potential and risks. Info here covers the project’s 35+ blog posts, input from prominent investors on Twitter, personal views and more. This is an objective take as I have never owned a Pixelmon NFT and do not currently have a stake in the project.
In short, although still a ways off before release with plenty of hurdles ahead, some renewed buzz is justifiably starting to build and the project warrants keeping an eye on moving forward.
Pixelmon Origins
The original pitch for Pixelmon was simple — create an open-world, Pokémon-style NFT RPG game. Sounds awesome. I distinctly remember the day of the highly-anticipated mint in February 2022. I was at school and was considering running back to my apartment to join in, but given the pricey 3 ETH mint (Dutch auction format) ultimately decided to sit out. Others had similar enthusiasm, which led to the project minting out in less than a day and raising more than $70 million in ETH in the process. This still stands as one of the biggest NFT launches ever.
There was only one issue — the project’s founder, 20-year-old Martin van Blerk, was admittedly in over his head. The idea was great and expectations were high, but there was no concrete plan for development in place which soon became apparent when the artwork for the NFTs was revealed. See below for a few examples.
Half-assed and memeworthy to say the least. The last of these, simply named “Kevin,” was so bad that it became good in the eyes of a community that appreciates its memes, and has since become an historical NFT commanding above-market value to this day. And if this were the art, you can guess what the status of game development was.
To top it off, rumors soon started circulating of van Blerk going on an NFT shopping spree using the funds from the $70 million sale. After this chain of events how can you blame the community for labeling the project a rug? NFT prices soon fell off a cliff, and for most people, this was the last they heard or thought of the project again.
The Turning Point
Fast forward to today — Pixelmon was definitely not a rug and its team is actively working toward a playable MMO that captures the original vision of the project and more. So, what happened?
It all starts with new leadership and van Blerk’s willing to step aside. van Blerk probably could’ve rugged and ended the project right there and then after mint, so to be fair at least a tip of the hat must be given for him to recognize his failures and attempt to make things right.
“I’ve taken steps not only to realise that, okay, maybe I was out of my depth, but to say, ‘OK, how can I do the best going forward and what steps can I take to bring in people that have experience’.” — Martin van Blerk, Pixelmon founder
And then the turning point — in September 2022, it was announced that LiquidX, a Web3 venture studio, acquired a 60% stake in Pixelmon. LiquidX co-founder Giulio Xiloyannis took over as CEO, a new team was put in place and an entirely new roadmap was structured (all to be discussed). The ~$50 million still available from the mint was also secured through a multi-sig wallet setup, which Xiloyannis credits van Blerk for allowing him to put in place quickly.
It was an agreeable transition. Van Blerk needed help, and LiquidX saw an opportunity that they were willing to believe in and back for years into the future.
Step one was rebuilding trust from the ground up, which was a slow and steady process through daily AMAs in Discord. But from here on out, the stage was set for a rebuild.
“I’m going to come in and answer anything… [a]nd I did that consecutively for four months. Then, I started speaking to them through AMAs and voice chat. Even today, I come in and I answer that chat for 15 minutes every day.” — Giulio Xiolyannis on building trust with community members through AMAs (October 2022)
The Team
There may have been a lack of direction and talent working on Pixelmon before, but that is not the case today. The current team is 50+ strong, almost entirely doxxed and includes executive-level leadership across both Web2 and Web3. Giulio Xiloyannis, who’s at the helm as CEO, has a breadth of experience investing, founding and running large companies, including a long stint at Zalora. Some other team highlights are below.
- Stefan Ivanov (Art Director) — 13 years’ experience in game art and design; notable titles include Mortal Kombat, WWE Remastered and Saints Row: The Third Remastered
- Pascal Luban (Lead Game Designer) — Over 26 years’ experience across 14 studios; received the ‘Best in Gaming Award’ at the 2009 Digital Media Awards for his work on The One Hope™, a turn-based action-adventure title
- Sean-Li Murmann (Game Tech Director) — Seven years in video game production; worked on some of the biggest titles at Streamline Studios, including Final Fantasy XV
- Anthony Bray (Senior Producer) — Almost 30 years of industry experience; was part of the original Sony team established to introduce PlayStation in Europe
The team also recently announced its Advisory Board (which includes the former head of game content at RuneScape), whose talents and expertise span in-game design, art direction, legal and user acquisition.
It’s refreshing to see so much talent concentrating on a true Web3 game — the blessing of having such a massive treasury and an obvious advantage over most indie developers in the Web3 gaming space today.
