Spontaneous googling leads to sometimes unthinkable results. At least for me — for example, this is how I got on the Java Game development team in 2011 in earnest by googling «chase the cat off the New Year’s table». Geez, that, though epic, is a whole different story.
During one of my analysis processes, I’ve found the NFT Protocol company. Yes, NFT Protocol is a name; even though they are not yet launched, I have no reason to call them a startup, and below you will see why.
I’ll be brief. A lot of people think that NFT is just a picture, but the potential of the technology is much more. These guys have a cool thesis — to create a platform not only for image auctions but also other value and functions to add to NFT.
Let’s get back to the «First NFT DEX» statement.
I’ve stopped hunting for «the first» a long time ago. A long time ago, when I came up with an interesting idea, I was asked — «Why should it work?» and I answered: «Because no one had ever done it before!». I was reasonably told that this is no longer an argument or a guarantee of success nowadays. Since then, I have only focused on whether the idea is a resource or not.
And this is a huge resource, IMO.
The purpose of the DEX is to build exchange infrastructure on all chains with NFT activity on them and create liquidity for the entire NFT space.
How does NFT Protocol differ from something like OpenSea? What is its elevator pitch?
- The main difference is the feature set. NFT Protocol facilitates NFT to NFT swaps as well as NFT sales for any ERC-20 as well as bundles and standard ETH sales like OpenSea.
- Platform fees are also 0.001 ETH per swap taken, versus, for example, OpenSea’s 2.5%.
- Decentralized — gearing up to launch a decentralized exchange for NFTs on Ethereum and Polygon, powered by own $NFT governance token.
- Community-operated through own $NFT governance token.
Let’s learn each point as well.
NFT Protocol can swap 721s, ERC-20s, 1155s, etc. Moreover, you can also swap bundles of NFTs for any ERC20.
Valid point — why one would swap NFTs against each other? Is in this case the other NFT would need to have the same ETH value?
NFT<>NFT swap is something that could be used in a DeFi protocol, or as a way to «upgrade» an NFT, or for whatever reason one likes to do that. In the future, the platform wants to enable such trades like «I’ll swap my Cryptopunk for any other Cryptopunk» which would be cool for floor NFTs or something like that. This is a function that should not be underestimated — this makes NFTs liquid, i.e. a means of payment.
There is a niche of projects to which NFT to NFT swaps and maybe even bundle trades will appeal more than others, particularly in NFT gaming where players may want to trade a given in-game asset of which they have too many for another in-game asset they need to complete their collection/deck.
NFT Protocol will charge just 0.001 ETH per trade to the user who takes a swap. 2.5%, that f.e. OpenSea uses, does matter to a lot of NFT traders. If someone is trading a 50 ETH NFT on OpenSea the fee will be 1.25 ETH. On NFT Protocol the fee still will be 0.001 ETH. That trader would be saving 1.249 ETH which is about $4900 right now. Sure enough, that is going to be lucrative to even the wealthiest traders.
In most other instances people will want to buy and sell NFTs against some fungible token like ETH or other ERC20. In that case, NFT Protocol stands out against OpenSea in decentralization (if it’s on Ethereum or Polygon you can trade it — no curation). OpenSea can curate which NFTs are available through its platform because it’s centralized. NFT Protocol is decentralized and as such any NFT can be traded at all times. And in the same way, NFT Protocol will never have downtime as OpenSea does sometimes. So, as the user, you wouldn’t even know that this is DEX, and that’s a good thing; unless your favorite NFT gets delisted or the site goes down.
To be clear about this — team is maintaining a curated list of popular NFT projects that will show up in the DEX search engine by contract or collection title. At some point, DEX may charge a fee to collections who wish to be on the curated list, but for launch, NFT Protocol is simply providing this list for free to the existing most popular collections. So while they can curate that list, they still allow users to search by contract address so that users will be able to trade any asset on Ethereum even if it’s not in the curated list. trading a 50 ETH NFT on OpenSea the fee will be 1.25 ETH. On NFT Protocol the fee still will be 0.001 ETH. That trader would be saving 1.249 ETH which is about $4900 right now. Sure enough, that is going to be lucrative to even the wealthiest traders.
4. Governance token
…becomes interesting because the direction of the fee treasury is decided by NFT token holders. 0.001 ETH fee is for everyone and that fee decreases linearly according to $NFT holdings down to 0 at 100k $NFT holdings.
So, this project is based on Etherium but used the scalability of the Polygon and the low Flow commission.
All transactions on Ethereum are subject to gas fees, that’s true. NFT Protocol will have a Polygon deployment as well though. Fees on Polygon are very low, so many traders may wish to pay Ethereum gas one time and bridge their assets over to Polygon where they may enjoy cheap transactions.
Ethereum and Polygon first, building on Flow comes later. But from its side, Flow tweeted about NFT Protocol recently:
Bringing the DEX from Ethereum to Flow will take time and will require either dev with Cadence experience. The front-end relies on Web3, JS which is an Ethereum, EVM thing, so it won’t need to be rebuilt, but the back-end will because Flow isn’t EVM compatible. Also, the standards are different, f.e., ERC20 or ERC721 are likely don’t exist on Flow.
