The King and Queen Makers of Kusama Kingdom: Overview & King's Launch Mechanisms and Analytics
Executive Summary
(1) The Kusama Kings NFT project, founded by Rachel (@ladykusama) and KBL (@1xKBL), is an early adopter of the Kusama blockchain and the RMRK NFT standard. The project was established to bring together serious builders, investors, and enthusiasts of the Polkadot-Kusama ecosystem, and to invest in early-stage Web3 projects.
(2) The Kusama Kings NFT collection raised roughly $1 million USD in revenues on sales of 110 NFTs, mostly through its weekly auctions over a 4-month period, launching approximately 6 to 8 NFTs per week. The launch mechanism enabled the community, and the value of NFTs, to grow slow and steady.
(3) Resale royalties have accounted for less than 1% of the King’s (~$1M) revenues to date.
(4) On a per-NFT basis, the Kings are among the highest revenue generating NFT projects to date, with average revenues of over $8,000 per NFT.
(5) Since its launch in October 2021, the Kings NFT has vastly outperformed KSM (its blockchain), RMRK (its NFT standard and marketplace), Kanaria (RMRK’s flagship NFT), and USD in terms of value appreciation and retention.
(6) The rarest NFTs have generally commanded a price premium of 2x to 3x over the more common NFTs. The rarity premium reflects the enhanced value of the art and intrinsic value of rarity as there is not much of a difference in utility across the rarity tiers.
(7) NFTs sold via auctions were much less likely to be resold than NFTs obtained via below-market pricing (giveaways and stealth drops).
Part 1: Project Overview
Background
In October 2021, Rachel and KBL founded Kusama Kings, an NFT collection capped at 110 NFTs, with the goal to bring together serious builders, investors, and enthusiasts in the Kusama-Polkadot blockchain and RMRK NFT ecosystems, to learn from each other and invest in early-stage Web3 projects.
Rachel is a digital artist, with a background in digital animation and visual effects and has spent most of her working life traveling around the world. KBL is a certified accountant and principal at Silvermine Capital, a private equity firm. He previously worked in TradFi at Goldman Sachs.
The Kusama Kings NFT (and later, Queens NFT) (collectively, “Kusama Kingdom”; @KusamaKingdom; https://www.kusamakingdom.com/) provide access to early-stage investment opportunities. To date, the Kings and Queens have collectively provided seed funding, participated in private sales, and provided other types of early-stage funding to a variety of DeFi and NFT projects in the Polkadot-Kusama ecosystem, including Ajuna and Talisman, among others. Members have collectively invested millions of dollars to date in early-stage startups in the Polkadot-Kusama ecosystem.
The Kings additionally have the “King’s Bounty.” This is a community fund, allocated to cryptocurrencies of Polkadot and Kusama based projects. The Queens have the “Queen’s Jewels” community fund, investing in stable coins for yield. The Kingdom occasionally holds private auctions in which notable NFT artists make rare artworks available exclusively for the Kings and Queens.
The Kings and Queens also provide access to “The Great Hall” and other channels in Discord relevant to Web3 such as NFTs, DeFi, and crowdloans as well as other social channels (e.g., health and gym) and project-specific channels for due diligence prior to investing. In this way, the Kusama Kings and Queens NFTs are much like memberships to a country club.
The Kingdom’s current members include founders, executives, and developers of NFT projects, DeFi projects, and Web3 media companies; digital artists and creatives; and NFT and crypto enthusiasts and investors. Virtually all are active participants in the Polkadot-Kusama ecosystem and have extensive knowledge and expertise in their Web2 and Web3 fields.
Following up on the success of the Kusama Kings, Rachel and KBL launched the Kusama Queens NFT collection in March 2022. The Queens are also capped to 110 NFTs and provide access to the utilities of the “club.” The founders have announced that membership to the Kingdom will forever be capped to the 110 Kings and 110 Queens.
The Kingdom has raised over 3,000 KSMs (roughly $1 million) from initial sales of the 110 Kings NFTs from October 2021 through February 2022 and over 4,000 KSMs (roughly $0.5 million) from initial sales of the 110 Queens NFTs from March 2022 through August 2022. In total, the Kingdom has raised over 7,000 KSMs (approximately $1.5 million) from initial sales of 220 NFTs from October 2021 through August 2022. The USD conversions are calculated on a per-NFT basis, based on the KSM to USD exchange rate as of the date of auction or sale.