Gameplay
Although people are starting to realize Pixelmon’s potential given its war chest, revamped vision and developer talent, the reality is that the game is still a ways off before release. MMOs can easily take 5+ years to create, so having anything of substance out by end of 2023 would be a massive achievement given LiquidX only took over about a year ago. However, the team is aware of the challenge as well as the expectations placed on them and hopes to deliver slices of the game in advance to maintain attention, which can later lead back to a fully playable MMO. To this end they’ve already started releasing some cool interactive pages like the Collector’s Hub for players to set up profiles, soon evolve Pixelmon, etc. In case you’re thinking the full game is coming out anytime soon though, just something to be aware of.
“If 2022 was dedicated to building the foundations, 2023 will be focused on constructing the product to be built upon…” — Statement from Pixelmon’s CEO in January 2023
That being said, the game being built is pretty cool. It takes place in a world called Nova Thera, filled with extensive lore, tribes with rich history/culture and more.
Think Pokémon, with collecting, battling, grinding and leveling up of various species, but with a modern touch, including social aspects (where players can roam and speak to one another), exploration (open-world wandering) and combat-based experiences (Pixelmon battling within arenas).
The latter, called the Arena, is expected to be the first slice of gameplay released. Here’s an early look that was provided months ago. Live gameplay streaming of the Arena is also expected within the next couple of weeks which will showcase holders playing in real-time. The exploration part of the game is a bit more behind though and still in the prototyping phase.
Overall, it’s a proven formula only enhanced by Web3’s possibilities, particularly within the collecting gameplay genre.
In-Game Ownership — Right-of-Game (RoG)
Potentially the most interesting part of the Pixelmon revamp is their innovative approach to play-to-own (P2O) gaming. The strategy, which they call Right-of-Game (RoG), attempts to solve an important dilemma, which is how to provide players (fun) economic ownership without greatly advantaging early NFT entrants who already have an active stake in the project.
Pixelmon’s answer lies in clearly differentiating between its two key stakeholders — investors and gamers. They plan on creating two classes of NFTs comprised of L1 Genesis NFTs and L2 In-Game NFTs. The L2 class is intended for the actual gamers. Play, collect and battle with Pixelmon NFTs while grinding up levels in an open world, just like what you would expect. However, to allow for mass market adoption and a high player base, there needs to be unlimited versions of these L2 NFTs that are available for players or else there would be a cost barrier for new entrants.
But how does this reconcile with current NFT holders who paid thousands of dollars for the same Pixelmon? Won’t they just be diluted by the unlimited L2 versions coming to market? This is where the L1 class comes in, which includes all of the current Pixelmon NFTs and Trainers you see on sale today. Think of these as the ‘original paintings’ (limited supply) that are separate from the gameplay flow, and the L2 In-Game NFTs as infinite print copies. What distinguishes the originals is that they represent a revenue share on corresponding in-game characters and/or items (via royalties on microtransactions).
See below for an example with respect to Borg, one of the current Genesis Pixelmon. L1 Borg owners will receive a share of the proceeds generated by all L2 Borg NFTs. So, when Borg in-game skins and enhancements are traded for real value, L1 Borg NFT owners receive a kickback and split the royalties on each transaction. And so on for other Pixelmon and Genesis NFTs like Trainers and their associated gear.
Pixelmon’s whitepaper also contemplates ownership rights beyond in-game transactions, such as with respect to broader IP like merchandise, comic books and other games. Although cool, this extension probably won’t have any relevance unless the game is off-the-charts popular, so probably not something to weigh heavily in the near term.
But to sum up, RoG decentralizes Pixelmon IP and provides Genesis NFT owners the right to royalties derived from any commercial use of corresponding IP, in-game or otherwise. All of this occurs under the hood while the true gamers can focus on what they do best — gaming. Stakeholders have different rights but interests are still aligned — i.e., in their own way, everyone shares in value creation as the game grows.
Genesis NFTs
Now for a quick overview of the current L1 Genesis NFTs that have a right to revenue share on corresponding in-game transactions.
Genesis Pixelmon — Currently limited to Generation 1 Pixelmon. 10,005 NFTs, each representing one of 69 different species, four origins (Water, Fire, Air, and Earth) and six rarity tiers. These are the core of the game — akin to first-generation Pokémon. If you’re wondering, the new team revamped the Pixelmon art in August 2022, improving from the versions shown earlier at mint.
Serums — Although serums hold no standalone IP rights, they can be combined with a Genesis Pixelmon to evolve it, creating a new and unique Pixelmon royalty stream. The first evolution serum burn is slated to release on May 1st, 2023.
All creatures can evolve twice from their original form (E1), and only selected creatures will have a third evolution step (E4). The number of evolutions is capped, and higher evolutions will be less in number — e.g., there will only ever be 2,800 E2 serums, 1,000 E3 serums and 33 E4 serums. Given the limited supply and the fact that E2s and above will also receive a fixed amount of royalties from the total pie for that species, I’d imagine serums and higher-evolution Pixelmon will come with quite the price tag in the future. Remember though — this limited supply only applies to L1 NFTS which receive the revenue share. Gamers will also be able to grind their way through evolutions in-game without necessarily paying (play-to-own style).
