DeFi Kingdoms Expansion to Avalanche — Why and How it Can Benefit Everyone
Nothing in this article is intended to be financial advice and is strictly for informational purposes. The thoughts expressed herein are my own and not indicative of the views and opinions of the official DeFi Kingdoms team.
Two weeks ago, on December 2, 2021, DeFi Kingdoms announced its first cross-chain expansion of the game to the Avalanche blockchain in a realm that will be called Crystalvale. In this article I share my thoughts on why it’s okay for DFK to be working on expansions already, why the expansion is extremely bullish for DeFi Kingdoms and why and how it presents an enormous opportunity to both current $Jewel holders and those looking to enter the game.
TLDR:
Its good that DFK is already working on expanding. Its not a zero sum game taking efforts away from developing the game and we all stand to benefit significantly by expanding before copycats do. The tokenomics of the expansion are genius and will end up benefiting everyone — $Jewel holders have an enormous opportunity before them. #Not financial advice.
Background information on Crystalvale expansion
For those unfamiliar with the expansion you should check out the following:
- DeFi Kingdoms Official Crystalvale FAQ issued in connection with announcement
- DeFi Kingdoms article about the expansion
- AMA from team on Crystalvale expansion (12/2/21) and AMA from team on expansions generally (11/22/21)
What this article IS NOT:
- Details on how to poise yourself for the Avalanche expansion. We’ve only received very high level details for now (there will likely be some airdrops to xJewel holders, in addition you’ll need to bridge Jewel over and single stake it to earn Crystal, etc) and so all we can do is speculate at this point, so let’s hold tight and wait for official details from the team. They aren’t going to stealth launch this, and Frisky has said they will give us ample time to put ourselves in the best position to make a move.
- Differences and similarities between Crystalvale (Avalanche realm) and Serendale (Harmony realm) — its effectively going to a very similar realm with minor differences but the core game will be the same.
What this article IS:
- My thoughts and recap of prior team statements on WHY they are expanding and why one shouldn’t be worried that they are already expanding.
- My thoughts on why the expansion is extremely bullish for $Jewel holders and how this will create a lot of opportunities, including for those that aren’t current holders (because now they know and can assess and act on this knowledge).
Why its okay for DeFi Kingdoms to ALREADY be working on expanding
A lot of community members have expressed concern about how the team is talking about expansions and yet we still don’t even have all the profession quests out (much less combat and land). This is fallacious reasoning though to think that because they are thinking about expansion that they are impeding development of these Harmony/Serendale features.
As an example, here are some thoughts from people in the discord over the past few weeks. Again these are filled with logical fallacies, but I hope to centralize a lot of the thoughts that have been shared on why one need not worry about these and that there are a multitude of benefits that will arise from the expansion.
“It feels cash grabby, team is worried about expanding but we dont even have lands yet? Or mining and foraging quests?”
“Would appreciate you guys giving top priority to quests over expanding to other ecosystems etc”
“Hi dev, I see expanding to other chain working for yourself than for early player like us. It is dilution. If you are for us, your job is to bring in more people into harmony and play hence increasing value of jewel and not dilution.”
Every long term project requires multiple overlapping workflows. There are team members dedicated to expansion, which doesn’t impact the developers continuing to work on the game contracts for Serendale
First — there seems to be this misconception that by focusing on expanding that the development of Serendale (on Harmony) will suffer. This isn’t a zero sum game where any minute spent working on an expansion will be one less minute spent on Harmony. The team has hired people specifically for the expansion rollout; for example they hired Dreamer, an ex VP from Goldman Sachs to help lead the efforts around tokenomics and economies of expanding to another chain, not to mention all of the business and marketing related team members involved in an expansion. The team is constantly expanding, on the bus dev side as well as the core development side.
