How to invest in expensive NFTS through NFTX?
Recent Hashmasks NFT Prices continue to move higher in the region. "Also performed exceptionally well, with an APR of 266.24%. More and more people are paying attention to the NFTX platform, and more and more heavyweight NFT projects are joining in. What is NFTX? How do I apply NFTX? It became a topic of discussion in many communities. BlockBeats introduced NFTX in December 2020, when it wasn't very popular. As NFT has grown so far, NFTX has again become a topic of discussion in the community, and we are republishing this article to help you understand.
NFT has long been criticized for its liquidity, and the days or months it takes to close a deal have deterred investors who might otherwise join the NFT sector. Historically, NFT has been placed on marketplaces such as OpenSea for selection, rather than circulating across exchange platforms like ERC20 tokens.
So, are you looking forward to a platform that can convert your Zombie Cryptopunk NFT into ERC20 tokens, trade them on platforms like Uniswap, and even convert them into another Zombie Cryptopunk NFT?
Or, if you don't own a certain type of NFT, but you are optimistic about its prospects and want to invest in it but are worried about liquidity, is there a platform where you can join the ranks of NFT investors without having to worry about the poor liquidity of NFT?
NFTX profile
NFTX is a platform for issuing ERC20 tokens whose value is supported by NFT collectibles. These tokens are called "Funds" and, like all ERC20 tokens, they are interchangeable and combined. By using NFTX, users can publish and trade funds backed by their favorite NFT collectibles, such as CryptoPunks, Axies, CryptoKitties, and Avastars, directly from DEX like Uniswap.
There are two types of funds on NFTX:
-D1 funds have 1:1 support between individual NFT contracts and ERC20 contracts. For example, having two Punk-Zombie funds means that a user can redeem two ZOMBIE Cryptopunk funds at any given time.
-D2 funds are Balancer pools that consolidate D1 funds. For example, PUNK is a D2 fund that combines 5 different D1 funds, such as Punk-Basic, Punk-Female, and more. The goal is to provide more diversified exposure without requiring users to hold multiple tokens.
When a fund is created, the account that sends the trade is designated as the fund manager. This will allow creators to change fund parameters such as fees, liquidity provider incentives and NFT exchange eligibility. When founders have made changes to the fund, they can "finalise" it, which means they give up control in order to gain credibility.
The target user
There is a misconception that NFTX is only for NFT collectors, but most NFT collectors like to browse and trade "standalone" NFT, so there is no reason for them to convert their collections into homogeneous tokens.
However, many people in the crypto space do not have the time to learn about NFT to make a decision about whether they should trade "standalone" NFT, but they are eager to be exposed to the NFT market. These are the people NFTX is targeting, they trade PUNK tokens on Uniswap, not minting them on NFTX or exchanging them for Cryptopunk NFT. Most of the time, only arbitrageurs mint or redeem fund tokens. This is similar to the dynamics of WBTC. Most people who trade WBTC do not forge or destroy it themselves.
NFTX started with only D1 funds, so in the beginning the home page would list very specific funds (such as Punk-ATR-4), however once a D2 fund was created (such as PUNK) the home page could shift the focus to those funds.
The idea of NFTX is to make the website similar to CoinMarketCap or DefiPulse in the NFT field. Users arrive at the home page and see indicators for top funds like PUNK, KITTY, AXIE, AVASTR, GLYPH and JOY. Eventually, it is hoped that NFTX will be home to over one hundred top NFT funds, each of which will provide real-time price, trading volume and TVL data.
Token rights and distribution
The NFTX smart contract uses an upscalable agent controlled by the NFTX DAO (on the Aragon main network). This means that the NFTX token holder has the right to change the NFTX smart contract if the user has reached a consensus. Currently, all changes require a vote of 80 percent of tokens in favor of a proposal for 24 hours to pass. In the future, NFTX could propose lowering the support threshold and increasing the duration (e.g. 65% support within 5 days), but the current shorter voting time allows the NFTX platform to update more quickly, while the 80% threshold helps prevent governance attacks.
