How Milady's meme effect and controversy help Floor DAO 'print money'?

Milady's controversy and topics are constantly being discussed, and as a financial asset, such controversy is reflected in the price fluctuations and market trading activities of NFTs.

As a type of meme culture financial asset, Milady is arguably the best choice for cryptocurrency speculators. Every hot topic ignites countless discussions on the internet, causing prices to fluctuate sharply. Whether it is the scandal of team founder Charlotte Fang causing a sharp drop in prices, or the surge caused by Elon Musk's tweet effect, it has triggered instant buying and selling of spot/futures transactions. By predicting and buying or selling its market trends, one can either profit or lose.

However, for decentralized market makers like Floor DAO, they are engaged in risk-free trading. As the largest Milady market maker on NFTX, Floor DAO has provided over $2 million in liquidity and currently holds 178+ Milady. This means that regardless of whether Milady rises or falls, Floor DAO can profit from the volatility by encouraging frequent trading on NFTX.

According to the incentive settings of the Milady liquidity pool on the NFTX platform, every time a mint and redeem operation is performed on Milady, the liquidity provider Floor DAO will receive a fee of 1% and 2% respectively. These fees will be distributed in the native token MILADY of the fund pool. The more volatile Milady is, the more MILADY Floor DAO earns.

According to the data, Milady has become the main revenue-generating asset of Floor DAO, contributing 60% of its income, and these earnings will be distributed to holders in the form of FLOOR through the rebase mechanism (v1 version). According to BurstingBagel, an active member of Floor DAO, the average APR of Floor DAO is 14%. Considering that the current coin price is far lower than the price of the treasury assets, the actual APR of investing in FLOOR may be higher, making investing in FLOOR a more attractive choice than other DeFi yield strategies.

Floor DAO Introduction

Started from Floor DAO of NFTX, it has had a very clear product positioning and revenue model since its inception, which is to serve as a decentralized market maker for NFT projects on the platform to provide deep liquidity and earn high rewards, and distribute the earned income to FLOOR holders through a bonding mechanism similar to Olympus.

Therefore, to understand Floor DAO, one must first understand NFTX and Olympus DAO.

NFTX has long been committed to solving the liquidity problem of NFTs. Due to the non-fungible nature of NFTs, there is a problem with poor liquidity. To solve this problem, the first step is to give NFTs liquidity.

So, how does NFTX do it?

By allowing users to deposit non-fungible ERC721/1155 tokens into the NFTX platform vault, corresponding ERC-20 tokens (referred to as vTokens on the platform) can be minted. vTokens represent ownership of the NFT, and holders can redeem the corresponding NFTs randomly from the vault or sell them directly on specific DEXs for immediate liquidity, or earn profits by staking vToken SLP (Sushiswap LP tokens) or vTokens themselves.

For example, users can deposit AZUKI NFT into NFTX, mint $AZUKI (ERC-20) tokens, deposit PUNK NFT to mint $PUNK (ERC-20) tokens. By using $AZUKI or $PUNK, holders can redeem random NFTs from this treasury (if specifying a specific NFT, a 5% fee is required), sell them on exchanges, or stake them for profits.

However, this model has always had a major problem - a lack of deep liquidity, which has hindered wider adoption in the DeFi ecosystem.

This is the opportunity that Floor DAO sees - starting with blue-chip NFT CryptoPunks, providing deep liquidity for blue-chip NFTs on NFTX, and earning transaction fees as the main source of income.

According to the platform mechanism of NFTX, providing liquidity on the platform not only earns trading fees in Sushi, but the platform also distributes NFTX vault fees as additional LP rewards. These fees are paid in specific tokens from the insurance vault, with rates ranging from 1-10%.

Above is the product positioning and revenue model of FloorDAO. So, how did FloorDAO initially obtain startup capital?

实际上，FloorDAO adopted a bonding mechanism similar to Olympus V2 for fundraising, as well as a rebase mechanism for distributing profits.

Without private placement or seed round, without VC, Floor DAO initially adopted bonding mechanism for its initial launch. As a fundraising method, bonding mechanism allows users to sell specific assets to the protocol in exchange for its native tokens issued.

Due to the fact that $PUNK (the vToken corresponding to the Cryptopunks liquidity pool on NFTX) was the only supported asset at the initial launch, Floor DAO initially only supported $PUNKS as bonding assets. Users could bond PUNK to the Floor DAO treasury in exchange for discounted FLOOR tokens. In this way, the treasury obtained the first batch of startup assets - PUNK and PUNK-ETH, which were used to provide liquidity on NFTX.

