Draft Proposal: XIP#11: Grant request for FloorDAO to seed NFTX vaults

Summary

We are an anon, self-funded team that has started to sweep floors with a plan to market make for the NFTX marketplace. :broom: (see details of our first acquisition below)

We are requesting a modest amount of ETH to cover gas costs for seeding liquidity on NFTX.

Rationale

At NFTX’s launch, well over 100 floor CryptoPunks were acquired by the treasury, creating a moat for NFTX that very few projects can compete with.

NFTX has since added many of these Punks to the PUNK vault, providing a liquid and successful marketplace for buyers and sellers.

Unfortunately, in instances where NFTX or the community have not been able to provide significant inventory (see BAYC), the vault enters a negative feedback loop where volumes dry up along with fees, giving very little incentive for others to add inventory. This results in the vault becoming dormant.

We have seen this play out across not just BAYC but other vaults too. KONGZ and CLOCK have also seen TVLs trend down over time due to a lack of initial inventory.

While in some instances the community/developers will seed the vault themselves with great success (see PURR), this type of activity will be the exception and not the rule until NFTX has demonstrated what many of us already know - that it is a critical platform for NFT distribution and yield.

FloorDAO aims to solve this by acquiring assets (from minting or secondary markets) and seeding vaults on NFTX with the plan to provide long-term liquidity and/or inventory. :broom:

FloorDAO Proposal

We want to take the lessons from PUNK and PURR and apply this to vaults with strategic importance moving forward.

Problem:

  1. NFTX vaults need liquidity to start the flywheel of Fees + Volume => More Inventory => More Fees + Volume.
  2. Liquidity can be hard to come by as creators/communities do not understand the benefits of NFTX and individuals seeding the 20+ items to kickstart a vault is often financially prohibitive.

Solution:

  1. Sweep floors to seed NFTX vaults and kickstart the flywheel.
  2. Seed liquidity for a minimum of 6 months, although in most cases we expect inventory to remain in NFTX indefinitely.

FloorDAO’s First Acquisition

Today, we acquired 35 memberships to GEN.ART which will provide FloorDAO with a perpetual claim on all future mints.

This means that for every GEN.ART drop, we will be able to seed an NFTX vault with a significant amount of liquidity.

Our plan is simple, for all GEN.ART mints that we participate in:

  • Create an NFTX vault
  • Seed 25% LP liquidity (subject to change)
  • Seed 75% single-sided liquidity (subject to change)
  • Increase LP liquidity as market stabilizes and IL risk reduces

What’s in it for NFTX?

  • In the immediate term - a liquid secondary marketplace for all GEN.ART drops.
  • In the longer term - a liquid secondary marketplace for a broader range of collections.

Ask

@ 120 GWEI the estimated cost for each seed would be:

  • Mint 35 GEN.ART: 1.1 ETH
  • Vault creation: 0.15 ETH
  • Sushi pool creation: 0.4 ETH
  • Mint & stake (9): 0.25 ETH
  • Single sided stake (27): 0.4 ETH
  • Approvals: 0.1 ETH

Total: ~2.4 ETH

We are requesting ETH to cover the seeding of 10 GEN.ART drops (minting the drop through to vault creation and seeding liquidity on NFTX).

Total ask: 24 ETH

Funds would be sent to a separate wallet and gas expenditure recovered after each mint to allow for clear tracking of fees.

Caveat 1: above is an upper-end estimate, FloorDAO would wait for gas prices to drop to what it considers reasonable levels before minting. Any left over gas money would be used on future mints and require less funding from NFTX.

Caveat 2: we require single-sided staking to be in place so that we can skip the 5% mint fee before we can begin seeding liquidity. In the meantime, inventory items will be minted and held in our wallet.

1 Like

A rather low request amount, and given that you’ve approached NFTX directly to use the protocol to hold these I think it’s a negligble amount to move forward with (i.e. I’d support it in a vote).

A couple of questions that I have (mostly because I’m curioius).

  1. Are you planning on minting every piece that is produced by the Gen.Art team for the first 10 pieces? Or do you have a decision process to pick the right options to mint?

  2. Will you seed the first 25% of the collection with LP liquidity now and wait for single sided staking, or only do the 100% once both options are available? Single sided is something NFTX is keen to roll out asap, but wondering on your thoughts if it is delayed.

  3. The request is just for the Gen.Art pieces, do you have any ongoing plans to expand to other collection floors?

2 Likes

Great questions, hopefully this helps add some clarity:

  • We will mint everything that is thrown at us. However it is possible that GEN.ART governance decides to reduce supply of each mint from 5,100 (same number as memberships) to something smaller, meaning members must be selective about their mints. In any case, FloorDAO will always maximize the number of mints available to them.
  • We believe that without single-sided inventory, volumes in the vault will be lower and so IL will not be as well offset by fees. For that reason we want to wait until single-sided staking is available to reduce IL.
  • No further plans as yet, if successful, we may look to establish a greater stake in GEN.ART. That said, we are looking to make high-conviction bets on other collections as they arise but nothing concrete at this moment.

As an aside, there is also the question of minting non-floor GEN.ART. In these instances FloorDAO will sell/hold the pieces. We expect we’ll typically have a minimum of 20 assets to add to NFTX vaults. This will reduce the staking side of the gas costs. And as mentioned, any left over gas will be used for future mints.

When the initial 24 ETH is nearing its end, we will update everyone with some metrics to determine whether our endeavour is worth sponsoring further!

1 Like

Due to a dip in the floor price of memberships, we have purchased an additional 5 to bring us to a total of 40.

This does not change our Ask and with gas prices coming down, it may also not reduce the expected number of vaults we create and seed (10) in this initial batch.