Fracton: NFT ETF will truly liberate NFT liquidity
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NFT liquidity dilemma
Today, the value of blue-chip NFTs has been widely recognized, but holders have no other effective ways to make profits other than selling them for profit. However, even if the holders are bearish and want to sell "to do swings", it is difficult to sell in time before the price falls, so they have to fall again and again.
In addition, a large number of Crypto traders are limited by the unit price of tens of thousands or even more than 100,000 US dollars for blue-chip NFTs, and cannot participate in the trading of blue-chip NFTs. At the same time, the high trading market fees and project party royalties limit the arbitrage space of NFT, because once bought and sold, the loss exceeds 10%.
However, now the NFT market has become an important part of Crypto transactions. The Opensea contract consumes 160.10ETH of Gas in 24 hours, accounting for 11.33% of the total Gas consumption, ranking first among all contracts.
Therefore, investors are eager for lower NFT transaction costs and more NFT derivatives transactions, and can further enjoy NFT market dividends by using leverage and other methods. However, it is not feasible to directly apply the DeFi mechanism to NFT, because NFT is essentially a super long-tail asset with very poor liquidity. With a market value of $22.73B, the daily transaction volume is only about $18M, which is less than 1/1000 turnover rate.
Let's first look at the liquidity dilemma facing the NFT market today from the data.
Take the well-known BAYC as an example. NFTgo data shows that in the past 30 days, the transaction volume of BAYC exceeded $40M, and the average transaction price of BAYC was about 79.13 ETH. In this case, only more than 270 BAYCs were exchanged within 30 days.
When this article was written, an Opensea seller named gracian changed the price of his BAYC four times within 4 days, from 82.2 ETH to 67.88 ETH, but still did not sell the BAYC. It can be seen that for sellers, when funds are urgently needed, NFT is difficult to realize quickly (the current NFT mortgage loan agreement can only lend about 30% of the funds). What's more, for buyers, they only need to increase the floor price by 10%, and there are already more than 20 BAYCs on sale. For buyers who want to buy a floor monkey, there are too many choices: attributes, rarity, appearance or not...
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NFT fragmentation scheme and its problems
The emergence of KuCoin NFT ETF is expected to solve these problems. Through lower transaction friction, rigid NFT redemption, more stable price anchoring and richer composability, it brings NFT fragmented tokens into a field that no one has set foot before, and brings the financial attributes of NFT Play it all out.
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Fragment BuyerIn NFT fragmentation solutions, two roles are most important: NFT providers and fragment buyers. However, most current fragmentation platforms focus on providing services for NFT holders and encouraging them to smash NFTs, but they do not pay enough attention to users who trade fragmentation tokens. This leads to no one trading even though there are enough fragments in the pool. Moreover, most of them rely on DEX platforms to build liquidity pools, and their operation and learning thresholds are even higher than NFT.
In other words, most of the existing fragmented platforms in the market have made products with poorer liquidity in order to solve liquidity.Why is there such a situation?
The cost of holding blue-chip NFTs is too high, and the on-chain interaction of buying NFTs is also complicated, which keeps many retail investors out.How are NFT ETFs changing this?
It turns one BAYC into a large number of BAYC fragments, and only needs to sell a part of the fragments in the ERC20 market immediately, and the holder can quickly recover the funds. At present, the only technical support for NFT ETF is Fracton Protocol, which has fragmented 11 BAYC, 5 CryptoPunks, 127 4 digit ENS and 8 The Sandboxs 3x3 LAND to establish corresponding NFT ETFs.
It is reported that its BAYC ETF hiBAYC has been launched on the Kucoin platform, with a trading volume of US$7.9 million on the first day, and the current daily trading volume fluctuates between US$1 million and US$3 million. In the past 30 days, the average daily trading volume of BAYC NFT was only 1.33 million US dollars.
In other words: Fracton's ERC20 BAYC fragments, the transaction volume has been equal to or even higher than BAYC.What is more obvious is that during the fragmentation process of 4 digit ENS, due to Fracton's large purchase of 4 digit ENS, its floor price has risen from 0.85 ETH to about 1.5 ETH, which has subsequently sparked heated discussions among users and has been further raised by the market To 1.7ETH,Make its floor price doubled.The hiENS4 token has always been at a high premium after KuCoin went online, and the current price is converted into the price of NFT
It can be seen that the convenient operation threshold and low handling fee of CEX NFT ETF provide an excellent entrance for a large number of fundamental investors who want to enter the NFT gate, and more investors will further promote the flow of NFT fragments sex.
