UUU ZED Run Horse

ZED Run: What is a Foal Swap?

Rainier Racing Co.
Coinmonks
Published in
10 min readMay 24, 2022

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The news is out! The next Lucky Maiden will run from May 29th to June 2nd and will coincide with the ZED Run Maiden tournament as well.

The Maiden tournament format is designed exclusively for unraced horses to test their ability over the weeklong event and earn thousands of dollars in prize money.

This is a great opportunity for those with unraced horses to double dip to earn Ethereum during the weeklong qualifying process.

So, how do you get an unraced horse? There are a few options for you:

1) Buy unraced directly off Hawku (filter included in link)

2) Breed a male horse with any female in your stable

3) Conduct a foal swap

If your more of a visual learner, you can watch the YouTube video that runs over similar information as this article and walks you through using our Foal Swap Calculator.

What is a foal swap?

A foal swap is when the owner of a male horse (stud owner) makes a prearranged agreement with a female horse owner (mare owner) to take the offspring after breeding. The mare owner will enter the stud barn, locate the stud, and pay a fee to conduct the breed and produce the offspring.

The stud owner will receive a percentage of this stud fee with the remaining percentage going to ZED Run as part of the racing prize pools. The stud owner will provide the mare owner a rebate of this stud fee in addition to a preferred return to compensate the mare owner for giving away the offspring.

Why do a foal swap?

There are a few reasons and advantages to conducting a foal swap:

· For the stud owner:

a. You have a high-quality stud, but no mares in you stable, you can breed with a third-party and receive your stud’s offspring.

b. You have a stud, but no corresponding mare with overlapping distance preference or variance, then you can find a more suitable mate and produce better offspring than you could through in-house breeding.

c. You have greater insight into the quality of the offspring and greater price control as compared to buying in the open market.

· For the mare owner:

a. You have a guaranteed sale of your offspring before paying a stud fee.

b. You receive a full rebate of the stud fee plus a guaranteed return.

c. Additional incentives, such as a profit share of the offspring’s winnings, can be negotiated to provide additional income after the sale of the foal.

How to structure the deal

For the deal to make sense for both parties, there’s a bit of research and math that needs to be conducted. You will need to know what the various market prices for new foals of your specific bloodline, breed, and genotype; the minimum stud fee for your specific stud; and how long you will keep your horse in the stud barn to determine how much of the stud fee you will receive from ZED.

Fortunately, Rainier Racing Co. has done the heavy lifting and produced a Foal Swap Calculator online. Using this tool, you can screen for sales of the specific new foal that your breeding arrangement will produce and then compare how various rebates, preferred returns, and days in the stud barn will affect the value of the deal.

Now, let’s walkthrough a setting up a foal swap using a practical example.

The Parents

For this example, I am going to walkthrough breeding Quality, my Z2 Nakamoto Legendary colt, with Needle, a Z4 Nakamoto Legendary mare.

Z2 Nakamoto Legendary Colt
Z4 Nakamoto Legendary Mare

The logic behind this breed is that I do not have a mare within my own stable that has similar racing distance preferences or base ability as Quality, therefore I will conduct a breed with a mare I consistently race against in Class I (the highest class).

As you can see in the summary stats above, that have comparable Win/Place/Show percentages, Heat Rates, and are extremely profitable. Additionally, both horses are mid-distance specialists, running top of class in the 1600m-2000m distances, as indicated by their Heat Rates below.

Quality: Heat Rate at Mid-Distance
Needle: Heat Rate at Mid-Distance

Furthermore, the horses have complementing racing qualities that show mesh well together in the breeding 2.0 algorithm. For example, Quality has high base ability, but very little variance as indicated by the heavy left lean of his C1 1600m placement chart, 90% C1 Heat Rate, and 90% 1600m Heat Rate:

Quality: High Base Ability, Low Variance

Needle, on the other hand, has slightly lower base ability, but significantly higher variance a shown by the natural U-shape of her placement chart and lower Heat Rate in her preferred distance of 2000m in C1:

Needle: Lower Base Ability, High Variance

By breeding these two horses together, our goal is to produce an offspring that specializes in mid-distance races and can consistently win daily tournaments, as that is currently the weakest field of competition in the game and provides the highest probability of achieving a daily payout. By combining Quality’s high base ability with Needle’s high variance, we should have a winning combination!

The Offspring

The ZED Run breeding algorithm will determine the actual racing ability of our offspring, but there are a few things that we can calculate ahead of time to determine what the market value of the foal will be.

Key drivers of the value of the foal are its bloodline, breed, and genotype. ZED gives us the information that we need to determine these traits as laid out below.

In our example, we are breeding a Nakamoto with a Nakamoto, so therefore will produce a Nakamoto offspring:

Bloodline Generation in Breeding

Breeding a Legendary male with a Legendary female will produce an Exclusive foal:

Breed Generation in Breeding

Lastly, the genotype will be determined by adding the genotypes of the parents together. In our case, this would be a Z2 + Z4 = Z6.

So our offspring will be a Z6 Nakamoto Exclusive. We can then enter this information into the Foal Swap Calculator to screen for all sales of unraced horses of that type.

Stud Fee

The next piece of information that we need to put into the calculator is the stud fee. I highly recommend using the minimum stud fee for the male horse, as this will reduce the total cost to both horse owners, thereby increasing the value of the offspring.

