The long awaited DeFi Kingdoms (DFK) expansion has arrived, and it definitely made a splash. With eye-popping APRs, airdrops up the wazoo and good ole fashion gamification, we were not disappointed. The launch has had the NRN discord buzzing for a while.
It is always fascinating to see which topics we write about garner the most attention and why. When Canuck wrote about the launch of DFK’s new blockchain and shared his thoughts on it, the response was tremendous. Clearly, gamified Defi is a popular subject among crypto users as it has become one of the most significant growth sectors in the blockchain space. If you haven’t checked out DFK before, it endeavors to make the aspects of DeFi fun, and channels the fond memories of games many of us grew up with. Add in the element of play-to-earn, and many often forget they are adulting. If you are beginning in DeFi Kingdoms, click through these articles to go down the rabbit hole. Crier has been passionate about this subject for some time.
It is important to remember that with all things crypto, we are still early. Mass adoption isn’t here and arguably won’t be for at least a few years. Throw in the fact that the vast majority of those who have plunged into all things web3 are still Eth only. This creates both a problem and an opportunity for new and non-Eth-based projects. This is a topic Canuck covered in more depth in Battle of the Blockchains. The most effective option is to avoid the high gas (transaction) fees for doing DeFi transactions on the Eth network. Projects like DFK are not feasible unless transactions can be completed for a fraction of a penny. $40 per transaction, typical on Ethereum, is simply a nonstarter. The biggest problem with projects on other Layer 1 competitors is the lack of liquidity and perception of how difficult and/or time-consuming it is to transfer funds from one chain to the other. Coming up with a system that is as close to idiot-proof as you can make it, given the current technology, was one of the first hurdles DFK was going to need to address in launching an expansion on a second chain.
With the brand new direct bridge to the new DFKchain from Harmony or AVAX opening through Synapse, it feels as though it has been a very smooth transition thus far. It is important to remember, not only did DFK move to a second chain (Avalanche), but they also built their chain on the Avalanche Subnet, thus allowing their $Jewel token to be the governance token rather than having to rely on $AVAX. This essential but straightforward distinction does a lot to ensure the long-term viability of $Jewel, and the increased demand for it was seen in the price of the token, more than doubling around the launch time.
Seamlessly pulling off this technical integration while getting the launch right really speaks to how well organized this team has become. They also managed to take this rather complex bit of tech and attached a very simple to use interface to make an easy transition for new players (think new liquidity). Here is a quick snapshot of the interface that greeted players when they went to Crystalvale for the first time.
Liquidity is the lifeblood of every economic market in the world. The infamous depression of the 1930s is a very somber example of what happens when liquidity disappears. So getting fresh liquidity onto a brand new blockchain would be no easy feat. In the web2 world, often, this type of startup liquidity could only come from deep-pocketed venture capital. The beauty of web3, however, is this is no longer the case. In under a week, DFK already has over $500M in Total Value Locked (TVL). Once DFK had solved the issue of getting liquidity onto the chain, how do they ensure it stays? Must avoid those Vampires, remember!
The gardens have been arguably the most lucrative part of the game in Serendale (the original DFK on Harmony) and will continue to be so for Crystalvale. They also really help provide the stickiness required to keep the liquidity from growing wings and flying off to the next shiny light it sees. The first available pair in the Crystalvale garden was the LP for the Xjewel-Jewel pair to earn Crystal (the new currency for Crystalvale) emissions. There was a particular genius to this strategy as well. In Serendale, they had a bank, later renamed the Jeweler. When you deposit $Jewel at the Jeweler, you receive XJewel. This is a gamified way of what is known as single staking in the DeFi world. In making the first Crystalvale garden LP trading pair Jewel-XJewel, players essentially lock up a double whammy of Jewel and then transfer it cross-chain. When we don’t have immediate access to our money, we are less likely to impulse spend it; thus, the liquidity sticking around is increased. VERY SMART!
A few days later, some more pairs were offered, allowing Crystal to be paired with USDC, AVAX, or Jewel. Another strategic move is that as Crystal starts to be paid out to players, DFK wanted to ensure they do not have a large sell-off that would destabilize the initial project launch. DFK addresses this issue with an excellent combination of high, early APR to entice investors while having a vesting schedule that ensures the available supply takes a while to accumulate. You can see the below with an APR of 4,346%, but much of it is locked for an extended period.
Players are also shown very clearly how the locked Crystal is being released and what advantages they have for waiting to claim their current earnings. Some things to consider when moving into Crystalvale.
The biggest takeaway is that Crystal emissions are roughly 3200% on the Xjewel-Jewel LP, which is 160.35% APR in unlocked Jewel since 95% remains locked. The Crystal-Jewel pool is roughly 219% APR unlocked. We currently left our Serendale pools running to see how well the gardens would perform.
With the departure to farm $ Crystal, the Matic pool is at 409%, 241.8% unlocked APR since 59% is unlocked. While this is a higher percentage, the ratio between jewel and crystal is currently 2.95 Jewel per Crystal.
Crystal value is roughly $20 currently. If the current emissions and ratio to Jewel/Crystal hold, it is more valuable to farm in Crystalvale with a Crystal price above 11$, but we believe the ratio will go down as more Crystal is emitted to trading and we receive our airdrops of Crystal.
Another exciting aspect of this game is the opportunities posed by players having large bags on locked assets. Serendale offered a feature that allowed players to sell their locked $Jewel, and many chose to do so via secondary marketplaces for as little as 25 cents on the dollar. Then with some of the game enhancements, miners were introduced, which allowed heroes to mine for locked $Jewel, thus releasing some of the bags early for players. This led many to face the age-old question.
One important thing to remember, even with increased utility and a popular project, $Jewel is still an altcoin and very susceptible to large swings in price. Projects will often move on news or events unrelated to its performance. While both of us are believers in the project and continue to re-invest portions of our emissions, we are also firm believers in the mantra 1Eth=1Eth. It is important to take profits when times are good, and converting $Jewel gains into cold-hard Eth is a great way to do this. Dollar-cost average $Jewel into Eth along the way is very important to us as we need to recover investments into a riskier asset.
Overall, the outlook on the whole Defi Kingdoms ecosystem is promising. With more planned outposts, they will be able to create a thriving and robust liquidity pool with far-reaching bridges between chains. As soon as we see the production on the land aspect of the game, we will see what the wait has been for, and we couldn’t be happier with the current output.
As with all of my writing, this is not financial advice and is my opinion. I cannot stress enough how important it is to do your research on all financial endeavors. This is not meant to be construed as financial advice. I hope that these newsletters can help investors realize the current financial systems’ downfalls and usher in a more equitable system without middlemen.
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