Navigating Through DeFi
Walkthrough of terms found in the KnightSwap(BSC), & Dark Knight(FTM)
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If you are new to the decentralized finance (DeFi) world it can be very much like jumping into the ocean with no life vest
This guide is meant to go over some of the terms that are found to help you to achieve some more Clarity and build more Certainty in the process, and only by doing so will you be able to then Collapse Time.
Websites
KnightSwap BSC- https://app.knightswap.financial/
Dark Knight FTM- https://dark.knightswap.financial/
Table of Contents for easier searching
- Total Value Locked (TVL)
- Knight Stats
- KNIGHTSWAP BSC Farms Section
- Dark Knight Farm Section
- Multipliers
- How do you calculate the price of 1 LP token?
- Fees
- APR
- Be Careful With Chasing APR/APY
- APR/APY Is Also Not What You Think
- Knight & dKnight earned
- Farms vs Pools vs Raids
- Vaults
- How To Move LP Tokens
You have a choice as an investor
If you are reading this in 2021, Crypto is still new, and part of you being an early adopter to the technology is that there is lots of upside potential and not a lot of support (this would indicate more centralization).
We do our best in the ecosystem to explain as much as our time/resources will allow so that you have an understanding of what is going on, including many things that no one else will explain to you.
However, the demand for more knowledge and support while wanting the upside of the tech that comes with it is selfish & ultimately ends up slowing down development.
Total Value Locked (TVL)
This is an important one when it comes to a decentralized exchange (DEX) which is what KnightSwap & Dark Knight are.
Total value locked refers to the amount of capital currently held within the platform. You can think of it as an “account balance” except it is not owned by a singular person. It is the culmination of all the individuals storing their capital within the platform.
Why is TVL important? The more TVL there is the more trust there will be for a platform. The more trust = more partnerships = more users =more sustainability.
Would you invest your money in something that has 500K or 4 billion $ of TVL?
Knight Stats
Marketcap- (market capitalization) refers to the total dollar market value of a company, token, project etc. In crypto this is calculated by the total number of tokens in circulation X the current price.
Circulating supply- of $KNIGHT at this writing is 7,862,855 & the current Price is $.8285924 multiply the 2 together and you get approximately $6,536,139 for the marketcap (the priced changed while I took these screenshots).
Total Minted- The $KNIGHT token is not a fixed supply asset, unlike $GUARD or $WOLFIES. The contract allows for more minting (producing more) of the tokens. Whereas the contract of $GUARD or $WOLFIES does not.
New Knight/block- This will be fixed at 10 $KNIGHT per block(Blocks are files where data pertaining to the network (in this case BSC) are permanently recorded. A block records some or all of the most recent transactions that have not yet entered any prior blocks. Thus, a block is like a page of a ledger or record book. Each time a block is ‘completed’, it gives way to the next block in the blockchain. A block is thus a permanent store of records which, once written, cannot be altered or removed.)
KNIGHTSWAP BSC Farms Section
(https://app.knightswap.financial/farms)
Knight — BUSD LP- refers to the Liquidity Pair (LP) of the 2 tokens $KNIGHT + $BUSD joined together. The process of making a liquidity pair is what allows other investors to be able to safely trade between the two.
To learn more about liquidity & how to provide it on KnightSwap
Dark Knight Farm Section
(https://dark.knightswap.financial/farms
To learn more about liquidity & how to provide it on Dark Knight
Multipliers
These are the orange numbers found on top next to “No Fees.” KNIGHT- BUSD has 45x, KNIGHT- BNB has 60x, & BNB-BUSD has 15x
Every DEX will have these listed out somewhere on the farms page here are some other examples
What multipliers do you see?
What these multipliers refers to is how many more $KNIGHT (or whatever farm asset you are looking at) is produced per block for that particular farm.
The multipliers are the only way that a DEX will be able to regulate the emissions of their token after being audited. Right now the amount of $KNIGHT produced per block is 10 and so the only way to change how much $KNIGHT a farm receives will be to change the multiplier.
How do you calculate the price of 1 LP token?
