DeFi Kingdoms ($JEWEL) on Harmony One Network
I. Overview of DeFi Kingdoms Opportunity
DeFi Kingdoms is a game, a DEX, a liquidity pool opportunity, a market of rare utility driven NFTs, and it all plays out in the form of fantasy pixel art. DeFi Kingdoms marries the innovations happening in DeFi, with the full potential of blockchain technology in game and NFT form. In addition to the incentives and rewards programs native to traditional DeFi, users will utilize NFTs in order to be able build an operation/level it up to increase farming and staking returns. Users will also be able to do daily quests to collect rare NFTs that augment and impact the rewards and returns of the DeFi experience, in addition to future roadmap objectives.
DeFi Kingdoms has packaged DeFi elements into a fun and synergistic game, providing $JEWEL token holders with an engaging and sustainable experience that is very different from almost every other DEX. DeFi Kingdoms is located on the Harmony One Network. Harmony is a L2 interoperable scaling solution on Ethereum. Harmony also allows for L1 style architectural development which makes it comparable to other L1 (AVAX, FTM, SOL, etc) networks with regards to speed and transaction costs. Think of DeFi Kingdoms as the leading DEX on the budding Harmony One network, similar to Trader Joe or Pangolin on AVAX, with a fundamentally new integration; its own unique NFT metaverse designed to augment and impact the DeFi rewards and returns for users.
II. Investment Thesis & Highlights
My core macro investment thesis for the next 6-12 months focuses on the following themes and sectors. DeFi Kingdoms does a fantastic job of combining at least 2 of the themes, most importantly L1s/DEXs and NFT/metaverse.
L1s/DEXs
NFTs/Metaverse
Storage
DAO/Community
L1/DEXs - DeFi Kingdoms is currently the preferred DEX on the Harmony. This is illustrated by the growing TVL (70M to 115M from Oct 7-Oct 11) and more TVL than almost all of the other Harmony DEXs combined. DeFi Kingdoms TVL is split between single sided staking of $JEWEL tokens, as well as very high APY LP farming, with a heavy emphasis on longer term sustainability in the tokenomics of rewards.
This is also a tangential bet on the L1/L2 Thesis as DeFi Kingdoms is the current preferred DEX/LP platform on Harmony network. Harmony is flying under the radar relative to many of its rivals, boasting a relatively recent $300M incentive program for dApp development. As the Harmony network closes the gap on its L1 & L2 competitors, DeFi Kingdoms is well positioned to be a large beneficiary of these capital flows.
NFT/Metaverse - DeFi Kingdoms has recently released its long awaited Gen-0 Hero NFTs. Heroes play an important role in DeFi Kingdoms. They will grant early access to locked $JEWEL token rewards, collecting additional NFT items from Quests, battling other Heroes, etc. 2000 Gen-0 Heroes have been minted, with attributes and abilities (summoning, questing, kingdoms/lands, battle etc) that will benefit user experience, rewards, and returns within DeFi Kingdoms. Proceeds from the initial Hero mint is used to reward staked users, quest reward fund, game development fund, marketing fund, and dev fund.
DAO/Community – While no official DAO plans have been announced, the DeFi Kingdoms project has a very active and budding community with over 8K members on Discord. Over 350 community members dialed into the weekly team AMA on October 11th, and this number has only continued to increase as the project and team executes on its roadmap. The focus always appears to be on project development and community input, with no real focus on short term prices (outside of how it affects the user experience in-game).
III. Investment Analysis & Valuation Framework
The JEWEL token is more than your average governance token. JEWEL is positioned to be the main token of value accrual in DeFi Kingdoms. It will be used to purchase items and unique NFTs such as Heroes and Kingdoms, and various in-game ‘boosts’ (decreased build times, refreshing stamina, etc). JEWEL tokens will also be used in liquidity mining, allowing you to earn even more through staking.