Second — anyone involved in a large and long drawn out project knows that you have to have multiple workflows going on at once. The efforts of expanding have to be undertaken months in advance of actually launching the expansion and those initial efforts and discussions take place largely on the business side — so people shouldn’t be worried about core harmony game development being short changed. Take a modern day example of farming (like actually farming food that people eat) as an example. Often while they are selling last year’s crop farmers are already preparing their fields for planting in the current year. While they are harvesting this years crops they are already planning how to rotate and plant their crops for next season and how they are going to sell their current crops. DFK can’t just wake up one day and say okay we want to expand now. This takes months of long work, and so its better that they are working on it now, and again, they have built the team out to have specialties and focus on different efforts.
Great care was taken to ensure that the roadmap for the development of DFK: Serendale is not impacted in a negative way by expansions. We have scaled up our team in preparation for this launch and we will continue to do so.
What’s going to happen to the game on the Harmony blockchain? Serendale contains 8 of the eventual 16 base classes, and as such will always be the flagship offering of DFK, meaning the road map will continue to be developed there first. New features will launch first in Serendale as well, creating an incentive for players to continue to play on Harmony. Serendale will continue to grow and thrive, with Crystalvale bringing added value in the form of new genes and unique quest lines so that there’s always more than enough content for everyone!
Eat or be eaten, first mover advantage and cutting off the copycats before they overtake us
We’ve spent a lot of time thinking about this and we believe this is the right move for the community and having the advantage of being the first on chain game to expand to these other networks. We are very excited about the opportunity this creates to increase the quality of our game. Really excited for this and want to say thank you to everyone for coming.
-Frisky Fox
Not much needs to be said about this. But just think about what happened with all the treasury protocol projects like Olympus (OHM). Once a project becomes popular and successful, the developers on other chains start crawling out from under the woodworks and will fork and copy the project on their chain to gobble up the TVL and capital that that chain has to offer.
If DeFi Kingdoms doesn’t expand to other chains before copycats can mimic it, then its giving up access to all of that TVL, additional capital and player base that it otherwise could have tapped into (which would benefit everyone, players especially) to the copycats, which would just create a divisive market around DeFi Kingdoms forks.
This is just another step on our road. We’ve created the biggest defi project on Harmony. Others are going to try and copy this and we want to maintain the first mover advantage on those other chains as well. If you look at a lot of projects here on harmony, you’ll see that a lot of them are just forks or copies of projects on other chains. We would be the first project that STARTED on Harmony and will then be bridging out.
Yes, there are risks. Lots of projects have tried and failed. However, we feel it is more risky to not try and expand. You want to be set up as the flagship play to earn game on existing chains before others create a clone of it on their chains and then we will be competing with all of these other clones. Now instead of having to compete we are going to expand.
-Frisky Fox
Why expand onto multiple chains?
I’m mostly going to regurgitate the rationale already provided by the team directly on their November 22, 2021 AMA (written summary here) and in their official DeFi Kingdoms Expansion Strategy Overview.
Purpose of Expansion:
- Attract new players to join the adventure in a realm custom built for their native chain [SAMICHPUNCH NOTE: this is the biggest reason in my book — more new players = more money into the ecosystem]
- Increase the demand on JEWEL and Hero NFT’s
- Lower barrier to entry for new participants and provide them with an opportunity to fund the game in early stages, earning their realm’s power token
- Expand value of existing Hero NFTs through access to new gene-sets and classes with expanded quests
If you want some more details/meat about what they mean by some of these, check out the November 22, 2021 AMA write up I linked above.
Why I think you should we be excited about this expansion
There’s a lot of things to be excited about both as a $Jewel holder or just anyone standing out on the outside thinking about jumping in. I’ll try to break these down into topics:
- New chains = new TVL, new player base = more adoption = increased value of DeFi Kingdom economy (across all chains)
- Current holders will qualify for airdrops leading up to the launch.
- People will have to buy Jewel to get Crystal for the initial bootstrapping of Crystal supply — this will raise price of Jewel.
- Arbitrage Opportunities — The high tide will raise all ships. [SAMICHPUNCH NOTE: This is probably my favorite!]
