NFT20 Litepaper
Introduction
NFT20 is a permissionless p2p protocol to tokenize NFTs and make them tradable on decentralized exchanges such as UniSwap or Sushiswap. Anyone with an NFT can create a new pool or add his NFT to an existing pool and get ERC20 Token derivatives of their NFTs in a permission-less way, those tokens can be transferred and traded on DEXes right away.
Background
History of NFTs shown that a very small portion of NFTs stay valuable over the long term but 99% of Non Fungible Tokens lose value after a few months and their liquidity is $0.
In the example of Crypto Kitties, over the last 7 days a total of 1051 CKs were sold on the second hand market for a total of 23K$. The biggest sale during this week was recorded at 1.2K$ and only 61 of those sales were over 100$ (5.8%) while most items traded for a few dollars. (source: CK on NonFungible.com).
While Crypto Kitties is one of the most popular NFT projects with nearly 2M items held by nearly 100K addresses, the lack of liquidity is hitting harder the less popular NFT projects.
Also, trading NFTs on second hand markets is subject to high fees captured by the platforms and the project creators.
The goal of NFT20 is to enable project owners, collectors and investors get better way to trade and value NFT tokens (ERC725 and ERC1155).
How It Works
When you add a new NFT project to the NFT20 DEX the NFT20 Factory will create an ERC20 representation of the NFT project and give you 100 tokens per 1 NFT deposited.
At first we expect users to deposit low value NFTs in this scheme and thus creating an average price per NFT per project due to OpenSea + Uniswap arbitrage.
If you believe to have a higher value NFT, you have the option of creating a decentralized dutch auction right within the NFT20 asset page and get paid in the ERC20 tokens derivatives of that project’s NFT.
NFTs that are held in their respective pools can be withdrawn at any time by any user by depositing 100 tokens, you pick which NFT available from the pool to withdraw, this feature makes the NFT20 DEX not only a trading mechanism but an NFT swapping mechanism.
Example1: Linda owns 1 NFT Crypto Kitty that she can’t sell, she goes to the CK NFT20 asset page and deposits the Crypto Kitty NFT and gets 100 $KITTY tokens. She can now go to Uniswap and trade them right away, or add liquidity to them and get rewards by benefiting parties.
example2: Katherine owns a Gen 0 Crypto Kitty NFT so she think’s it’s worth more then 100 $KITTY tokens, she creates a dutch auction for the market to decide a fair price (in $KITTY), she can cancel the auction at any time if the NFT is not sold.
example3: Enea owns a Gen 0 Crypto Kitty NFT and on the NFT20 Kitty pool he sees a Gen 1 Kitty he likes.
He tokenizes his gen 0 > gets the 100 $KITTY tokens > redeems them right away for the Gen 1 Kitty he liked.
Use cases
In this section we’ll describe how various actors of the NFT ecosystem can make use of NFT20:
NFT holders: Collectors of any project can easily deposit their items in exchange of the associated token in order to get instant value out of their items. It’s also an ideal way to get a hand on items of a collection as the volume garantee a fair price for both sellers and buyers.
NFT creators: NFT project developers can create or support the pool for their NFT project. Having a healthy pool with good liquidity on a DEX enables their users to easily trade their items together, and for new comers to get their items at a fair price. The pool can also be used as a sale mechanism for NFT projects while the pair is incentived to get high liquidity.
NFT investors: Having access to a large pool of tokenized NFTs of any collection enables generic investors to speculate on the price of a collection without having to worry about identifying and buying individual items, as those operations can become pretty difficult for handling a large amount of NFTs while fungible tokens (ERC20) are easier to transfer and trade.
Platform Governance & Team
The parameters of the platform will be governed by a DAO managed by the $Muse token holders, here is what qualifying VNFT NFT holders will be able to decide:
- Fees to take from each tokenized NFT that will be distributed to them (aka fees on the dex).
- Change the requirements of project approval for $NFT20 farming.
- Team structure and marketing spend of the DAO resources.
- More to be decided.
Small demo of what’s to come
Initial Team
NFT20 was developed by Jules and Adam with design help from Carlos Veloso, the project was bootsrapped without any external investment or presale and creaed under the VeryNifty NFT shop.
We’re friends and have been following and working in the Ethereum space for over 4 years. Our latest project VeryNifty Gallery, a tamagotchi-like game is still the #3 most played Ethereum game on DappRadar has done more than 70K transactions on mainnet.
Adam:Serial Indie Maker.
Jules: Full Stack developer that joined the space as a smart contract freelancer. Co-founded DAppBoard (Google Analytics for smart contracts) in 2017. This adventure lead to joining Consensys where he worked on analytics for DEX platforms, smart contracts and other products.
$Muse governance Token Distribution
The $Muse governance token was ditributed with our first game Very Nifty. Early players of this 4 months old game had the luck to mine the initial $muse supply. At launch of governance the token is held by more than 700 addresses and will be used to vote on proposals.
The total number of token already distributed is 550K of a total supply of 1M $Muse. The 440K $Muse left to create tokens will be rewarded to LP providers for NFT20 pairs and $muse-ETH at a rate of 500 tokens per day.
What is the utility for the $Muse Token?
The protocol gets 5% fees on all tokenized NFTs, $NFT20 holders will be able to provide liquidity to the different NFT-ETH pairs and get $Muse tokens, those tokens can be burned to get a share of the fees generated by the protocol.
Liquidity Incentives
Liquidity is a big part of any DEX. 500 $NFT20 a day will be allocated to incentivize liquidity with 500 $Muse a day of all farming going to the DAO to cover expenses.
At the beginning we are going to incentivize NFT pools that have over $10k in liquidity on Uniswap or Sushiswap. This can change upon Snapshot voting, but we feel 10K liquidity for an NFT project is good enough for all users to have the options or buying and selling without waiting days on OpenSea for someone to bid.
We also created a new scheme to receive multiple yield from same LP tokens in a safe way, **we’ll open source this together with the DEX. **We expect NFT projects to incentivize liquidity too, we are already in talks with some of them.
Example: If you add liquidity to $PIGGY (made up NFT token) — Eth on Uniswap we will give you $Muse tokens as yield but also the PIGGY project will be able to give you yield for the same LP tokens.
Open call to all NFT project teams
Reach out to us to see how both communities can benefit from our DEX, we are looking for long term strategic partnerships for projects that want to incentivize liquidity for their users.
Join The Community
Join our discord, telegram and twitter to be part of the discussion.
Disclaimer: Due to this being a community first project without any type of funding, we reserve the right to change the lite paper and tokenomics at any time until the day of launch.
EDIT: Post was updated on Jan 8th to edit tokenomic vesting and launch date.
