Author: @ Defi0xJeff , Head of @steak_studio

Compiled by: Rhythm Little Deep

Editor's note: This article analyzes the strategy of staking and points game on the Virtuals platform veVIRTUAL. The article introduces the latest token economics updates, emphasizes the alignment of long-term stakers with the interests of the protocol, and reminds not to lock up tokens in full to maintain liquidity. The author recommends earning 100,000 to 400,000 Virgen points per day, locking up 10,000 to 50,000 $VIRTUAL, and being flexible in responding to market fluctuations, while selecting high-potential projects to maximize returns.

The following is the original content (for easier reading and understanding, the original content has been reorganized):

This is a short and concise post sharing my thoughts on veVIRTUAL staking and how to play the points game.

If you’ve been active in the trenches of Virtuals lately, you may have noticed that the team just rolled out one of the biggest updates ever:

• Kaito has been integrated and a comprehensive Yapper leaderboard has been launched to incentivize top Yappers and Kaito stakers to earn points.
• Updated token economics, introducing veVIRTUAL (20% of points now go to veVIRTUAL stakers, not holders).

The change in token economics aligns the interests of long term supporters (those willing to lock up $VIRTUAL) more closely with the interests of the protocol (Virtuals and the proxy team). This new dynamic reminds me of the xGRAIL token economics (during the Arb season) and the ve(3,3) token economics when Velodrome and Aerodrome were emerging on OP and Base.

One lesson I’ve learned from riding the various narratives and waves since 2021 is that it is extremely unwise to lock up all of your tokens to the maximum extent possible, regardless of the circumstances (especially the veTokenomics model).

Why?

Taking a step back, the value of $VIRTUAL comes from transaction fees, from trading activity on its platform. The more projects come online, and existing projects continue to innovate and launch exciting features, the more people will be excited to trade on Virtuals.

Next came “Virgen Points”, a must for participating in the Genesis launch, earned by actively trading on Virtuals, holding/diamond holding proxy tokens, and holding $VIRTUAL (before the latest changes). $BIOS became the number one case, and this 100x star continued to attract builders and traders into the Virgen trenches, solidifying the flywheel effect.

Virgen points have now been established as “digital gold,” with each point worth between $0.012 and $0.034 (if you earn 100,000 points per day, assuming you invest your points in successfully launched projects, you can earn between $1,200 and $3,400 per day).

Now... the reasons why I say max locking is a bad idea are as follows:

• No launch pad lasts forever—trends and narratives rise and fall in waves, influenced by many factors. The Virtuals team has shown they are masters of storytelling, but with competition, no one knows how long the current Virtuals wave will last.
• There is a "sufficient" threshold for points earned per day (per wallet). For example, if you lock up 150,000$VIRTUAL at most and get 150,000 veVIRTUAL, you will earn 1.5-1.8 million points per day. You don't need that many points, bro.
• There is an implicit liquidity cost. During a cycle, a token can go up (or down) dramatically. When it’s going full steam ahead, if you don’t have the ability to take profits, you can’t realize your gains. Next, the token will go down, because nothing lasts forever. All good things must eventually come to an end, and it’s all about whether you can extract the most value from them.

Again - if you look at this table, you'll see that the return on your points spend is highly dependent on the quality of the projects you invest in, the hype around the project (how many points are invested), and how high the FDV (fully diluted valuation) can go post-launch. Project selection is critical in this game. The better you pick, the higher the value you can capture from your points.

How much $VIRTUAL should be locked up? What is the strategy?

Assuming the worst case scenario for $AXR (needing 4 million points to get a full allocation), earning 400,000 points a day for a week to a week and a half should be enough. This is equivalent to locking up 50,000 $VIRTUAL for two years.

Assuming $WHIM is the baseline case (820,000 points are needed to get the full allocation), earning 100,000 points per day should be enough. This is equivalent to locking up 10,000 $VIRTUAL for two years.

The rule of thumb is to earn 100,000 to 400,000 points per day to ensure that you have enough points to participate in medium- to high-heat launches every week or week and a half.

It is up to you to decide whether to lock up some $VIRTUAL in the maximum or all $VIRTUAL in the medium term, but make sure to hold both liquid and illiquid assets to maintain flexibility and realize profits when $VIRTUAL continues to rise.

Specific gameplay

I only lock up a small portion (5-10%) of $VIRTUAL as veVIRTUAL at most to ensure there are enough points to get a full allocation for high-heat launches, and the remaining 95% remains liquid to realize profits when the market picks up.

Assuming I make 250k points per day, I make decent decisions when choosing projects and exit at the right time, each point is worth $0.022 = $5500 per day -> payback in just 5 days.

If we assume a worst case scenario of $0.010 per credit, that's $2,750 per day -> payback in just 9 days.

I plan to only select projects with the best point value for short-term operations, and only hold level 1 projects with Diamonds. The ultimate goal is to accumulate more $VIRTUAL, and view the Genesis Launch Platform/Virgen Points as a place and mechanism to generate income for $VIRTUAL tokens.

Friends who are interested in my future choices can check out my latest Substack article "The After Hour EP.2", where I share my analysis of three upcoming projects.

Make sure you know what you are doing. Do your math before making a decision. Don’t lock up all your assets because of FOMO, which is the worst decision.

Please remember that investing in Virtuals Agents is more like "trading" than investing in technology (at least for now). You are investing in micro-projects with extremely low market capitalization, which have the potential to skyrocket.