Keep in mind — the dev team’s funds are in $Jewel. They have no incentive to hurt Jewel here.
Everything we do is to try and exist the value of our current assets. We all have good “warchests” with Jewel. So the last thing anybody wants to do is hurt that. Always going to try and increase the utility of the existing assets with each expansion. — Frisky Fox — AMA
1. New chains = new TVL, new player base = more adoption = increased value of DeFi Kingdom economy (across all chains)
Harmony currently sits on coinmarketcap with a market cap of $2.3B USD.
Avalanche currently sits on coinmarketcap with a market cap of $27.3B USD, approximately 11.8x more than Harmony.
DeFi Llama reports Harmony ecosystem as having $522.21M in TVL, whereas it reports Avalanche having $11.6B in TVL, over 22x more than Harmony’s TVL.
Let’s consider the TVL element. Avalanche has 22 times more capital locked up in various avalanche projects than Harmony does. What do you think happens to that TVL when new and exciting projects come to Avalanche? I’ll tell you what happens because the same thing happens on all chains — people will liquidate positions and move into new projects that they think have growth potential. The same has happened on the harmony ecosystem when a new exciting project comes out — people start to shift some of their TVL from one project into another.
With 22x more TVL than Harmony and the type of momentum and credibility DFK has (see Yahoo finance article about DFK and Axie), it is highly likely that some of that 11.6B in TVL is going to find its way into the DFK ecosystem (more on what that means for Jewel below). Lets just say even 4.6% of that makes its way into DFK — that would already surpass the entire TVL of the Harmony ecosystem (and it would all be in DFK). That would propel the price of Jewel (and Crystal — see discussion below on high tide raises all boats) to dramatic heights.
Let’s consider the player base element: The market cap of AVAX is ~11.8x higher than Harmony and TVL is 22x higher. That’s because its simply just a bigger ecosystem. Bigger ecosystems ->more holders in ecosystem -> more potential players for DFK -> more adoption -> more TVL, usage and demand -> higher prices for everyone.
Just look at the last 30 day growth in users, transactions and volume for DFK. Imagine what happens when you now have access to TVL and user base that is (as Frisky would say it) “Orders of Magnitude” larger.
The excitement to me comes from the additional exposure and getting this out into the hands of other people. If we isolate it here, it doesn’t benefit everyone as much. You don’t have to be on the Harmony chain for that ecosystem to benefit the Harmony chain players. Increasing the utility of everything for everyone is going to be great. If you want to go to experience these new lands you can. If you don’t want to that’s fine. Everyone will end up winning here — Professor Tango — Dec. 2, 2021 AMA
I won’t beat a dead horse on this topic, but if this isn’t clear how this would be beneficial, drop a comment.
2. Current holders will qualify for airdrops leading up to the launch.
Leading up to the expansion Jewel holders are going to eligible for airdrops. We don’t know details or quantities, we just know there will be airdrops. To be clear, airdrops is not how most of the Crystal is going to be emitted, prior Dev statements have indicated it will largely be through staking Jewel over in Crystalvale for the initial emissions, and slowly shifting into emissions for staking pairs in liquidity pools.
Here’s some statements the Dev’s have made on this. For exact details, just stay tuned and consider stacking Jewel now in case there’s a big pump after an announcement.
There’s a lot of really cool things we’ll be able to do for existing players to rewards them with this expansion. When we launched on Harmony we pre-minted a certain amount of Jewel for the team and development. We don’t need it all, so what we might do is start pre-minting and rewarding players in airdrops to start rewarding existing holders. Also — in terms of the other chain — if you go to Pangolin DEX, and you buy some Jewel you don’t really have a way to earn rewards yet (although Pangolin sounds like it will be creating an incentivized pool there). There will be multiple ways to earn from this expansion and we will announce them all. — Frisky Fox in Dec. 2, 2021 AMA
What do we need to do to get the PT on avax? — Wzwz
For now, get and hold JEWEL, to qualify for airdrops and have so that you can be some of the first to jump in on the higher emissions for single staking once it launches — Frisky Fox in Discord
Got 2 questions: — Will active players that have a lot of heroes and have summoned a lot also be rewarded or is it mostly the passive stakers in the bank? — Will locked jewel also be considered for the new token airdrops? — satdart
Good questions. We’ve got a few different airdrop formats coming up that we haven’t seen before, and one of them involves heroes in a big way. Stay tuned for more info on that. Locked jewels won’t be considered for the new token airdrops, we see locked jewels as their own reward, but want to incentivize and reward holders of the circulating tokens — Frisky Fox in Discord
3. People will have to buy Jewel to get Crystal for the initial bootstrapping of Crystal supply — this will raise price of Jewel.