The Kingdom has also raised revenues from sales of additional, non-dilutive NFTs (e.g., wedding rings that can turn into a prince/ss). KBL also has a few plans in the works to raise additional revenue in the future.
Early-Adopter Challenges
The Kings were minted using the RMRK NFT standard (RMRK 1.0) on the Kusama blockchain and initially transacted on RMRK’s Singular 1.0 marketplace. The Kings NFTs migrated to RMRK 2.0 and Singular 2.0 in April 2022.
As one of the first adopters of RMRK, Kusama, and Singular, the Kingdom faced a number of significant challenges.
First, as of October 2021, there were very few NFT buyers in the RMRK-Kusama-Singular ecosystem. RMRK’s flagship Kanaria bird NFTs had just hatched in September 2021, and at that time, very few (if any) RMRK-based NFT collections other than Kanaria had sold more than 100 NFTs.
Second, resale royalties could not be assessed on Singular until the NFTs migrated to RMRK 2.0 in or after April 2022 (more than 6 months after its launch).
Third, bids and offers are not yet possible on Singular, making it more challenging to gauge buyer demand.
The Kings overcame these challenges and went on to raise close to $1 million (with only 110 NFTs), in large part, due to KBL’s and Rachel’s hard work, member support, and a 4-month launch period with auctions for several King NFTs every week.
NFT Collection
The Kings NFT collection has 4 rarity tiers. The Limited Kings are the most common with over 50% of the supply and the Legendary Kings are the rarest with only 10 out of 110. The more rare NFTs have more unique and detailed artistic features (e.g., animation, unique accessories). While the rarity of the NFT has not had much of an impact on utility so far, the rarer NFTs have routinely sold for 2x to 3x that of the more common NFTs (as described below).
Current Ownership
As of September 25, 2022, the Kingdom has approximately 123 unique members. The table below shows an estimate of unique owners based on their NFT ownership. The percentages for each ownership type are based on a total of 123 unique owners (e.g., Royals: 37 / 123 = 30%). The percentage for Total reflects the share of unique owners relative to the number of NFTs (i.e., 123 unique owners / 220 NFTs = 56%; 110 King NFTs and 110 Queen NFTs).
King of Kings and Queen of Queens owners have a full set of Kings or Queens (Limited, Rare, Ultra Rare, and Legendary). Royals have a King and Queen. The estimates are based on Discord server roles (not on unique wallets) as some owners allocate their holdings across different wallets.
Part 2: King’s Launch Mechanisms and Analytics
Launch Mechanisms
The first Kings NFT (King #1, Limited) was launched on October 8, 2021 as a giveaway. Seven more Kings NFTs (3 Limited, 2 Rare, and 2 Legendary) were given away for free and fourteen were stealth dropped at discounted prices from October through November 2021.
The remaining 88 NFTs were launched via weekly auctions from October 10, 2021 through February 13, 2022. The NFTs were consistently released every week, “rain or shine,” thereby signaling to potential buyers that an alternative to buying a King this week is to buy it next week during the 4-month launch period.
In a typical week:
1 Legendary King was auctioned using Dutch Auction via Singular;
1 Rare and 1 Ultra Rare Kings were auctioned using English Auction via Twitter; and
3 Limited Kings were auctioned using a variant of multiple English Auctions via Twitter DM.
(There were slight variations in the mechanism and number of releases per week.)
These launch mechanisms, along with the efforts by KBL and Rachel to build the community, were very successful in raising capital and recruiting people who have a genuine interest in being part of the community.
At a time when many NFT buyers are “flippers” and “speculators” who buy and sell within a short period and have little interest in adding value to the project, KBL and Rachel, along with the early OG members were able to cultivate a network of people who add value to the community.
The Kingdom’s comparatively slow release, taking place over 4 months, enabled the community to grow slow and steady. As the value of the network grew, so did the value of the NFTs. Launching the NFTs over time also enabled Rachel to adapt to her art to reflect contemporaneous trends in the crypto and NFT industry (e.g., incorporating trending topics and memes, collabs with rising artists).
