An overview of the NFT fragmentation track
An Overview of the NFT Fractionalization Landscape
Bridget Harris
原文编译：Mike Jin& Iris，加密谷
NFTs as alternative assets
A core theme of cryptocurrencies is community: giving power back to content creators, eliminating the need for middlemen, promoting accessibility by removing barriers to entry, and creatively leveraging developers, artists, and creators to build amazing agreements. Non-homogeneous tokens (NFTs) and their use cases are a good example of this theme. NFT is a unique digital asset -- such as art, music, or collectibles -- that lives on a blockchain, allowing artists to sell their creations as a commodity. Fragmentation allows users to break down NFT into smaller replaceable fragments, with a variety of application scenarios.
Compared to traditional art, NFTs are becoming a highly versatile asset class with an explosive growth in creative use cases. For example, in Uniswap V3, the LP location is represented by NFTs. NFTX, Unicly, and Fractional all decompose ERC-721 tokens into ERC-20 tokens, which allows them to be used in DeFi for the following functions:
1) Pool tokens on Uniswap or Balancer to earn transaction fees,
2) Use tokens as collateral for yield farming on networks such as Curve or Aave,
3) Borrow stable currency with token.
This increased liquidity of NFT makes these protocol fragmentation approaches very attractive to investors, as they essentially turn each individual NFT into a liquid, yielding, productive asset. As the value of NFT rises, differentiation enables individual investors to acquire a higher value NFT or a smaller stake in a basket of NFT. Entry and exit are easier, and more trading volumes allow the market as a whole to better balance asset prices. If not, many fragmented NFT investors may not have access to these NFT gains at all. In addition, investors and artists are able to sell shares in the National Trust on a proportional basis, which makes the community ownership approach possible. Regardless of their physical location, reputation or cryptographic knowledge, any artist can commercialize their work with greater flexibility on a platform with a good user interface.
NFTX - Index fund method
NFTX is a decentralized agreement that pools NFT of equal value into index funds. Users earn ERC-20 tokens by contributing artwork to the index or by buying a fragment of the index. This ERC-20 token for NFTX is called a vToken and is a 1:1 copy of the random NFT in the index that your NFT is minted. NFTX has advantages and disadvantages. How does it fragment the set of NFT? First, it assumes that all NFTS in an index are of equal value. In practice, this rarely happens and can become a problem when vToken owners redeem their tokens. Instead of receiving a token payment, the owner of a vToken receives an actual NFT in a random index basket.
When you cash out of a fund, you receive the actual NFT in the index, not just ETH, which can create a more personal dynamic between the index and the buyer. NFTX users may be more likely to believe in the long-term value of NFT because some investors will get it (with ETH, etc.) when they redeem it from the vault. Index tokens are a more efficient way of capitalizing on behalf of floor assets, since a single Fractional or Unicly vault needs to be capitalised for each vault/asset. As the depth of assets increases, greater capital efficiency allows for lower collateral rates for agreements. However, the value model can be problematic because the value of each NFT is constantly changing, depending on market perception, similar to how stocks behave. For example, if certain information about a national trust is discovered, such as negative news about its previous owner, its face value may rise. In a rapidly evolving ecosystem, influence matters, information travels fast, and NFT indices can be complex.
A simple example: on NFTX, a user cashed out of a basic CryptoPunk index. He received a relatively low value Punk from the vault because the index was made up of floor Punk. However, personal preference comes into play here - a user may expect a particular Punk in the index, but not be satisfied with the Punk he receives.
NFTX solves this problem in V2: users can pay a 5% token bonus to specifically select NFT in the index, rather than receiving one at random. Technically, if the user chooses the random route, they can drop the NFT back into the index library and try again, but the Gas bill increases, so they will only repeatedly replace the art if the Gas is below 5% of the value of the art they want. Similarly, a user can begin the index cashing process, discover which actual NFT they will receive as part of the transaction, and then resume or cancel the transaction before it is completed. They can then repeat the process until they get the NFT they want. This creates an interesting dynamic, as it can lead to an incentive to cash out as quickly as possible, since the earliest users get the most optionality if they use the method described above. In V2, multiple users may compete for a particular NFT in the vault because the buyer pays an additional 5% fee.
So far, NFTX's platform has been dominated by lower-value artworks such as floor CryptoPunks rather than high-end NFT, making it the most interesting platform for floor assets in relative terms. Users can borrow NFTX's floor index token by pledging it to an agreement like Compound. From the liquidator's point of view, however, the floor assets could lose value at redemption because of a slip point. If there is not much depth behind the index token, the liquidator may sell it immediately when the price falls in exchange for the USDC, as they do not want to have an asset on their balance sheet that is declining in value. Similarly, if multiple people have a floor index token and they borrow against it, there could be a liquidity shortage in the market if the price of the token falls.
The problem of NFT as collateral also comes into play here: when liquidated, the piece may be partially liquidated. In partial liquidation, defaulting NFTS are deposited into an index fund. In theory, some tokens representing index funds will be owned by lenders and some by borrowers. Half of the mortgaged NFT can then remain as collateral, but only with a proportionate amount of debris. Once an NFT is split, it is very difficult to turn it into a full NFT, so this use case prevents investors from using their NFT as collateral. It is up to the community to decide whether partial liquidation will become mainstream (or even reasonable), but we will no doubt continue to see creative efforts to turn NFTs into productive assets.
The NFTX token is the most efficient of the three protocols for tracking the value of assets on the ground. That's because investors have more liquidity to deposit or withdraw from index funds than with other agreements. The less liquid approach in other agreements means that prices of underlying assets are shown to lag behind true valuations because there is less incentive to keep up with the market because:
Investors are not redeeming for actual assets
Users cannot use NFTs to actively enter and exit Unicly & Protocol such as Fractional.