In the December 2, 2021 AMA someone asked Frisky what will happen if people just dump their Jewel for Crystal, his response was:
Frisky: This would be counterintuitive because the only way to get Crystal initially will be to hold Jewel and stake it. If your strat is to sell Jewel you will have a bad time. Everything we do will be to expand the utility of Jewel.
So yes there will be some airdropping of Crystal — but the official DFK announcement, the FAQ and Dev statements indicate that the main source of Crystal supply initially will be emitted from the Gardens, just like Jewel was when DFK launched on Harmony.
So that means if the people holding $22B worth of AVAX and ~12B worth of TVL on Avalanche want their hands on Crystal they have to buy Jewel. That's called demand. What happens when demand is greater than supply? Price goes up. This will likely manifest itself in multiple ways — either the very small amount of liquidity for Jewel on AVAX’s DEX’s rigth now will be so small that any meaningful demand heavy volume will drive the price on AVAX dex’s so high that smart investors will buy Jewel cheap on Harmony, bridge their Jewel over to AVAX and sell there, or AVAX holders will come to Harmony and buy here. Both of which will create upward price movement. See more on arbitrage opportunities below.
The new realm will have its own power token (similar to Jewel). It will not be Jewel, however in order to earn the power token, there will be an extended seed phase where you will need to single stake Jewel in order to earn it. So lets say there is an equal number of new participants as current participants and lets say the 20k new participants would like to stake and earn the new power token on a Non-harmony chain. They will have to go to the market, but Jewel and stake it in order to earn the new power token. What does this mean for the price of Jewel? The price should increase all other things equal. — Dreamer on Team Nov. 22 2021 AMA
I cannot emphasize how important this aspect of the tokenomics is to the expansion. You cannot take part of the initial supply of Crystal without buying Jewel.
4. Arbitrage Opportunities — The high tide will raise all ships.
“Arbitrage” this term has been thrown around a lot — and sometimes its associated with a negative connotation, but in reality, crypto markets and security markets in general are fundamentally driven by arbitrage. Why do you think the price of BTC on coinbase is almost always around the price of BTC on binance? Same with any DEX. In reality, they have their own separate prices, but they in practice will always be around the same price due to arbitrage trading.
Example: Take DFK as an example. The price of ONE-JEWEL is driven by an algorithm built into the dex based on buys/sells and the amount of liquidity ON THE DFK DEX. That prices cares nothing for the price of ONE or Jewel on another exchange. Let’s further assume someone comes in with $10M USD and buys ONE on DFK’s dex, this would pump the price of ONE very quickly on DFK’s dex, but not on any other exchange. So what does an arbitrager do? They immediately go to some other exchange outside of DFK and buy some ONE for cheaper (which raises the price on that exchange) and then bring it over to DFK’s DEX and sell it (which lowers the price of ONE on DFK’s Dex). Eventually arbitragers will milk everything there is to milk in price difference until the price of ONE is essentially the same across the various exchanges.
So how does this apply to DFK expanding from Harmony to Avalanche? There’s several examples, and frankly, I’m excited about the opportunity they all pose. At the end of the day, the net effect will be increased prices for everyone across the board when you have a large influx of capital from another chain such as Avalanche.