Floor DAO also uses the rebase mechanism of Olympus V2, and distributes rewards based on the growth of the treasury's earnings allocation protocol.

As a type of profit distribution mechanism, the rebase mechanism will automatically adjust the balance of the native token staked by users based on a specific range of profit rates.

In the rebase mechanism of Floor DAO, users stake $FLOOR to generate $sFLOOR, and every 8 hours, it will automatically rebase once. The yield of the rebase must be kept within a certain range. If the market value held by the Floor DAO treasury is greater than the circulating market value of FLOOR, additional FLOOR will be minted and distributed as rewards to users who stake FLOOR.

For Floor DAO, the prerequisite for sustainable development is that the assets raised through Bonding must generate returns that are higher than the inflation rate of $FLOOR.

Ve, Tribalism and FloorDAO V2 Version

Ve represents "voter escrowed", a model invented by Curve Finance that allows users to lock tokens to convert them into governance-enabled ve-tokens for a maximum period of 4 years, and then obtain voting rights corresponding to the locked token quantity and duration.

Starting from version 2, FloorDAO has shifted its focus to on-chain governance and adopted the VeToken economic model to allocate voting rights.

The most important change in FloorDAO v2 is the weekly Floor Wars, where the floor NFTs are cleaned.

Floor Wars is divided into two parts, namely New Collection Votes and Sweep Votes. Only NFT projects that enter the New Collection Votes are eligible to participate in Sweep Votes, competing for the floor sweeping votes.

During Floor War, Floor DAO's financial strategy and (future) product earnings are tracked, and the earnings earned in the next two weeks are proportionally allocated through the final voting results of Sweep Votes, which will be used to clear the floor price of the winning NFT series. In the latest round of voting, 79.43% of the votes supported FLOOR buyback, and 9.91% were used for Milady to clear the floor price. (Link to tweet: https://twitter.com/FloorDAO/status/1661039191868817409)

In addition, governance also supports FLOOR holders to vote against specific NFTs for liquidation, and liquidates the NFT collection based on the proportion of votes. The ETH obtained from the liquidation will enter the budget funding pool for the next Floor War.

The Floor DAO team believes that this will intensify the competition for votes, especially among the NFT community where tribalism is prevalent. This is because NFT holders who want to compete for liquidity supply from FloorDAO not only need to vote for their own NFTs, but also can vote against their competitors. This can create new demand for FLOOR tokens and holding FLOOR tokens is not only for voting to support their own NFT community, but also for opposing competitors who are seeking more floor cleaning budget for their NFTs.

Unlike in version 1, where tokens were minted through Bonding (thus diluting the holding power of existing holders), this new Bonding mechanism is obtained through Bonding in Floor Wars (thus weakening the voting power of others).

This is very in line with the tribalism gene of the NFT community, especially communities like Milady with a fan circle atmosphere, which have high participation and activity. In order to win, they will do everything they can to exert their maximum potential and viral marketing potential to win the competition.

During the floor price cleaning voting activity of Hidden Hand by Floor DAO, approximately $25,000 worth of FLOOR tokens were purchased. The Floor DAO team believes this is a positive market signal, demonstrating that adopting this new VeToken economic model to distribute voting rights and capture profits is feasible.

V2's future goal is to increase the budget of Floor Wars, create higher levels of governance participation, and, more importantly, the team hopes to stimulate competition for FLOOR voting rights through new mechanisms, while more governance use cases will be able to increase the price of FLOOR.

In addition, the v2 version of Floor DAO will also expand its sources of income, from only supporting the NFTX platform to extending its reach to a wider range of NFT-Fi systems, adding support for liquidity provision on Sudoswap, Uniswap V3, Charm.fi Uniswap V3, and Papr. This approach of following the income and cultivating it wherever it may be is also in line with the core spirit of DeFi.

Questioning and Issues

With the changes in version 2, the profit distribution model has also changed. The original profit distribution model, which was distributed through rebase, is no longer effective and has been replaced by a new distribution mechanism. According to official documents released in version 2, the profits generated by the FloorDAO treasury will no longer use the original distribution mechanism, but will be divided into two parts. 50% of the profits will be used to clean up the floor price NFT in Floor Wars, and the remaining 50% will be reserved by the DAO, with 70-80% of the profits being used to repurchase FLOOR tokens and kept in the treasury.

