Prop-13 Phunks Auction Flywheel

This proposal will authorize the CryptoPhunks Treasury compensating Middlemarch and HWonder for building and maintaining the CryptoPhunks Auction House’s soulmate: The CryptoPhunks Auction Flywheel.

This vote will authorize the immediate deployment of CryptoPhunks Auction Flywheel.

The Flywheel test site is currently live here: https://testnet.phunks.pro/

What is the Phunk Auction Flywheel?

The Phunks Auction Flywheel is a dapp that appraises mid- and top-tier CryptoPhunks and gives holders the option to sell them to the Treasury at a small discount to fair market value in a trustless, fair, and automatic way.

What are the benefits? The Flywheel:

Gives the CryptoPhunks Treasury access to underpriced Phunks it can hold for the long-term and eventually sell at auction. It allows the Treasury to be systematically and intelligently long on Phunks. Betting on ourselves without overpaying.

Gives Phunk holders increased access to liquidity.

De-risks accumulating more Phunks. It is easier to bid on a top Phunk at auction if you know that if things go bad for you and you need liquidity, you can get out at a fair price.

Mitigates any Phunk inflation caused by the Auction House causes by ensuring that Phunks sold at auction will never be sold significantly below fair market value (as any sale at this level would create an arbitrage opportunity with the Flywheel).

How does the Phunk Auction Flywheel Work?

The core philosophy of the Flywheel is trustlessness. We do not want to rely on any human being or even a small group of people to make valuations and purchasing decisions for Phunks. Why?

Errors: people with Phunk expertise can be good Phunk appraisers, but they also have biases. Any systematic approach to purchasing Phunks must be data-driven.

Fairness: the system will break down if there is the perception that some have greater access to liquidity than others.

To enable trustless appraisals, the Flywheel contract relies on a ChainLink-driven Oracle that provides on-chain valuation information at the time of purchase.

At launch this Oracle will be NFTBank, the current market leader at NFT appraisals. NFTBank’s entire business revolves around accurate appraisals, mainly to enable lenders to accept NFTs as collateral. NFTBank provides a robust API in addition to its Oracle so everyone can look up the value of their Phunk portfolio at any time.

However, if in the future the Treasury decides that NFTBank is no longer the best option for appraisals, the Flywheel enables a new appraisal provider to be easily swapped in.

The Flywheel is not trying to compete with NFTx, as NFTx is already an excellent provider of low-end liquidity. For this reason, the Flywheel will only purchase Phunks valued at a (Treasury-configurable) multiple of the NFTx Phunk spot price. This too will be enforced on-chain and trustlessly.

Initial Flywheel configuration

Here are the Flywheel configurable parameters and how they will be set at launch. Post-launch they will be changeable by the multi-sig

Initial deposit of 25% of treasury (ETH) to be sent to FlyWheel contact Max Percentage of allowance (ETH) that can be spent weekly: 25% Trustless appraisal provider: NFTBank (oracle can be changed or upgraded) Multiple of NFTx Spot Price to determine minimum Flywheel price: 1.5x Percentage of fair market value the Flywheel will pay: 90%

Scope of work

Launch and open-source front end and contract Maintenance: consultation for life of project

Cost: $200k USDC, payable immediately after launch, to be equality split by @middlemarch.eth and @hwonder