At KnightSwap we have made the process by displaying the LP token price right on our farms (green line)
For those that want some more knowledge on how this is calculated
1 LP token price= Total value of liquidity pool/circulating supply of LP tokens
Let’s walk through an example
So plugging in the numbers to the equation
1 LP token price = 29,361,612/9,294,314.45= 3.159 which is what the UI display showcased up above.
Fees
Some platforms there are fees associated with using their tools. They may explicitly state it or it may be found in small print, or within their white paper. It is important for you to search this answer out before you jump in and out of these tools and end up losing more value than you gain.
For KnightSwap & Dark Knight the native farms and pools do not have any fees associated with it.
APR
Annual Percentage Rate- Yearly interest generated by a sum that’s charged to borrowers or paid to investors.
APR in this case is what is being paid out to you as an investor. If you click on the little box (pink arrow)
This box will pop up giving you a more detailed layout of what you can expect. ROI (return on investment) Please read the print at the bottom in orange.
Compounded Once Daily- This means to achieve the rates specified for the APY you need to pair the earned $KNIGHT with $BNB to create more LP and add that back into the original farm
APR can change it is not a fixed amount. Lots of different factors will go into that but at the end of the day APR doesn’t really matter it is merely a reflection of the data.
The farm & pool emissions are already calculated to produce a certain number & so higher APR does not always mean better.
Be Careful With Chasing APR/APY
An Example
This is the APR for 1 day of GNANA → BANANA- 106.30% APR
This is the price of BANANA for that day & let’s say you bought in at $1.721
The price of BANANA a week later is $1.175 but the APR has now gone to 121.64%.
Your initial investment dropped 32% but you gained 20% in APR.
So if you needed to pull out your GNANA to now sell you would be at a net loss from your initial investment.
APR/APY Is Also Not What You Think
The blockchain is not programmed for the USD it is the UI that is built (not just for our project but a majority of DEX’s probably) showing you the representation in USD because this is what majority of investors are processing in so the accuracy and precision is way off.
APR/APY is simply a UI display.
Farms, Pools, Raids are all operating off a specific token amount that is set by the developer of the project.
Ex) Investors want to have $GUARD as a Raid within the KnightSwap ecosystem. They would provide $40,000 worth of tokens for 1 month to be given out.
The APR/APY is doing a back calculation of the amount of tokens that can be given out to each staker based on their % share of the $KNIGHT or $dKNIGHT token. You can never get more than $40,000 worth total from that Raid (unless they added more tokens to the supply)
How APR/APY can change- Scenario 1
If the price of PETS decreases this can be one factor that decreases the APR shown because the price of the token is now worth less although the same amount of tokens would be provided to stakers. Since the total number of tokens remained the same but each one is worth less your APR would be lower because your value is less overall.
Scenario 2
The price of $KNIGHT Increases & $PETS stays the same= APR goes down. Each token value being staked is now worth more. But you still receive the same amount of tokens.
Scenario 3
If price of $KNIGHT gets cut in half & $PETS stays the same= APR goes up. Each token value is worth less so you need a higher APR to “make up” the difference but the end result is that you receive the same amount of tokens in scenario 1,2, & 3
Let’s repeat this again Farm/Pools/Raids/Vaults are based on TOKEN EMISSIONS per BLOCK (not in $ per DAY)
Blocks are not equivalent to how 1 minute = 1 minute in time they will vary
Another Example To Drill This Home
If you had 5000 LP tokens that emitted 10 tokens/day IF the tokens remained the same & TVL was the same for the entire year then you would get 73% APR
This is practically impossible as the price of the token will fluctuate and TVL will change as well.
Let’s say that the 5000 LP tokens are worth $2,500 and emits tokens $5.00/day at 73% APR
If the value of your LP token decreases to $2,000 because either BNB or another asset value changes. You still have 5000 LP tokens which means you will still EARN $5.00/day in tokens but now your APR has changed to 91.25% to account for the drop in price.
The APR can go all the way to 101.39% and prior to you reading this you would have be super happy to see this but now you know better. One reason is that potentially your asset value went down as a whole to $1,800. This doesn’t matter UNLESS you need to SELL your asset and now you are DOWN $700.