To find the minimum stud fee, the easiest way to do it is to go through the process of entering your stud into the stud barn but stopping short of actually placing him into stud. This allows you to see what the required minimum stud fee is for your specific horse:

Minimum Stud Fee for Z2 Nakamoto Legendary as of 5/24/2022

Here the minimum required fee is 0.0783 ETH. We will input this number into the calculator as well under “Stud Fee”.

Stud Duration

Next, we will need to set the duration of the studding period. This is important because the longer you keep your horse in stud, the more of the stud fee you receive into your account. The current percentages allocated to the stud owner based on duration are:

Stud Fee Allocation as of 5/24/2022

If you can afford to keep your horse off the racetrack for the longest period, 7 days, I highly recommend that you do so in order to keep the greatest amount of the stud fee. This helps reduce the total cost of the offspring once you provide the mare owner with a rebate on the stud fee. Currently, you will receive 56% of the stud fee if you leave your horse in the stud barn for 7 days.

With all this information, we can now go to the foal swap calculator and see how we should structure the foal swap so that it makes financial sense for both horse owners.

The Foal Swap Calculator

In the calculator, the first step is to input the stud fee, the percentage of the stud fee allocated to the owner based on duration, a preferred return to the mare owner, and the stud fee rebate. I recommend leaving the Market Price Selector set to “Median”, as this will be the price at which 50% of horses sell below or above. That means that from the mare owner’s perspective, they have a 50% chance of selling above that price with a 50% chance that they will ultimately have to sell below that price. Using this as a starting point in structuring the deal is reasonable given the risk of not being able to sell the foal in the open market at a price higher than the median. Additionally, most mare owners will expect a full rebate of the stud fee, so I would leave that at 100% as an initial assumption, as well as the 20% preferred return. We will change the preferred return once we screen for the specific offspring that our breed will produce.

Entering the 0.0783 ETH stud fee, 56% allocation to the stud owner for a 7-day duration, and leaving the initial return and rebate assumptions at 20% and 100%, we will see the following:

Starting Assumptions

Next, we will screen for our specific unraced offspring to see what the range of prices paid were in the Hawku market. We will select “0” on the “Total Races” selector, then filter for our specific genotype, bloodline, and breed, then select “Colt” and “Filly” as the gender, since this horse will also be unbred.

Our screener for our Z6 Nakamoto Exclusive offspring will look like the below:

Screen for Unraced, Unbred Z6 Nakamoto Exclusive Sales

After running the screener, you will get a range of values from the minimum to maximum price paid:

Range of Prices Paid for UUU Z6 Nakamoto Exclusive Foals

Since we are evaluating the Median price, the calculator will automatically pull this value in for the calculations. If you wanted to evaluate the foal swap against the other values, you could select those from the drop-down menu as well.

Given our initial assumptions on the rebate and preferred return percentages, we get the following outputs:

Deal Structure 1: 100% Rebate & 20% Preferred Return

What this shows us is that the deal as presently arranged does not make sense for the mare owner. They could sell a similar foal into the open market and expect an ~45% return on their stud fee, compared to the 20% return they would make from the foal swap. This is a great deal for the stud owner, as they save 0.0199 ETH in this swap arrangement as compared to buying in the open market at the median price.

For this deal to make sense at the median price, the preferred return that the mare owner receives must at least match the return the mare owner could expect from selling into the open market at the median price. Updating our “Preferred Return” assumption to 45.39%, we get the following output:

Deal Structure 2: 100% Rebate & 45.4% Preferred Return

With this deal structure, 100% rebate + 45.4% preferred return, we see that the mare owner should be indifferent to selling the foal to the stud owner vs. selling into the open market at the median price. Their net profit will be exactly the same as if they bred their mare with their own stallion in a secondary stable to receive the 56% discount on the stud fee, then sold at the median price. For the stud owner, they should be indifferent to receiving this foal vs. buying one at the median price in the open market. The total cost to the stud owner is the same either way.

The calculator also summarizes the transaction at the bottom in plain English:

Deal Structure & Transaction Summary

These assumptions can be changed and returns & rebates negotiated until the deal makes sense for both horse owners.

Concluding Thoughts

Stable owners should not feel limited in their ability to produce quality offspring for their stable if they only have male horses in their stable. By reaching out to the ZED Run community you can find someone who has the perfect match for your stud and negotiate a foal swap.

Do your research, use the calculator, know your numbers! Do not overpay for the foal or structure a transaction that does not benefit you.

By using the calculator, you can easily see if a deal makes sense and how it could be tweaked in order for you to get the best deal possible!

Please like and follow on Medium, Twitter, Instagram, Facebook, and check out our website for more information.

If you have questions on how to value a horse or are interested in us doing an analysis for you, please contact us at RainierRacingCo@gmail.com and we will get back to you within 24 hours.

Pricing & Valuation Resources

Rainier Racing Co. — Check us out to get market data and read our ZED Run Market Reports.

Hawku — Use to find new listings, screen for similar transactions, and review racing statistics.

Know Your HorsesTHE place to do a deep dive on your horses and other stable owners.

Zed Ranks — Great place to get a rough estimate of a horse’s value.

StackedNaks — See your horses statistics ranked against other in the game.

ZED Run — The game!

Join Coinmonks Telegram Channel and Youtube Channel learn about crypto trading and investing

Also, Read

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Rainier Racing Co.
Coinmonks

Passionate about using my background in risk management & Tech Banking to help fellow Zed Stable Owners have confidence in the prices they pay for their horses.