Trainers — 7,000 playable characters used for exploration in the Pixelmon open world. In addition to being PFPs, avatars are full-bodied 3D assets, meaning holders will be able to download the source files of their trainers to use anywhere in the metaverse (after holding the NFT for a minimum of 30 days). Trainers are generated as permutations of 176 different unique gears, armors and accessories, including 20 full-body outfits and 40 weapons. Similar to the Pixelmon Genesis NFTs, trainers also include the shared revenue rights with respect to the in-game set of gears and skins that each trainer has in its combination.
To gamify the experience for NFT holders while the game is still in development, Pixelmon also recently launched a concept called Trainer Adventures. By staking a Genesis trainer, it will go on an “adventure” each week and potentially return with goodies such as serums or rare armor. Staking one Trainer for a week equals one lottery ticket for these prizes.
“Building a game is a long process, and NFT communities are not very patient…So, what we realized early on is that we needed to play two things in parallel. We needed to gamify the NFT holder experience while building a game.” — Statement from Pixelmon’s CEO
Other Factors to Consider
With the above, you should be fully caught up on Pixelmon. The ecosystem is admittedly quite confusing given not only the project’s ownership transition but also the various Genesis NFT collections involved, so I hope it helps. Below are also just a few more tidbits to consider when thinking about the future of the project.
Land. There will be tradable in-game land in the future, which might provide unique services or resources for players (e.g., a lumberyard). No significant details are provided here yet though.
Token. Closer to launch, there will be tokens with both utility and governance functions. To note, the project has indicated that there will be a single governance token shared across the four in-game tribes, with ownership of a Genesis NFT associated with a specific tribe required for access to that tribe’s governance activities. This structure is in furtherance of a ‘Decentralized Autonomous Tribe’ (DAT) idea that the project has floated in their whitepaper, where each of the four in-game tribes are governed by a DAO. It’s way too early to speculate on the details of DAO structure and the like, but if you want to get an idea of early thoughts check out the relevant section in the whitepaper. Very creative.
Runway. In an August 2022 Twitter Spaces the team indicated that cash burn is approximately $1 million a month, which would allow the project to function for four years without any other revenue given the ~$50 million treasury to start.
Whales / Spirit DAO Support. This is a little off the track, but interesting nonetheless. Two of the biggest whales in the project are Grail.eth and Konger.eth, both members of Azuki’s exclusive Spirit DAO and major holders of other top projects. Each has been vocal on the Pixelmon comeback in recent months. Everyone’s protecting their bags and to a degree the same is occurring here, but when I see some smart money staying in projects and sometimes doubling down, I take note.
Closing Thoughts / Risks
All in all, the stage is set for quite the comeback for Pixelmon. This is not the rug you once thought it was — a new team, talent and vision has elevated the project in my eyes to the higher end of Web3 gaming projects in terms of potential.
However, stress “potential.” There is still a ton of work to do, and achieving massive success is by no means ensured. Web3 gaming delays are par for course, and to expect anything different here is probably a mistake. That means we’re probably looking at some time in 2024 for anything of substance in terms of gameplay, which is still lightning speed considering the time it usually takes to build a full-fledged MMO. How the Web3 gaming space develops elsewhere during that timeframe is unknown, and it’s possible other projects steal the hype in the interim. We may never see the sub-0.5 ETH Genesis Pixelmon NFT prices again, but my hunch is that another dip (probably less significant) will occur as attention shifts while the project continues to develop.
Lastly, it’s possible one of Pixelmon’s greatest strengths turns into a risk. One of the core tenets upon which the project is based is separation of L1 and L2 NFTs, with the former receiving a share of revenue on corresponding IP. I love the idea, however the risk is regulation. I’ve written before on how certain NFTs projects are getting dangerously close to being considered securities under the SEC’s current Howey framework (Moonbirds / PROOF Collective served as an example). The determination is very fact-specific, but the primary factor is whether there is an expectation that profits will be derived from the efforts of others. When anything related to a revenue share or royalties is brought up, projects might face this risk. It could be less relevant to Pixelmon since the royalty idea wasn’t put in place until after the original NFT mint sale occurred (so only secondary sales are involved here), but who’s to say how anything will be interpreted as this is new legal ground. It’s a tough position for projects to be in given the horrible guidance provided by the SEC to date, and therefore most have decided to innovate first and deal with regulatory risk later. I can’t blame them, as whose to say that regulation won’t also change in the future as the SEC finally catches up. But just another risk to consider as Pixelmon continues to move forward and defy the odds.
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