Data
For this article, I received data from RMRK (via WagMedia) on all sales transactions on the Singular marketplace for the Kings and Queens NFTs from October 2021 through September 11, 2022. For each transaction, the datasets report the date of sale, sales price, buyer, seller, and NFT ID. I also received data on the weekly floor prices of RMRK’s Kanaria NFTs from September 2021 through September 2022.
I appended the Singular dataset with information and data from public sources (e.g., sales format and auction dates, KSM:USD conversion rates), information provided by KBL (e.g., giveaway NFTs), and Kusama Kings members who had done OTC transactions.
Auction Prices
The weekly auctions enabled prices to adjust to the growing value of the network as well as the volatile nature of the crypto and NFT markets on a weekly basis.
Figures 1a-1h show the auction prices over time corresponding to the Limited, Rare, Ultra Rare, and Legendary NFTs in KSM and USD. The prices (dots) correspond to initial sales via auction during launch (October 2021 through February 2022). The dotted line is the linear trend. The USD conversions are calculated on a per-NFT basis, based on the KSM to USD exchange rate as of the date of auction or sale.
The auction prices for the Limited Kings (Figures 1a and 1b) are shown here. Limited King #110, sold for 120 KSMs ($19,638) on February 13, 2022, was excluded as it was bundled with a Kusama Queen NFT. The figures for all rarities are in the Appendix below.
The price trends during launch were all “up only” for the most part (e.g., roughly 7x for the Limited Kings in both KSM and USD).
Resales
Through February 8, 2021, when the Kings were available via initial sale, there were only 16 resales recorded on Singular (11 Limited, 4 Rare, 1 Ultra Rare) out of a total of 110 Kings NFTs. Through August 2022, there were 30 resales of Kings recorded on Singular (20 Limited, 9 Rare, 1 Ultra Rare). I also obtained data on 4 OTC resales of King NFTs through August 2022 (2 Limited, 1 Rare, 1 Legendary).
The stealth dropped NFTs, which were initially sold at discounted prices, had the highest propensity of resale (8 / 14 = 57%), followed by giveaways (3 / 8 = 38%) and auctions (22 / 88 = 25%) (e.g., there were 8 resales among the 14 NFTs that were initially sold via stealth drop). The Stealth Drops were discounted by 50% or more compared to contemporaneous auctions.
The auctioned NFTs had the lowest propensity of resale compared to NFTs that were given away or sold at below-market prices. This is intuitive as an auction is generally better at directing the NFT to the person who values it the most compared to giveaways and below-market pricing (at least as of the time of auction).
Figures 2a-2d track the auction and resales prices of the Limited and Rare Kings through August 2022. Giveaways and Stealth Drops are excluded as their prices do not reflect market prices. Limited King #110, sold for 120 KSMs ($19,638) on February 13, 2022, also was excluded as it was bundled with a Kusama Queen NFT.
The price series for the Limited Kings (Figures 2a and 2b) are shown here. Prices were generally “Up Only” in KSM throughout this period but decreased in USD in the bear market.
The figures reflect only the OTC sales that I was able to collect from the current members of the Kingdom and do not include OTC trades that involved multiple different NFTs or additional considerations. The sales prices of OTC transactions for which I had data are consistent with those on Singular.
The figures for the Rare Kings are in the Appendix below.
King NFT vs Selected Alternative Investments
NFT prices are affected by both macro trends and by factors specific to the project and art. It is therefore instructive to compare the value of the King's NFT relative to alternative investments over time.
One natural comparator is KSM, the blockchain of the King's NFT. Another is RMRK, provider of the Kings’ NFT technology and marketplace.
In October 2021, the first month of the Kings’ launch, there were 15 sales of the Limited Kings at an average USD price of $1,885 (i.e., roughly $2,000). In October 2021, the average price of KSM was roughly $350, the average price of RMRK was roughly $9, and the average floor of a Kanaria NFT was roughly $850. Therefore, in terms of these alternatives, the cost to buy a King NFT in October was roughly equivalent to 5 KSMs, 200 RMRKs, $2,000 USD, or 2 Floor Kanaria NFTs.