The rationale for the locking model is to help the project retain value for the long term, ensuring only those who want to be a part of the long term vision of DeFi Kingdoms will earn maximum rewards available to early epoch adopters. The locking model is clever in its design, by balancing the rewards needed to attract early LP providers against the long term interest of a sustainable price for an in-game token. Additionally, the locking model provides early LPs a strategic decision to claim their rewards early and compound staking rewards at the cost of locking a higher % of their rewards until after Epoch 51, OR to delay claiming until a later Epoch to unlock a higher percentage of total rewards at the expense of not being able to compound garden rewards in the meantime. Locked tokens remain locked until the end of the 51st Epoch (estimated in Q3 2022). Locked JEWEL will begin to unlock ratably over the next year (assuming a block speed of 2 seconds per block on the Harmony Blockchain). Please see end of report appendix for a table illustrating the rewards program and locking schedule.
Valuation & Metric Comparison Takeaways
i. Harmony One (as an L2 scaling network with L1 similarities) is predictably lagging the other L1 networks in terms of absolute TVL, but not nearly as much in terms of TVL % changes over time. This lag can be most attributed to the other L1 networks having more developed ecosystems to date, most notably in the areas of multichain interoperability. It is much easier to increase TVL when you can seamlessly pull from all L1 networks (Harmony/DeFi Kingdoms is working on this, notably with FTM recent announcement)
ii. Harmony One also boasts the lowest MKT Cap/FDV ratio
iii. DeFi Kingdoms at first glance is not the most undervalued project by standard metrics such as TVL/Mkt Cap, Mkt Cap, FDV; the recent boost to FTM TVL gives those protocols the edge on these metrics.
iv. DeFi Kingdoms does have a few other valuation metrics in its favor; TVL change since September illustrates a huge influx of capital onto the DeFI Kingdoms platform. DeFi Kingdom also has the lowest TVL/fee generation ratio all platforms illustrating user activity on the platform
v. DeFi Kingdoms also has 60% of the entire TVL of the Harmony Network, no other dex comes remotely close to this metric. As the Harmony network closes the gap on its L1 & L2 competitors, DeFi Kingdoms is the obvious place for this capital to land
vi. Conservative: Using public comps and assuming that Harmony’s TVL doubles from 250m to 500m over the next 6-12mos (with no cross-chain interoperations), we can estimate that at least 30% of this TVL will flow into DeFi Kingdoms due to its dominance on Harmony. This effectively would increase DeFi Kingdoms TVL by 60% to 225M from 148M (+75M) with the majority of that demand going to JEWEL tokens. Given the issuance schedule, TVL increases/demand flows, we can roughly estimate JEWEL to be worth $6.5-$8.5 per token.
vii. Expected: Using public comps and assuming that Harmony’s TVL increases 3-4x from 250m to 1Bn+ over the next 6-12mos (WITH cross chain interoperability), we can estimate that at least 50% of this TVL will flow into DeFi Kingdoms due to its dominance on Harmony. This effectively would increase DeFi Kingdoms TVL by 250%+ to 520M from 148M (+375M) with the majority of that demand going to JEWEL tokens. Given the issuance schedule, TVL increases/demand flows, we can roughly estimate JEWEL to be worth $10-12 per token.
viii. None of the above valuation takes into account anything related to the working metaverse (still adding content as well), the unique NFTs with functional stats impacting your farming/rewards, or the demand effects these uses have for the Jewel token will have. It is quite hard to predict this as well, and you are relying on the leadership team and community to execute on roadmap objectives. What we do know is that this is the most creative and functional implementations of a dex to date, positioned nicely on Harmony network to benefit from any amount of TVL inflow
Sources:
https://docs.defikingdoms.com/how-defi-kingdoms-works/jewel-token
https://dfkwiki.com/guilds
https://defillama.com/chain/Harmony
https://docs.google.com/spreadsheets/d/11sdgJjpy9p6P7b_sm6MUJrxjC2K8BAT4FP8UBoybcug/edit#gid=509527948
Appendix:
LP Rewards Program and Lock Mechanism (only half fit on page)
October 7th 2021 through October 15th 2021
