Shall We Seed NFTX Vault With Floor SAD?

Voting Proposals
#1

Authors

quag (Core @ NFTX, proud owner of many SADs)

Summary

This proposal suggests using a small portion of DAO Treasury funds to purchase a fixed amount of SAD songs and pair them with the corresponding ETH in an NFTX vault.

Motivation

Song-A-DAO provides ‘Protocol Owned Liquidity’ (POL) of their NFTs with a permanently liquid price floor; giving total confidence to participants that they can instantly buy, sell, and swap their songs. The DAO acts as a buyer of last (or first!) resort while capturing the fees of this activity. The benefits of this approach are starting to become more obvious and The Purrnelope’s Country Club project seeded an NFTX vault as part of their roadmap. Having a liquid $SONG token opens up opportunities throughout DeFi as we are slowly beginning to see the possibilities of backed NFTs (such as borrowing against PUNK on Rari) in the landscape.

The biggest potential downsides I can see are impermanent loss and missing royalties. The former can be mitigated by utilising NFTX’s ‘single side staking’, where you can earn fees by staking only the NFT and not pairing with ETH. The latter I believe would at least partially (and maybe more) be accounted for in the form of vault fees from the buy, sell, and swap activity in the vault.

Proposal

Clear a budget to purchase ~80 SAD NFTs (~2% supply)
Pair 50 with the corresponding ETH to supply liquidity in NFTX vault
Stake the remaining 30 to provide additional inventory and offset impermanent loss.

Opportunity

Song owners can swap, buy, and sell instantly
Composable $SONG ERC-20 token that is backed by the NFTs
Song owners could stake their $SONG to earn yield
Continues to show participation in web3 space
The DAO becomes the primary fee capturer of fungible SAD activity (POL)

Team & Resources

@quag would take the lead on this:
Based on today’s (Feb 9, 2022) price, a sweep of 80 SADs using gem.xyz would be 9.37 ETH.

The floor price would be temporarily raised from 0.06 to 0.17 so a decision would need to be made on what the price should be set at when seeding the vault. (To try and prop up the new 0.15 floor or market make back at the old floor.) Or split the difference. Somewhere around 0.1 would seem reasonable? 50 @ 0.1 would require 5 ETH as liquidity.

Yes vote would cost:

Gem sweep: 10 ETH
NFTX Vault setup: 0.5-1 ETH (NFTX vault setup costs )
Pool liquidity: 5 ETH (more/less depending on price chosen)
Misc gas: 0.5 ETH

Total required: ~16 ETH

No vote means:

We’d spend no money and not set up a vault.

1 Like
#2

Based on today’s price, a sweep of 80 SADs using gem.xyz would be 9.909 ETH.

The floor price would be temporarily raised from 0.06 to 0.18 so a decision would need to be made on what the price should be set at when seeding the vault. (To try and prop up the new 0.15 floor or market make back at the old floor.) Or split the difference. Somewhere around 0.1 would seem reasonable? 50 @ 0.1 would require 5 ETH as liquidity.

Gem sweep: 10 ETH
NFTX Vault setup: 0.5-1 ETH (NFTX vault setup costs)
Pool liquidity: 5 ETH (more/less depending on price chosen)
Misc gas: 0.5 ETH

Total required: ~16 ETH

4 Likes
#3

I’m pro nftx vault, and I feel aiming for 0.1 eth as the initial vault price is the best approach.

1 Like
#4

I think .1 is a good compromise for sure!

#5

I’m certainly coming round to this idea. So in practice, if I wanted to sell, I could sell to the NFTX vault, which would pay me 0.1eth for any SAD NFT? And if I wanted to buy, I could buy one from the vault for 0.1 eth? And theoretically, if the song I want is in the vault, i could swap for (costing just gas + NFTX fees). Is that how this works?

So this sets a price floor for SAD songs.

Some (maybe) dumb questions:
What happens when/if the pool liquidity runs out?
How does $SONG work? Is it just 1 $SONG = 1 SAD song?
What happens if the floor rises… does this create an arbitrage opportunity and the vault getting drained?

Sorry - these might be stupid questions. I looked for docs on NFTX examples but I think I didn’t find answers.

Thanks!!

1 Like
#6

@quag Can you answer this? I still don’t fully understand, haha!

#7

I found these docs. https://docs.nftx.io/
Sorry, couldn’t find it on the site but Google pointed me right.