The Kings Limited NFT vastly outperformed KSM, RMRK, USD, and Kanaria from October 2021 through August 2022. Figure 3 compares the value of 1 Limited King NFT versus these alternatives through April 2022. (There were no sales from May through July 2022 in the data).
The table below compares the average values in December 2021 (the peak of the Limited King NFT price) and August 2022 (the last full month of data). There were four resales of the Limited Kings NFT in August 2022, two via Singular and two via OTC. The Kings continued to outperform these alternatives through August 2022.
Rarity Premium
The rarity premium for the Kings NFT collection, mostly reflects the incremental value of Rachel’s enhanced artwork and the intrinsic value of rarity as there is not much of a difference in utility across the rarity tiers.
Figures 4a and 4b show the auction and resale prices from the period in which there were contemporaneous market transactions recorded for most rarity levels (October through February). As shown in the figures, the Legendary tier commands a convincing premium over the Rare and Limited tiers, and the Ultra Rare tier exhibits more volatility, week over week, than others.
Revenues and Volume
Through September 11, 2022, the Kusama Kings NFTs have generated total volume of 5,288 KSMs ($1.25 million), of which 3,266 KSMs ($0.92 million) were from initial sales and 2,000 KSMs ($0.32 million) were from resales. The Kings’ initial sales captured 62% of total volume, based on KSM (74% in USD), and resales captured 38% based on KSM (26% in USD). The USD conversion is calculated on a per-NFT basis, as of the date of auction or sale at Singular.
In stark contrast to many NFT projects on Ethereum, resale royalties have played a negligible role in raising funds for the project. Through August 2022, the Kings have generated approximately16 KSMs in resale royalties, which amounts to less than 0.5% of total revenues from sales of the Kings NFTs.
Royalties are estimated based on resale volume on Singular from May through August 2022 x 5%. The Kings were not able to collect royalties until the NFTs were migrated to RMRK 2.0 starting in April 2022. The Kings also cannot collect royalties on OTC transactions.
The Kings generated close to $1 million in revenues from only 110 NFTs, which amounts to more than $8,000 per NFT on average, with virtually no reliance on royalties. On a per-NFT basis, the Kings are among the highest revenue generating NFT projects to date.
The King's launch mechanisms have been very efficient at cutting out the middlemen (i.e., the flippers and marketplaces and their surcharges and fees). The project did not lose much revenues to flippers and most members have not had to pay for reseller markups.
Capturing revenues efficiently is important for the project as more revenues enable them to invest more into the project, which, in turn, increases the value of the project to its members.
As a counterfactual, if the Kings had relied on raising revenues mostly from royalties, they would have needed an insurmountable number of resales to achieve the same revenues.
The Kings generated 3,266 KSMs in initial sales by launching the NFTs over a 4-month period. If instead, the Kings released all NFTs on the first day at an average price of 4 KSMs, the initial sale would raise 4 x 110 = 440 KSMs. In order to generate the remaining 2,826 KSMs with a 5% royalty rate, the Kings would need 56,520 KSMs in resale volume (514 KSMs per NFT). But if there were that much turnover, there would not be much of a community and the value of the network would be substantially less, which, in turn, would make those resale volumes unachievable in the first place.
The importance of the launch mechanism cannot be understated. A well-designed launch mechanism can help the NFT project succeed whereas a poorly designed launch mechanism can ensure its failure.
Recap and Sequel
Part 1 provided an overview of the Kusama Kingdom, with a focus on its first NFT collection, the Kusama Kings.
Part 2 provided the analytics on the Kings’ launch mechanisms, prices, sales, and rarity premium.
I am planning to cover the Kusama Queens and game theory on the launch mechanisms as a sequel to this article.
Acknowledgements
Many thanks to Kusama Kingdom (@KusamaKingdom), RMRK (@RmrkApp), and WagMedia (@thatMediaWag) for the data, as well as the editors at WagMedia (@thatMediaWag), Csaint02 (@csaint02), Gambo (@Gambo00004), PNin (@BalanceBorn), and Sanchez (@sanchzeph) for their helpful review and comments.
Disclaimers
This article is based on the data and information as September 2022. The data in this article have not been fully audited.
I own one Kusama Kings NFT (Limited), one Kusama Queens NFT (Limited), and one Kusama Kingdom Wedding Ring as of October 3, 2022.