Illustrative Examples:
- Price of bridged Jewel on AVAX dexes takes off to the moon with all that AVAX TVL wanting in on the initial Crystal emissions, Crystalvale Gen0’s and Land. Holders of Jewel on Harmony or smart investors will head over to DFK on Harmony — buy Jewel there cheap, take it over to AVAX and sell it high. This will raise price of Jewel on Harmony and lower the price of it on Avalanche until there’s no more arbitrage opportunity.
- Price of Crystal is 2x the price of Jewel, but it still costs 30 crystal to summon with your Gen0 on AVAX as it does 30 Jewel on ONE. Smart players will sell 15 Crystal for 30 Jewel, bridge their heroes over to Serendale (Harmony), and summon using the 30 Jewel instead. This arbitrage can and would continue until there’s no incentive to do it anymore. Price of Jewel in this case would go up, Crystal would go down until they are equal. This is driven by using the same quantity costs for everything (i.e. same amount of Crystal needed to do any in game action that requires Jewel).
- Hero floor prices are higher on Crystalvale than Serendale because there’s not enough heroes there yet, and many many more players wanting heroes on Crystalvale. Serendale players can bridge heroes over to Avalanche and sell their heroes at a higher floor price. Savvy Avalanche players could head over to Serendale, buy heroes there and bridge them back. This can and would continue until floor prices are relatively equal and there’s no more financial incentive to bridge over JUST for price difference opportunities.
The exact inverse of these would also be the same, Jewel prices moon and Crystal doesn’t. The arbitrage opportunity is there and the markets are efficient. Eventually they will all equalize. This is driven by the well-thought out tokenomic model, mainly (1) the power token has to be seeded (or initially emitted) by single staking Jewel and (2) the in game prices of the power token (in this case, Crystal) will be numerically the same as Jewel (i.e. 16J to summon with a Gen 1 for the first time, 16C to summon with a Gen1 for the first time on Crystalvale).
It’s going to extend to heroes as well. If you think about Taverns on other chains, they will probably have different floor prices across all these chains. There will be a lot of balancing after the seed phases. There will be arbitrage across many aspects of the game. — Dreamer — Nov. 22, 2021 AMA
If a power token becomes largely undervalued then what will happen is smart players will hop over to the cheaper realm, exchange their higher value token for the lower value token and summon for cheaper. The real storehold of value will be in our NFT’s because these can be bridged across chains. It can level up, have resourcce and equipment. The long-term value is really going to be in our NFTs, and the power tokens will be particular to the associated chain in terms of governance. We want everyone to be able to benefit. — Dreamer — Nov. 22, 2021 AMA
This new partnership is designed to incentivize further growth for Jewel, Harmony, and Avalanche. We have carefully crafted our expansion strategy so that we can provide the maximum benefit to our existing players while also attracting more liquidity and players from new chains. In particular, the single-staking model is key. Jewel tokens will have even more intrinsic value, with professions quests now live on Serendale and the option to single-stake for a new token in Crystalvale. Meanwhile, Avalanche users who may not be on Harmony will have an incentive to bridge and start earning in Serendale as they prepare for Hero and Professions launches in Crystalvale. And, since there will be more Quests available in Serendale than in Crystalvale for a good while, players will always have a reason to bridge onto the Harmony chain to play. There will be many quest arcs that go across chains to complete. Our goal is to onboard a host of new players, provide a new opportunity for ground-level entry into the Crystal token, and to increase the utility of both tokens and our NFTs, which benefits the entire community — Crystalvale Expansion FAQ
This obviously isn’t all there is to say about the expansion to Avalanche, there’s a whole list of in game aspects that are going to be great (and fun) for people actually playing the game. The team has hinted to what those might look like, and we’ll anxiously await further details.
Please give this a clap and drop a comment if you have any thoughts or view things differently. I love to hear other people’s views, especially when they aren’t the same as my own.
Check out my Index of Samichpunch DeFi Kingdoms Articles for a list of all of my other articles. You should definitely bookmark this index. Follow my medium account to get updates when they go live!