HOWEVER, you are STILL earning $5.00/day in token emissions
You can flip this as well. If the APR is going down that possibly could be a good thing because your base may be growing. You are making more money even though the APR is going down.
This is ASSET accumulation & why the rich continue to get rich as they ACQUIRE MORE ASSETS that appreciate & they can use to generate more rather than selling their “golden goose”
Highly recommend watching this video as well
$KNIGHT & $dKNIGHT Earned
By placing your Knight- BNB LP into the farm you are earning $KNIGHT
By placing your dKNIGHT- USDC LP into the farm you are earning $dKNIGHT
Harvest- pressing this button will allow you to receive the $KNIGHT or $dKNIGHT you have been earning. These will go into your wallet. (you may need to add contract address to your wallet to see it)
$KNIGHT- 0xd23811058eb6e7967d9a00dc3886e75610c4abba
$dKNIGHT- 0x6cc0e0aedbbd3c35283e38668d959f6eb3034856
The “+” & “-” icons are how you can add your LP tokens or remove them respectively.
“Unlock Wallet”- if you see this make sure you are connected to either the BSC or FTM network for Knightswap or Dark Knight respectively & have your wallet connected.
Farms vs Pools vs Raids
- Farms are where you can deposit your LP tokens (remember these are pairs) → $KNIGHT
- Pool this is where you can deposit your SINGLE $KNIGHT tokens to start earning more $KNIGHT
- Raids- this is where you can deposit your SINGLE $KNIGHT tokens to start earning PARTNER TOKENS
For this partner token below we are earning $CRUSH by staking our $KNIGHT token.
On the $KNIGHT pool you will notice a different button. “Compound”
By pressing this button it allows the contract to harvest the $KNIGHT for you and then re-add the $KNIGHT into your staked pool. This saves you one less button click & gas fee transaction!
The typical route would have been “Harvest → “+” (to add more Knight)”
Vaults
Vaults can be found in many other platforms and some tokens are only providing a vaulting service. Here are some examples (I am not advocating for these just merely providing you with what they look like)
What does a Vault do?
So remember back to our farm example?
Place a LP (KNIGHT — BNB LP example) and you earn yourself $KNIGHT
A Vault is built on top of the farm which will take the earned token, sell that token and buy the LP back for you. It is automating a process that would take you many transactions to do & much of your time to do so effectively.
What you would have to do manually.
Knight BNB LP → $KNIGHT → Sell $KNIGHT in half to buy $BNB → Pair new $KNIGHT + BNB to make → New KNIGHT BNB LP & add it back to your farm.
4 button clicks & now imagine doing that multiple times a day…
If you would like to put all this on auto pilot you can learn more about the vaults that KnightSwap has to offer below 👇
https://medium.com/wolf-den/tired-of-pushing-buttons-4d9e64b8cd40
How To Move LP Tokens
There may be a time where you may want to transfer your tokens from one wallet to another say for instance from your MetaMask to a hardware wallet.
Some tokens may have a tax associated with transactions, so forming and or breaking LP would incur the tax from the token. LP tokens however once created will allow you to move the pair without taxes associated. At KnightSwap they make this pretty easy for you to find the LP address of farm pairs.
Go to your particular farm & click on “View on BscScan”
This will take you to the BSC scan where you can find the contract address to add to your wallet. (Green line). Alternatively if you don’t have the convenience of KnightSwap you’ll have to go into your BSC scan and search for the LP address yourself.
Once you had the LP address the process of transferring from wallet to wallet will be the same.
Remember though if you have the LP staked into a farm or vault this won’t show up in your wallet you will have to unstake first before you can move the LP.
This document will periodically be added to as new topics come up.
DISCLAIMER: These articles are for educational purposes only. Nothing in this article should be construed as financial advice or a recommendation to buy or sell any sort of security or investment. Consult with a professional financial adviser before making any financial decisions. Investing in general and options trading especially is risky and has the potential for one to lose most or all of their initial investment
