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  • Writer's pictureZEU$

Theoretically, as of today, Earth2 has generated more Essence than Tiles outstanding

As mysterious is the case of Ether and Essence on Earth2, I decided to dig into this a bit. To recap, Earth2 tiles generate Ether which can be converted to Essence. While the Ether generation has more or less been stable versus the size of an account (# tiles), there is a certain mystery around the conversion rate from Ether to Essence - it fluctuates wildly and randomly between 30% - 100%; I haven't heard worse than 30% so far.

As of this writing, many users have already collected Essence which is almost close to the number of their total tiles, suggesting we are close to 1:1 ratio on Essence claimed versus Tiles outstanding. Of course this ratio could be lower for accounts who bought significant number of Tiles since Essence was released, and since they would have generated Essence on those tiles only after their purchase. Additionally the ratio will also be lower for people who spent a lot of Essence on EPLs. Below is the summary of data I could collect:-

Disclaimer: This is data collected on the fly on Twitter, so some of the data could be muddied - but drives the broader point that your account as of today likely has generated more Essence than Tiles in your account - after adjusting for any net tile purchases/ sales and Essence burned from EPL purchases. Also, big shoutout to below who replied @ZEUS_the_real on Twitter with their Essence and Tile-count.

The Big Picture about Essence value

Disclaimer: All of the below is my own math - not a financial advise. Also, very high level numbers and just meant to discuss rather a broader picture if the stated assumptions come true. Please use your own discretion when consuming the below section.

Earth2 has around between 45 - 50 million tiles outstanding, maybe around close to 46 million if I was to pick a number in that range basis an earlier data source. Theoretically, 45-50 million Essence would have been generated - but we are not sure how many have actively collected everyday. Assuming most big accounts did collect, and say 80% was collected - Essence outstanding would be close to 35 - 40 million. This is in 79 days when most users would likely have built their Free Mentars (Essence generated prior to free Mentars is negligible so ignored here). Therefore, as things stand annual Essence generation rate is about ~170 million.

Assuming 15 - 20k EPLs were sold say at an avg Essence of 150 (although 400 is the full cost, 100 was the promo cost for upto 2 EPLs), that puts the burn at about 2.5 million Essence. Assuming we have more burn use cases down the line (holos paid for with Essence, etc, etc. - conservatively we can estimate ~5-10 million Essence burned in the first year if not more. However there maybe additional land sales and say more 5-10 million Essence is generated along nullifying the burn.

Therefore net net we have about 170k avg. essence outstanding in year 1 (by Aug 2022). If Essence market-cap is valued a tenth of Decentraland's ~$5Bn worth $MANA (given E2's infancy etc. etc.) - Essence would have a market cap of ~$500 million. This puts the value of Essence at - 500/160 = About ~$3 per Essence! Even if we do half as bad - still $1 is not beyond imagination. Basis current implied Essence pegged value ($5 EPL = 400 Essence EPL) of $0.0125, that's a ~80x growth potential in less than year from now!

Also bear in mind, if Essence trades above $1, the land value at the lower end (cheapest countries) will have to rise too to avoid arbitrage. So land holders may get rewarded twice!

Why Essence is a great candidate for crypto

Essence generation depends on tiles outstanding, so its supply function is already defined. Its supply rate only grows if more land is purchased (potentially as E2 ecosystem grows). On Earth2 land value increases exponentially as more tiles get bought, therefore the supply rate of Essence doesn't increase linearly but rather incrementally - thus this serves as an anti-inflationary measure (good store of value).

Secondly, you need to hold land to generate Essence - which is a great model and supports the land value on E2. Holding land can be thought akin to staking - many crypto/NFT models already allow staking assets to generate crypto income.

Therefore, Essence being so closely connected to land makes it a great potential primary currency within E2. Land holds a special meaning in economics. In Marshall’s (economics legend) words, “Earth’s surface is a primary condition of anything that a man can do, it gives him room for his action".

Essence is Liquid - we can freely transact using Essence. We have already bought EPLs and soon holo buildings. This can be extended to almost any asset on Earth2. I wont rule out at some point you can pretty much purchase anything within Earth2 using Essence - Avatars, NFTs, 3D objects, etc.

All of the above makes is a great candidate to be the main currency within Earth2.

Closing Thoughts

Again, all of this holds only if Essence is released as a crypto and if market ascribes these values to the Earth2 token. It will depend on what you can do with Essence and how limited/ unlimited is its utility. Mind you - with $MANA you can also purchase LAND in Decentraland - so that's a big dependency to any future values of Essence discussed above.

Finally and more importantly, which will make or break this - whether the perceived overall utility of Earth2 itself rises and what people can do within it. A solid road-map with defined milestones could help achieve that along with some delineation of what is the ultimate vision.

ZEU$ out.

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