DeFi Kingdoms Play to Earn Token Plunges 90% Amid Mining Exploit

What happened? An error discovered by a few players allowed them to mine far more JEWEL tokens than they should. Therefore, a far higher number of token emissions resulted in price deflation - more tokens, less value per unit - plus a very negative repercussion from investors who feared a complete code-break. It was trading at $3.03 dollars before plunging directly to its lowest at $1.18 dollars in a matter of hours.

JEWEL plunges: The immediate panic was due to news of a coding error in a crypto project, which is always terrible. Secondly, mining is the main form of token earning in the game, so it was reasonable for users to presume that their main source of in-game income would be halted. Days after, developers provided a temporary solution which is still at play until a permanent option becomes available.

DeFi Kingdoms’ Rise: Reaching an all-time high of $22.52 in January, DeFi Kingdoms opened in 2022 as one of the most promising play to earn games available. Once reaching the #3 position in the metaverse and play to earn categories, it broke the record of $1 billion dollars in total value locked in its ecosystem merely four months after its launch in September 2021. On January 2nd 2022, it registered a whopping $114 million dollars in daily trading volume. Just to compare, Axie Infinity’s market cap at the time was 10 times higher than DeFi Kingdoms, but it only held a daily volume of $16 million in transactions.

The metaverse-aimed, play to earn game DeFi Kingdoms is facing quite the delicate moment in the project. After a serious mining flaw was found in its programming, its native token plunged 62% - its lowest value in history and 91% lower than January highs. In this article, we explain what made DeFi Kingdoms play to earn token plunge 90% when a potentially disastrous error was found.


What happened?

---

Leading developers in DeFi Kingdoms, including the main developer who is popularly known in the community as Frisky Fox, headed to the Discord main channel to explain what had happened. In a nutshell, an error discovered by a few players allowed them to mine far more JEWEL tokens than they should. Therefore, a far higher number of token emissions resulted in price deflation - more tokens, less value per unit - plus a very negative repercussion from investors who feared a complete code-break.

Developers explained that DeFi Kingdom’s security has a blockage structure that only allows a certain amount of JEWELs to be mined per “hero” - the NFT characters of the game. After most likely some random testing and playthrough, a group of users found out that they could easily bypass this security measure by transferring blocked tokens between several accounts and characters - thus, the limit would start anew and new characters would now be able to mine even more tokens, then repeat the cycle.

As the process went on, more and more JEWELs were inserted in the game - far more than the developers would ever expect in such a short period of time. According to Frisky Fox, it was calculated that the number of JEWELs being collectively unblocked through this method was about 12 thousand in merely 12 hours. In normal circumstances, it would take “an army of miners” to accomplish such a feat, they stated.

During the breach, the DeFi Kingdoms developers tried to reduce the impact of the situation but to no avail in its immediacy. They also concluded that the impact on the platform was too little in comparison to how many tokens have been mined in total - around 85 million at the time of writing.


JEWEL plunges

---

Even though the developers saw the number of breached tokens issued as of little impact, it did not nearly compare to how the community and its investors reacted to it. Once news broke out in the Discord channel, the JEWEL token began its downfall. On the night of April 30th, its market bled pure red across the board, reaching the historical minimum price of $1.18 dollars per token on Sunday. As a comparison, the token was trading right before the announcement at $3.03 dollars according to CoinGecko data - a 62% fall almost immediately. Compared to its January highs, when DeFi Kingdoms was skyrocketing, the plunge is 91.1%.

So why the panic? For starters, news of a coding error in a crypto project is always terrible news. The crypto market still has a sour taste from what happened to TITAN’s mining loop exploit with its algorithmic pair, which resulted in the crypto going from an all-time high directly to a 100% loss in a matter of hours. Secondly, mining is the main form of token earning in the game, so it was reasonable for users to presume that their main source of in-game income would be halted.

And that is precisely what happened. In order to avoid more tokens entering the DeFi Kingdoms platform through this exploit method, developers disabled all mining in the game until it was promptly corrected. A temporary solution to the issue was deployed in a couple of days, which helped DeFi Kingdoms recover partially from the sudden drop. On the 3rd of May, it already registered a $2.02 high.

Nonetheless, the impact of this mining breach is still pretty visible in JEWEL’s stats. The total value locked (TVL) in the platform dropped significantly, with far fewer trades per 24 hours in exchanges than in the previous weeks. Compared to its all-time high of $22.52 in January, DeFi Kingdoms still has a long road ahead for recovery if it wants to return to its golden days.


DeFi Kingdoms’ rise

---

DeFi Kingdoms opened in 2022 as one of the most promising play to earn games available. Once reaching the #3 position in the metaverse and play to earn categories, it broke the record of $1 billion dollars in total value locked in its ecosystem merely four months after its launch in September 2021. On January 2nd 2022, it registered a whopping $114 million dollars in daily trading volume. Just to compare, Axie Infinity’s market cap at the time was 10 times higher than DeFi Kingdoms, but it only held a daily volume of $16 million in transactions.

Like any company, asset or crypto project, it is unclear what the future of DeFi Kingdoms is going to look like. Regardless, it was very clear from the get-go that DeFi Kingdoms held a very active and passionate community. Given its impressive results since the release and how it managed to partially bounce back so quickly from a very tough scenario, one can only hope that the project manages to fully recover and return to its bright days of crypto gaming.


Author: Gate.io Researcher Victor Bastos

* This article represents only the views of the researcher and does not constitute any investment suggestions.

*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.