Unicly & Fractional-direct fragmentation
NFTX operates as a series of index funds composed of NFT, while Unicly and Fractional directly fragment the collection of individual NFT or NFT. Whereas Fractional and Unicly vaults are fixed size, NFTX is variable because it allows anyone to deposit and withdraw assets from the fund without restriction, according to the criteria of the vault. NFTX and Unicly & amp; Another difference between the fractionals is the redemption mechanism: in NFTX, the user redeemed the artwork in the index. If a user creates an index of 10 CryptoPunks on both NFTX and Fractional, the user will not be able to buy out a Punk on Fractional/Unicly. Unlike NFTX, Fractional and Unicly are not suitable for index funds because it is impossible to enter and exit funds once NFT is created.
On Unicly, NFT owners who want fragmentation create a uToken (an ERC-20 token) that represents a collection of NFT on the platform, or a single NFT. Once the collection is created, users can interact with it by purchasing its Utokens, bidding on NFTS in the collection (including individual NFTS), and governing the collection. While NFTX allows you to redeem the underlying assets in a fund, in both Fractional and Unicly, the user receives ETH when the collection is unlocked. A certain percentage of the total supply of UTokens must be in favor of unlocking the set in order to allocate the NFT to bidders and pay token holders their pro rata payments. At Unicly, this percentage was set by the creator of the uToken at the beginning of the differentiation process. Since users have to rely on others to unlock collectibles as well, Unicly has a more community-dependent governance approach with reduced flexibility.
High-quality SETS of NFT will be rewarded by Unicly via whitelist, which means that the pool can liquidly mine UNIC (Unicly's governance token) by betting on LP tokens. In addition, Unicly plans to enable Farming, so users will be able to stake their UNICS to earn more UNICS. This may have the effect of reducing the sales pressure on UNIC. Currently, users can add liquidity to the network and earn a fee of 0.25% on transactions, which is proportional to their share of the pool -- meaning they earn fees whenever a transaction enters or leaves the pool. Anyone can list their uToken on Unicly, so it's the buyer's job to make sure it's the right price.
The goal of Fractional is to be the most neutral protocol in the field. They took a very minimalist approach, providing developers with basic bare protocols on which to build functionality and mechanics, depending on how they wanted to fragment their NF. This flexibility allows for fragmentation in creative ways and gives each piece of art a different level of complexity. Just as every NFT is unique, a fragmented approach should not be the norm for all works of art; Fractional tries to address this problem as a user-friendly foundation that provides the basics of fragmentation and lets developers design the rest. Although NFTX contains more underlying assets, Fractional is likely to be used for a single expensive NFTs.
Fractional incentivise artists to add NFT to the platform by setting curator fees for NFT promoters, which operate similarly to AUM fees. In a buyout mechanism, token holders vote on the floor price of NFT, and the agreement takes a weighted average of token holder votes. The floor price of one token holder cannot differ more than five times from the votes of others to ensure that the weighted average remains fair. Fifty percent of token holders need to agree to trigger a takeover.
NFT and the future of NFT fragmentation
The fragmented landscape of NFT is still relatively new, and the emergence of winners in this space is dictated by factors such as curatorial fee/incentive structures for NFT owners, artists and investors. However, these agreements can also coexist harmoniously, with rich, diverse and unique funds on each platform, and new investors frequently entering and exiting the sector. Whether or not there is an eventual winner, NFT fragmentation does provide a more viable, easier approach for the industry, and greatly expands the financial utility of owning NFT -- in whole or in part. NFT itself is also exploited for new and exciting use cases, such as:
DAO as AN investment vehicle for NFT: DAO gained traction by forming a community around a piece of art that increased access to rare, expensive NFT artwork that few individuals could afford. For example, PleasrDAO, owner of the iconic $5.4 million Snowden NFT, is creating a Shiba Inu competitor backed by the $4 million Doge NFT. Similarly, JennyDAO-- a new DAO with Unicly tokens -- offers members benefits such as access to exclusive research, group chats, and NFT leaders. The funds raised will be allocated to purchase the NFT chosen by the DAO Governance Token holder.
Social media NFTs: We may start to see posts on social media being converted to NFT and distributed among an individual's original supporters, leading to community rewards for fans. For example, admirers of a celebrity's first Instagram post can reward them with a fraction of that post for their initial support. Alternatively, posts can be converted to NFT, automatic fragmentation, and sold on a gluing curve. The Minti platform allows users to mold their social media posts into NFT and create a digital identity around content that can be monetized. This puts power back in the hands of content creators and allows lower-level communities to better support their favorite artists without losing the lion's share to middlemen. Social media NFTs also enable fans to become more involved in the content artists post and allow artists to generate additional income themselves.
Small communities: Exciting communities are building around the National Trust, enabling more people to get involved in unique ways. Unlicensed platforms such as PartyBid make it easy for supporters to collectively bid for funds as a group and create a community around the work. Users can create a PartyBid on Foundation or Zora for a specific auction and pool funds to bid on the NFT. As these cohesive communities form around the work, more attention is drawn to the artists and more fans are able to directly engage and support them.
Personalization of NFT: As the Metaverse community grows in breadth and depth, the digital representation of individuals will require more individuality and uniqueness. This can be done by attaching certain defining characteristics to your NFT that make you look different from everyone else in Metaverse. Filta has entered this market with a unique NFT filter that users can buy from their favorite artists and then share to social media.
We are still in the very early stages of NFT application, but there is no doubt that experimenting with these concepts will result in new and exciting solutions that will further develop the rapidly emerging landscape and allow the NFT ecosystem to flourish.
Disclaimer: Divergence Ventures LLC is an investor in Fractional, PleasrDAO, Minti, and Filta.
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