I think I get it now. Certainly makes sense from a practical perspective if the goal is liquidity and bootstrapping DeFi onto NFTs. Clever.

The purist in me still thinks it erodes the “non”-fungible aspect of NFTs. However, that is the direction we seem to be going in as a nascent industry. A bunch of highly valued NFTs in a project and then “the floor”… Lol.

#8

Chinese translation of the proposal content:
提案内容的中文翻译：

作者
quag (NFTX核心成员, 持有多个SAD NFT)

概括
本提案建议调用DAO宝库的一小部分资金来购买定量的SAD NFT，并与定量的ETH相配来创建一个NFTX宝库。

动机
Song A DAO 为其NFT提供“协议控制流动性”，使得参与者可以完全自由地随时交易(买/卖/换)他们所持有的歌曲。DAO作为最后(或最先)购买者的同时，可以从中赚取手续费。这一举措所带来的好处已经越发明显，The Purrnelope’s Country Club 项目在其路线图中就将创建一个NFTX宝库作为项目发展的一步。具有流通性的$SONG代币可以为我们在DeFi领域带来新机遇，正如我们所见，NFT抵押正逐渐变得可能 (如在Rari平台上借贷PUNK)。

从另一方面来看，最大的问题是非永久损失和二手提成。前者可以通过NFTX即将推出的“单向质押”来解决(只需质押NFT而非NFT与资金)，后者可以通过NFTX宝库交易本身的手续费来进行弥补。

提案
动用资金来购买约80个SAD NFT (约总量的2%)
将其中的50个与流动性资金ETH一起加入NFTX宝库
将剩余的30个质押入宝库来提供额外库存，并控制非永久损失。

机遇
歌曲的拥有者可以随时进行交换，购买和出售
ERC-20标准的$SONG代币，由NFT本身抵押提供价值
歌曲拥有者可以质押$SONG来获得收益
扩大SAD在web3领域的参与度
DAO宝库可以获取部分NFTX宝库相关交易的手续费

团队与资源
@quag 作为领头人:
基于今天(2022年2月8日)的价格, 使用 gem.xyz 来扫走地板上的80个SAD NFT 需花费 9.909 ETH。

此举将把最低价格从0.06拉至0.18，意味着我们还需要决定创建宝库时的起始价格为多少。(维持新的底价0.15/使用旧的底价/取中间值，如0.1) 若取0.1，则需5ETH作为流动性资金(50个NFT)。

需求资金
扫地板: 10 ETH
NFTX 宝库搭建: 0.5-1 ETH (搭建消耗)
流动性: 5 ETH (根据决定的价格略微浮动)
gas费: 0.5 ETH

总计: 约16 ETH

#9

So in practice, if I wanted to sell, I could sell to the NFTX vault, which would pay me 0.1eth for any SAD NFT?

Yep. (Minus the fee, currently 10% for instant sells).

And if I wanted to buy, I could buy one from the vault for 0.1 eth?

Yep. (Plus fee, currently 6% for target buys)

And theoretically, if the song I want is in the vault, i could swap for (costing just gas + NFTX fees). Is that how this works?

Yep. Swap fee currently 6%.

So this sets a price floor for SAD songs.

It’s part of the mechanism that helps establish the price floor. Arbitragers/collectors will keep prices in line across platforms. e.g. if it’s cheaper on NFTX it makes sense to buy there first, or if NFTX is more expensive it makes sense to sell there vs listing on OpenSea.

What happens when/if the pool liquidity runs out?

Liquidity only “runs out” if no one is providing it. The DAO would be providing the liquidity and would require governance votes to remove it. If, ultimately, liquidity was removed, anyone with SONG tokens would still be able to claim songs from the vault using the ‘redeem’ feature.

How does $SONG work? Is it just 1 $SONG = 1 SAD song?

Yep. People put a SAD into the vault, they are given (mint) a SONG ERC20 token that can be traded, held in your wallet, or staked on the platform to earn yield from buys/sells/swaps.

What happens if the floor rises… does this create an arbitrage opportunity and the vault getting drained?

The only point you tend to see “drained” vaults is instances where the NFT suddenly offers utility or aidrops and people rush to grab them out of the vault to be eligible. The price itself going up isn’t an issue, there are many liquid and high value vaults such as LOOT, SQGL, AZUKI, MEEB, COOL, MASK etc.

3 Likes
#10

Thanks for taking the time to respond to all these points so carefully. Really helpful and clear now!

:smiley:

1 Like