The supply of NFTX tokens is 650,000 and the distribution is as follows:
Founder: 10%, unlocked after 5 years
NFT provider: 30%
ETH provider: 30%
NFTX working capital: 10%
Liquidity mining: 20%
It is important to keep hot funds liquid, so community public offerings will accept NFT in existing classes of ETH and D1 fund tokens. The NFTX team wanted to have the NFTX DAO raise enough NFT and ETH first to provide liquidity for the AMM pool. The NFTX team wanted to have the NFTX DAO raise enough NFT and ETH first to provide liquidity for the AMM pool. Doing LP makes sense for NFTX DAO, because it can improve the liquidity of funds and earn income for the Treasury at the same time.
Platform management
According to the NFTX team, the process for creating the fund was inspired by the Balancer pool creation process. In short, the pool creator will have "manager" authority, but will also have the option to relinquish control by calling the Finalize function. Like the Balancer pool, NFTX funds have a Finalize function, but unlike Balancer, when NFTX Finalize function is called, then control of the fund is given to the NFTX DAO for the following reasons.
The first reason the DAO gets the money management privilege is that, in some cases, the fund requires ongoing governance (such as adding new certifications); The second reason, more controversially, is that the DAO gets administrative authority so that the team can direct the platform to evolve as it sees fit.
For example, if funds start cannibalizing each other (for example, multiple funds targeting similar subsets of NFT), then this could harm the user experience of our platform, so in that case we could decide to close all but one fund so that the remaining one can thrive.
NFTX aims to provide a top-tier fund that has access to most of the liquidity of every major NFT contract. If someone wants to create a punk-V2 fund that's different from the main PUNK fund, that's a great idea (and actually encouraged by the NFTX team), but if we get into a situation where punk-V2 takes half of PUNK's liquidity and has a simple solution (e.g. merge differences), Then the DAO could consider doing this.
Moat and value capture
In the longer term, NFTX aims to form a moat as the primary issuer of wrapped NFT funds.
This is a potentially huge use case, and one that could one day surpass the combined market capitalization of all current cryptocurrencies. Digital land, in-game items, lease agreements, digital artwork, digital collectibles, digital lotteries, and more can all be represented by NFT. As the NFT ecosystem grows and people become harder to track, tokenized funds will become a necessity for many investors and trading platforms.
In terms of value capture, a 2.5% fee for all NFTX minting and burning operations is not inconceivable in the future. This increased cost will be absorbed mainly by arbitragarists and will allow fund tokens to be slightly decouple. For a encapsulated token like WBTC, a 2.5% price difference from a regular BTC would be a significant UX flaw, but for an NFT fund (which represents an inherently illiquid asset class), the 2.5% price difference might go unnoticed.
Growth path
- NFT borrowing
Minting D1 fund tokens (such as Punk-Basic or GLYPH) requires submitting NFT, and in many cases people don't want to give up ownership of NFT. These people prefer to lock in their NFT in exchange for a loan (similar to casting Dai with ETH). By having a surplus of D1 tokens in the NFTX library, the NFTX platform will be able to offer LOW-interest ERC20 loans to NFT collectors. In addition, there will be no risk of accidental liquidation of these loans, as the NFT will always be worth at least the same as the D1 funds they are eligible for.
- On-chain mobility
One of the biggest problems in NFT is pricing. Unless market makers have a good understanding of NFT, it is difficult to determine the true price of an asset. One reason is laundered trading, the other is illiquidity and the gap between sales. With real-time price feedback from popular funds, these two problems are largely solved. If a trader can check that punk-AtR-4 is 150% of the price of Punk-Basic, and punk-Zombie is 60ETH, then they can be sure, A Zombie CryptoPunk with four features should cost around 150% of 60ETH, or 90ETH. As this issue improves, it's not hard to imagine that when NFTX gets into the on-chain liquidity game, NFT market makers will be able to formulate strategies automatically and aim to become something of a "Kyber of NFT".
- Blind boxes and gift cards
Having a large NFT reserve opens up many possible use cases for NFTX. One possibility is to offer blind box play, which varies by NFT (for example, 20% chance of receiving a Zombie CryptoPunk). Another possibility is gift cards. Currently, when users exchange NFT by destroying fund tokens, the NFT they receive is randomly selected, however, NFTX has the potential to expand smart contracts so that (for an additional fee) users can choose the exact NFT they want. This will be similar to a gift card, enabling the recipient to enjoy the process of selecting their own unique item from the NFTX reserve.
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