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Metaverse Weekly

Metaverse Weekly: The Expanding Tokenomics of GameFi Protocol DeFi Kingdoms

The second installment of our new Metaverse Weekly feature.

DeFi Kingdoms (DFK) is a young play-to-earn (P2E) gaming protocol built on the Harmony Network. The protocol is fueled by its native cryptocurrency JEWEL. The JEWEL token powers in-game purchases and rewards such as NFTs (Heroes), collectables, and more.

DFK launched in the summer of 2021 with the intention to develop a gaming-powered yield farm. By leveraging the smart contract applications of the Harmony blockchain combined with Uniswap’s V2 protocol, DFK has managed to attract a healthy usage for its JEWEL token.

DeFi Kingdoms: Serandale: https://game.defikingdoms.com/ 

Tokenomics of JEWEL

The JEWEL token essentially works to function entirely like a gamified DEX (decentralized exchange). JEWEL employs basic DEX tokenomics in that DFK users essentially participate in yield farming to earn JEWEL tokens.

The JEWEL token itself has two key functions to understand overall. They are:

  • Depositing at the DFK Bank
  • Delegating JEWEL to a liquidity pool in the Gardens

When JEWEL is deposited at the Bank, users can exchange it for xJEWEL governance tokens which come with a yield, incentivizing participation. The other option is to simply delegate tokens to a liquidity pool, meaning that the user exchanges their liquidity to the pool to generate higher returns.

At genesis, 10 million JEWEL tokens were pre-mined and distributed out to multiple channels, including:

  • 5 million towards game development
  • 2 million towards marketing
  • 2 million to form the original liquidity pool
  • 1 million to the founding time

While the initial distribution of tokens was highly centralized, JEWEL has a fixed supply of 500 million tokens, meaning that only a small percentage of tokens was pre-mined and airdropped in the original distribution.

JEWEL token is capped at a fixed supply of 500 million possible tokens. The remainder of those tokens will be introduced into DFK via the yield farming mechanisms and follow the following supply curve:

Source: Messari

An important note about DFK’s JEWEL token is that the max supply can be changed at any time through governance. Users participate through the DFK Bank (via xJEWEL governance tokens) in which they receive governance power and rewards in exchange for their liquidity.

Criticisms of DeFi Kingdoms

While the tokenomics of JEWEL function properly, the current development of DFK  has been a subject of criticism as the protocol lacks a true gaming experience. The label of being a “gamified DEX’ is something that developers have even acknowledged.

As Ismail Mert Tarihci of Admix stated: “DeFi Kingdoms has been thriving on the future implied development of an actual game being built on top of the current DEX (decentralized exchange) mechanics of DFK.”

A push forward in the DFK roadmap is the integration of new realms into DeFi Kingdoms. The first of these new realms is the integration of a new DFK token called CRYSTAL via the Avalanche network.

Integrating Avalanche (AVAX) and the CRYSTAL Token

Towards the end of Q4 2021, it was announced that DFK would be integrated into Avalanche (AVAX) as a new accessible realm powered by its own token CRYSTAL. 

The move allows DFK to take advantage of the low costs and fast transaction times typically associated with the Avalanche blockchain network. It also expands the overall use case of the DFK ecosystem as a whole. This new realm is called DeFi Kingdoms: Crystalvale and is bridged to the main realm of DFK.

DeFi Kingdoms: Crystalvale: https://defikingdoms.com/crystalvale/ 

The CRYSTAL token operates very similar to that of JEWEL. It can be used to purchase or mint new Heroes (NFTs), utilized as liquidity in the DEX or farms, and serves as the Crystavale realm native currency.

The value of both JEWEL and CRYSTAL are linked through shared utility since they power many of the same features (called Power Tokens). Additionally, JEWEL fuels the gas fees for the main DFK blockchain where CRYSTAL transactions are settled, meaning JEWEL literally powers CRYSTAL.

Because of this, the incentives for holding JEWEL have expanded substantially. Those holding JEWEL are now the beneficiaries of increased transaction volume due to CRYSTAL.

Summary

The expansion of the DeFi Kingdoms ecosystem to include Avalanche not only provides an improved use case for DFK but also directly incentives higher usage of both the JEWEL and CRYSTAL tokens simply through basic economics.

While the further development of a true game on DeFi Kingdoms remains a speculation of sorts, for now, the protocol experienced substantial growth over Q1 2022 and looks to expand on that growth over the rest of 2022. 

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