DEX is technically difficult and requires more effort compared to other platforms. Some of the other NFT marketplaces that have been launched were able to be developed more rapidly because they are centralized or partially decentralized. Centralizing certain aspects of the NFT marketplace is an easy way to get around some otherwise technically challenging obstacles. NFT protocol confronts those obstacles with decentralization in mind and builds its own proprietary decentralized data management system similar to The Graph that allows the DEX to auto-update as the blockchain is updated with every new block. And building a customized frontend to work with that database is also technically challenging. They are truly building something that hasn’t been done before.
$NFT token is mapped onto Polygon, there isn’t any liquidity there yet, but there is nothing stopping anyone from creating a liquidity pool. Though seeing as how $NFT balances will yield discounts on DEX fees certain users may not want to move their $NFT over to Polygon.
One thing is that DEX will not initially be set up for royalties (but working on something for royalties in a future update) and many projects like Parallel depend on the royalties they get from marketplaces like OpenSea to continue funding the project. So Parallel may not be very excited about promoting the DEX as a place to trade their NFTs until it implements royalties.
Also, NFT Protocol partnered with Immutable X, layer-2 protocol for trading Ethereum NFTs. The integration seemed to be pretty straightforward. But it became clear that integrating would be a more complex task that would most likely necessitate a new smart contract to be written that allows NFT Protocol to offer its features within the Immutable X ecosystem. This is essentially another smart contract. It’s something the NFT Protocol team is going to investigate when it might make sense to begin working on that once the DEX is launched. It’s possible that at some point Immutable X may do the work necessary for integration to happen as well.
What are APENFT and Infinity tokens?
There’s some confusion about the connection between the $NFT token and APENFT token. There is no connection. It’s a different ball game. The tension came when APENFT copied the $NFT ticker and have NFT Protocol/Blockparty Telegram channel listed on their profile page on Huobi, which now has the entire crypto space, traders and investors, confused. The only NFT Protocol ticker is $NFT and they were the first project in the crypto space to use that ticker. They have been using it since August 2020. So, the $NFT ticker was existing for a year before this other project copied it.
It is also evidenced by the contract: $NFT is older — which is proof that APENFT copied the ticker.
Another contradiction was the new NFT marketplace with an Infinity token. Despite this marketplace being live NFTs can’t be swapped yet; they’re competing more so with OpenSea as a centralized entity with the same feature set — they copied their smart contract system and say it wants to be an anti-establishment rival to the OpenSea and is calling itself the «FTX of NFTs.»
In The Block post, they pointed out that «10% of the governance token supply ($NFT) will be distributed to existing OpenSea users who transacted before October 4th, 2021 11:59PM UTC»
But it rather was a mistake. Their marketplace is live, but they haven’t even created their token contract yet so there’s no reason they can’t choose a different ticker. In contrast to APENFT seem that Infinity is at least willing to consider changing their token ticker after the discussion with the NFT Protocol community manager.
And now — answer to 3 favorite questions from every community.
Software is always ready when it’s ready. Planning the launch is not a priority around the market. A priority is launching a refined and functional product that immediately makes an impact on the NFT space.
I think it’s safe to say that the DEX get launched this year. The team’s goal is to bring a product to market that will have an immediate appeal to the NFT space and bring value to token holders by doing so.
Now $NFT token is available on Uniswap, Bibox, and Hoo. Max supply is 88,888,888 tokens. All have been minted, some sitting in a multi-sig (governance-controlled), rest are liquid.
Listings will follow volume for the most part. A good approach is it goes product, then volume, and then listings. Realistic plan to have exchanges list NFT is:
- Launch product, then governance vote on incentives for liquidity on Uniswap, liquidity goes to $1-3m.
- Volume on Uniswap with sufficient liquidity unlocks some interest in other exchanges
- Governance token becomes interesting because the direction of the fee treasury is decided by NFT token holders
- Exchanges become interested because of increased volume
The date of release to exchanges, as well as the launch date, is unknown. But it could be predicted — you will notice a future listing on Uniswap when the volume explodes. Alternatively, check Etherscan. If there is a large number of tokens leaving the NFT protocol wallet then that is most likely a sign being listed.
- The $NFT ticker is not the only source of marketing even though it is quite good. Also, exchange listing when strategically aligned with the correct exchanges is worth it.
- Already around 30 contacts for marketing through marketing experts at Space Shibas. They are tapped into the NFT space.
- NFT Protocol going to have Parallel’s NFTs at DEX — that could be quite a good promotion for the DEX, especially since Paradigm got involved. Moreover, the DEX feature set is particularly useful for trading card NFTs like those from Parallel. Of course, there is a larger dilemma at play here in that NFT creators need to find a way to embed royalty payments into the NFT contract itself.
- Just look at the ingredients of this cocktail — Ethereum, Polygon, ImmutableX, Flow, maybe Solana — that’s a bomb!
As I mentioned, the $NFT token will also be integrated into the Blockparty platform. The strength of Blockparty is white-label marketplaces, broad reach across the art community, and exclusive curated drops with big names.
Due to Blockparty’s success with its white-label clientele, the team increasingly believes that the next move after the DEX launches will be to build Blockparty’s secondary market which will also be built into its white label package, thereby expanding NFT Protocol’s reach in a significant way. Blockparty just signed a huge deal with a powerhouse white-label client. News on that will be forthcoming.
Also, both NFT Protocol and Blockparty were repped by its CEO Vlad Ginzburg on NFT.NYC 2021 in November (personally I didn’t see a speech record, but the promo was planned beforehand).
And, the last question,
Rhetorical. There’s every chance to be soon, otherwise, I wouldn’t have spent so much time on analysis of this project 👌