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NFT holders
When we move our perspective away from fragment buyers, even for NFT holdings, there are still many shackles in the existing mainstream fragmentation solutions.
At present, the more mainstream solution is to package and fragment a series of one NFT or multiple NFTs. For example, all BAYC are locked in the agreement treasury, and the ERC20 tokens of "fragmented BAYC" are issued by the agreement. For investors, there is no need to buy real NFT, as long as they hold ERC20 tokens, they can enjoy the benefits brought about by the rise of NFT assets, and ERC20 tokens are also more convenient for them to control their positions.
But this solution is facing the dilemma of "going the other way".
(1) Occupying working capitalWhen ERC20 tokens are created, they cannot be traded directly, and holders need to provide other tokens of equivalent value to form LP pairs. Although providing LP can earn handling fees, it goes against their original intention of breaking NFT:
The purpose of smashing NFT is to replace funds, but now it needs to occupy more funds.
It is precisely because of this that holders who want to redeem part of their funds often do not take the initiative to smash their NFTs, but the platform requires holders to provide sufficient underlying assets. This is also a set of contradictions commonly found in existing fragmentation protocols.
However, Fracton's NFT ETF fragments can be circulated in mainstream CEXs such as Kucoin. With the help of CEX's powerful market makers, holders can immediately sell their own NFT fragments at a fair price without forming an LP pair.
(2) Charge high handling feesIn addition, the high handling fee charged for the conversion from NFT to NFT fragments is also the key to hindering holders from fragmenting NFT
. Fracton creatively uses "poolless liquidity" to create ERC-20 fragments, allowing users to fragment NFTs at zero cost without permission.When Fracton performs a fragmentation,
The process can be broken down into two steps: 1 NFT is fragmented into 1000 ERC-1155 "People's NFT", and 1 "People's NFT" is further fragmented into 1000 ERC-20 "hiNFT". The contract will automatically provide them with a fixed exchange relationship without the need to create a liquidity pool.In Fracton's poolless liquidity,
ERC-1155 was introduced as an intermediate layer. And the exchange always happens between "ERC-721 to ERC-1155", "ERC-1155 to ERC-20". The left side of the pair holds and sends tokens, while the right side mints or burns tokens.To the user, it may seem that the process has not changed, but it is aUnique technical innovations:Since no tokens are transferred (just minted or burned),Reduced swap gas by more than 25%.Compared with the traditional swap, it reduces the gas by more than 50%.
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NFT ETF achieves price anchor
NFT ETF further solves the most difficult problem of NFT fragments: the price cannot be anchored.The existing situation is: NFT fluctuates greatly, and fragments fluctuate slightly; NFT fluctuates slightly, and fragments do not move at all. This is because the high friction costs in the process of splitting and merging smooth out the arbitrage space for the price difference between ERC721 and ERC20.
The absence of arbitrage prevents the price of fragments from fluctuating with NFT prices.
However, Fracton charges only three thousandths of a handling fee for each step of redeeming NFTs with fragments, which is much lower than other platforms and OpenSea. At the same time, "poolless liquidity" also reduces gas loss.
This allows NFT fragments to have extremely low transaction costs, turning NFT into a financial-grade product. As long as the NFT market fluctuates slightly, there is room for arbitrage between fragments and NFT. The emergence of arbitrageurs allows fragments to anchor the rise and fall of NFT in two directions.This also provides richer composability for NFT fragments.
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NFT ETF Participation AdviceTo sum up, NFT ETF is a great opportunity for a large number of people who want to enter the NFT gate.Fundamental investorsIt provides NFT transactions with low operating threshold and low handling fees, while good liquidity and credible price anchoring provide the basis for the establishment of NFT derivatives, makingThe price fluctuation of NFT can be further amplified and profited from it. Due to the existence of Fracton ERC1155 token-People's NFT, the arbitrage space of NFT ETF fragments and NFT itself is also enlarged, which will be able to accommodate moreArbitrageurArbitrageur
Enter, thereby further consolidating the price anchoring of shards and NFT.In addition, good liquidity and credible price anchoring can not only provide support for NFT derivatives, but also provide NFT price feeds for other NFTFi projects, so that the financial attributes of NFT can be truly released. Especially users of NFT mortgage lending projects, whether it isNFT holdersstillfunding provider
, can all benefit from the mechanism of Fracton.
