Despite the explosion in NFT adoption we’ve seen in 2020 and 2021, there is still a lot of room for improvement with the buyer’s experience around NFT art and collectibles. The problems I see that have not been fully addressed yet include:
Lack of liquidity in NFT secondary markets. The major NFT marketplaces today are centered around a bid-style marketplace. This results in not being able to get instant liquidity on NFT assets at any time; one has to wait for someone to bid or buy at an asking price.
Centralized exchanges taking extremely high drop fees. NFT exchanges are monetizing by charging double-digit percent fees for creators to drop NFTs. This value can be passed onto the creator, or can potentially go towards cost savings for the buyer. In addition, so much buyer demand is being sucked up from the primary market auctions and sales. It’s creating an environment where people want to cash in on the primary market while exposing the buyers to potentially a very illiquid secondary market.
Lack of utility outside of owning the collectible. There are a number of creative ways to add a lot more utility to the ownership of digital art and collectibles.
Content curation. Curation can be subjective, but I think there can be a lot more tasteful NFTs than some of the drops we’ve seen.
DAOfi has a number of exciting ways to improve the buyer’s experience for digital art and collectibles NFTs.
Solving the liquidity problem. In order to solve the NFT liquidity problem, DAOfi will encourage artists to fractionalize a non-fungible ERC-721 into fungible ERC-20s using our take on the ERC-1155 token standard. Owning a single ERC-20 will be like owning piece of the art, much like owning a print. Those fungible ERC-20s will be placed on a bonding curve on DAOfi. Therefore, the AMM on DAOfi will always be able to provide liquidity for buyers and sellers at any time algorithmically. Some of our stakeholders have called DAOfi a “generalized Eulerbeats.” DAOfi is a DEX that is a fork of Uniswap and it also uses math from Bancor as well. We’re really appreciative of the core teams from both Uniswap and Bancor with their assistance. We decided to launch the DEX on xDai network in order to facilitate a more liquid buyer’s experience when trading on the DEX. Our hope is the reduced wait times and lower fees with an EVM sidechain should provide a much better user-experience for buying and selling assets.
The ERC-721 is fractionalized into fungible ERC-20s, and the fungible tokens are traded on DAOfi, which is a fork of Uniswap and used math from Bancor to create a bonding curve AMM market.
DAOfi is unique in that it allows markets to exactly control the price per token as tokens are sold. This allows the liquidity pool creator to completely control the price appreciation rate and price per token from the beginning, rather than price action being more of a black box with a fixed ratio AMM DEX.
Value goes back into the bonding curve. Since the fractionalized art on DAOfi trades on a bonding curve, all of the proceeds from sales just go back into a liquidity pool smart contract. The creator will usually retain a % of the tokens for themselves when they mint the token, so they can profit from the long-term appreciation of the art asset overtime. This has been a pain point for artists in the traditional art world based on our research. Artists want a way to be able to benefit from the secondary market upside of their work.
Code is art. Core to our vision of the digital art space is the belief that we will see a lot more art at the hybrid intersection between visual and audio forms of content and programmatic and algorithmic qualities. We’re excited to execute on this intersection of two worlds, and we love to see how the community and the crowd can play an interactive role in evolving and generative art pieces.
Holders of the idxm_tile_001 tokens can order a limited edition t-shirt.
Holders of the idxm_tile_001 tokens can order a physical print as well, paid via credit card. The print comes with a QR code that launches a certificate website that we built that shows basic information about the work as well as relevant on-chain metrics.
Adding utility via merchandise, prints, experiences. The art on DAOfi is experimenting with many innovative methods of additional token utility. Some of the drops on DAOfi will allow buyers to order a print if they hold a token, order swag and merchandise, be inside exclusive token-permissioned Telegram rooms with celebrities, attend special events, commission customized portraits, and more!
Most of the art for DAOfi will have their own dedicated drop web page that the artist builds. We do this because a lot of the art concepts that are launching are programmatic and layered, so a dedicated web page allows a single place for people to see the current state of the art piece.
The NFT lives in a web page. For many of the art pieces launching on DAOfi, the NFT meta data will point to a URL to where the art is displayed. The web page itself will use a decentralized tech stack where applicable, including IPFS. Many of the art pieces launching on DAOfi will be generative so it makes sense to point the NFT to a web page where the contents can constantly change.
Marc Horowitz, creator of the idxm_tile_001 piece, will also be rewarding free ERC-721 art tokens to the largest holders of the token and will also be randomly airdropping some of the 721’s to a few lucky holders.
Adding utility via airdrops. Some of the art pieces will be airdropping other assets, including ERC-721s, to reward token holders. Key to our ethos is the priority to give back and serve the community, not extracting as much value as one can in the primary market.
Removing double-digit drop fees. DAOfi doesn’t charge double-digit percent drop fees for creators in the primary market. The artist gets to choose how many of the fungible tokens they want to keep out of the pie of minted fungible tokens. Anyone can launch a market on DAOfi without permission.
Fraction is a crowdsale platform that will allow buyers to purchase fungible ERC-20’s in the primary market before they’re openly traded on a secondary market on a DAOfi AMM curve.
DAOfi is also launching a crowdsale community called Fraction for buyers to participate in the primary market allocation lotteries for art that we curate. The curation process involves getting in touch with our team and we’ll evaluate if it’s a good fit to be presented in Fraction. Learn more here https://fraction.art
The minimum to participate in the crowdsale community is holding 5,000 DAOfi (which can change, based on community feedback). Once you’re in the Fraction telegram group, there is a bot that will randomly draw members to reward allocations in the fractional art crowdsale (please note, only send crypto to the official Fraction group admin and please double check it is the right admin handle as well). After the crowdsale is conducted, the art piece will immediately trade freely on the secondary DAOfi market.
Our goal for DAOfi is to constantly think of ways to better serve the buyers of NFTs and how we can inspire digital assets that push boundaries. The goal is to provide value as possible to buyers, as opposed to extracting value. We feel there is a really exciting evolution in the space of digital art and collectible NFTs and we’re excited to attempt fresh ideas.
The rapid adoption of digital art and collectibles has been incredible. NFTs are no doubt a long-term use case for blockchain. NFTs are attracting a lot of new entrants to the crypto space, it’s an extremely exciting time to be innovating.
We have lined up tons of amazing artists that will be launching amazing experimental content in the coming weeks and we’re so excited to see how the fractionalized NFT space evolves! We have a large number of creators from fine art, music and entertainment supporting our launch.
We’re always open to feedback, just join any of our community channels below!
– Andrew Lee
PS: The first crowdsale on Fraction will be taking place today Tuesday, March 16 for Marc Horowitz’s idxm_tile_001 piece, and the art piece will be trading freely on DAOfi tomorrow Wednesday, March 17.
🔗 DAOfi Links