The purpose of Floor DAO is to transition into a fully on-chain governance mechanism DAO. It aims to acquire high-quality assets through NFT floor price sweeping wars and deploy them to investment strategies in NFT-Fi to obtain a continuous stream of income. It also tests and manages its own products and services in the constantly evolving NFT-Fi ecosystem. In the future, it hopes to allocate as much ETH as possible to the sweeping mechanism and expand its treasury through income-generating NFT collections.

However, this move has been opposed by some community members. Considering that the current FLOOR market value is lower than its treasury value (according to official website data, the treasury asset value is $9,277,583, and the token market value is only $6,270,117), there is a voice in the community that is not satisfied with the V2 version. This voice believes that the team should focus on narrowing the gap between the token market value and the treasury asset value, in other words, increasing the token price. BurstingBagel, an active member of Floor DAO, believes that if a more aggressive rebase mechanism is adopted, the APR can be increased from the current 14% to 20-25%.

FloorDAO hopes to create more demand for FLOOR tokens through the on-chain governance mechanism of v2. The premise of achieving this goal is to have more NFT communities participate in the competition for Floor War liquidity. Of course, this is not an overnight process. In addition to the product itself, it also requires more active participation from NFT communities and whether the halo effect of Floor DAO as a liquidity aggregator can be conveyed to the market in a consensus form. Finally, it also depends on the overall development and improvement of the NFT market itself.

It can be said that the transition from v1 to v2 has resulted in a decrease in short-term actual earnings and increased uncertainty for FLOOR holders, while participants like BurstingBagel prioritize earnings and returns.

For investors who were initially attracted by its APR, immediate returns and rewards are the most practical considerations and the most worthwhile things to strive for. Especially after experiencing the bankruptcy of the crypto narrative and the lack of market confidence in recent years, a crypto project with a substantial quality fund pool endorsement (valued at approximately $9,277,583 in treasury NFT assets), a proven revenue model (deploying liquidity to earn transaction fee distribution for holders in the decentralized NFT-FI market), and a deterministic return rate (204% LIFETIME APY) is obviously an attractive investment target. On the other hand, those uncertain, longer-term, and elusive visions are not so easy to achieve. In this sense, the disagreement between the Floor DAO team and community members over the v2 version is more like a long-termism versus short-term return battle, a confrontation between uncertainty and certainty, which is also an eternal theme in crypto investment and essentially a risk preference battle of investment strategies. In the current crypto bear market, high certainty and short-term stable returns are obviously the preferred investment strategy for most DFi degens.

Floor DAO 是否值得投资？

Is Floor DAO worth investing in?

As the earliest discoverer of Milady, Floor DAO included Milady in its investment list through a proposal when Milady's reputation plummeted due to team scandals. It purchased the asset at a low price in the early stages and it has now become its main source of revenue, with an annual interest rate of about 35%. It also contributes 60% of the income for FloorDAO.

Floor DAO has long recognized the investment potential of Milady as a financial asset. This is not accidental, but precisely because of the use of organizational forms and incentive mechanisms such as DAO, which can have a more sensitive perception of financial assets with strong meme cultural attributes like Milady. In other words, it is precisely because Floor DAO has a widely participating community and mass base that it can capture such assets with meme cultural genes in the early stage, and ultimately incorporate them into the asset portfolio of the treasury through voting and absorbing public opinion. To some extent, this community-driven voting mechanism can more effectively capture NFT assets dominated by meme culture, and the revenue distribution mechanism as a reward can promote active participation and governance in voting.

Of course, in addition to high-quality assets like Milady, Floor DAO's asset pool also holds top blue-chip assets like CryptoPunk. Data shows that Floor DAO currently holds 149 $PUNK, worth about $3.76 million. Although the holding proportion of PUNK is high, the APR yield is only 2%. BurstingBagel believes that the return on investment of CryptoPunks is low and its performance as an investment asset is poor. He has repeatedly suggested that the asset position be closed out and the funds be used for assets with higher returns. However, due to Floor DAO team's consideration of social contracts with CryptoPunks, they do not plan to sell them.

However, BurstingBagel also acknowledges that despite their own and many community members' dissatisfaction with the team's decisions, investing in Floor DAO remains highly attractive compared to other DeFi profit strategies. Considering that the NFTs held in Floor DAO's treasury are high-quality assets and the treasury's value far exceeds FLOOR's current market value, FLOOR still has some potential for growth. Even in the event of project failure, FLOOR holders can still receive distributions from the treasury assets. Overall, investing in Floor DAO is a safe and stable investment strategy.

Finally, Block rhythm reminds readers that this article is not financial advice. Cryptocurrency is a very high-risk investment, so please think independently before investing and DYOR (do your own research).

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