Authors:

NFTEarth Team

Summary:

Evolve NFTE into an Omnichain Fungible Token - via LayerZero Standard - one of the issues facing the NFTEarth protocol in the early days has been the need for a deep on-chain liquidity pool for the NFTE token, with current total liquidity on-chain currently at ~$10K, down from all time highs of closer to ~$200K. The existing liquidity pools are not sufficient for even small buys and sells, and are extremely prohibitive for larger buyers and sellers. For example, a $1K buy of NFTE leads to a significant % price impact, which is not conducive to attracting funds and larger buyers and sellers. Bridging with Multichain originally appeared to be one of the great solutions for NFTE, but in reality it turned into the tipping point for the token liquidity, and with the current Multichain news, and no other bridge providers in place for NFTE, it is simply not practical to expect to grow without a significant overhaul to the token architecture - one that will enable an Omnichain future, but not leave current participants behind as well. See LayerZero documentation here: https://www.npmjs.com/package/@layerzerolabs/solidity-examples and here: https://layerzero.gitbook.io/docs/

While the initial approach was to attract external LP through the gamified airdrops and staking/trading incentives emissions, much has changed including the DAO's focus on the marketplace as the counterpoint of the value creation that can be built from NFTEarth. These methods thus far employed have fragmented liquidity and proved to be inefficient methods, as the airdrop 1, which by most standards, was a large success, the DAO has been unable to procure the resources needed to attract the developer talent in a timely fashion to complete what was envisioned as the product. LP liquidity has been reduced too dramatically for the DAO to effectively move forward at this point and without another bridge provider available, token holders are effectively "stuck" - creating what is a massive burden on the DAO. It also renders the ability to attract developer talent via token incentives to virtually none. The NFTEarth Team and community has received significant feedback on possible scenarios for the best path forward and proposes the following: To migrate the NFTE token on a 1:1 basis to a LayerZero OFT standard, and allow for the migration of all tokens that exist currently today to the new token with the Omnichain capabilities. The feedback that the community gave on this could be summarized as follows:

• This future proofs NFTE for security purposes as well as moving to new networks if so desired
• It did not make sense to LP when the goal of single-sided (which has evolved to locked LP) NFTE token locking provided a compelling value in terms of protocol fees once on-chain games, trading of NFTs, and NFTFi applications ensue.
• The use of concentrated liquidity pools on multiple networks and also 50-50 pools has too much impermanent loss given the volatility of the NFTE token, and thus is not attractive to potential outside LPs
• Using a WETH pair (ideally a yield-bearing form of staked ETH) prevents LPs from taking advantage of the staked ETH yield, which has shown to be very compelling.
• The existing setup is simply not conducive to a long-term successful NFT hub and new token architecture is required.

While working on NFTEarth V2 architecture, critical community feedback discussed ways to improve liquidity, reduce slippage, and create a fairer platform for users who provide value to the protocol.

Motivation


Improving on-chain liquidity is the most critical factor to get NFTEarth into strong momentum as the NFTFi and LSDFi narratives build-up and having an omnichain token would provide a more seamless experience for NFTEarth DAO Protocol users as well as new entrants to NFTEarth ecosystem across Arbitrum, Optimism, Ethereum, and future chain deployments that are planned including: Polygon's New Layer2, StarkNet, Linea, Base, Scroll, and more for both the protocol token and its applications.

Specifications

1. Shifting the token to a LayerZero OFT standard (Omnichain Fungible Token) and then enabling a token migration for all users, and finally the creation of a ve8020 type pool: 80-20 NFTE and 1 of: wstETH/rETH pool on Balancer Protocol (1% fee) or another DEX interested in collaborating/providing resources to help grow the NFTFi and LSDFi narrative alongside NFTEarth.

• An omnichain token is needed going forward and LayerZero has demonstrated they have the resources for NFTEarth to safely deploy this solution.
• A slightly higher trading fee is also a disincentive mechanism for instantly dumping NFTE earned through emissions and is more in line with the volatility profile of the NFTE token
• Changing the WETH pair to wstETH or rETH (wrapped staked ETH through Lido or Rocket Pool ETH) allows LPs also to take advantage of staked ETH yield on top of the fees they are earning as an LP, removing the opportunity cost of becoming an LP with WETH.

2. NFTEarth V2 Functionality - Requiring Locked LP tokens instead of single-sided NFTE to earn protocol fees on all chains (the ve8020 model).

• Solely staking/locking NFTE tokens does not improve liquidity of the protocol; rather it serves to delay tokens coming into the market. By requiring locking LP tokens instead of single sided NFTE, the liquidity profile will meaningfully improve for the NFTE token
• The exchange of value here has been imbalanced, as it makes sense for those with “skin in the game” to be the ones that are the beneficiaries of protocol fees. These are the users that provide liquidity and enable the protocol to operate more seamlessly

Steps to Implement

• Upon launch of v2, deploy token migrator to the new NFTE omnichain token.
• Shift all planned protocol fees from the form of single sided staking NFTE lockers to locked LP tokens using a ve8020 method or similar structure (Balancer Pool Tokens for Arbitrum etc.) to earn protocol fees
• Reduce “Pool2” emissions to 0 or any other form of inefficient token distribution to 0.

Timeline


These changes would be put into effect immediately, or as soon as implementation is possible and paired with both the application uses of NFTEarth such as GameFi, etc. as well as the protocol staking component, likely to be a a form of ve8020 with staked ETH LST as the pair token, and built on Camelot, Balancer, Uniswap, or SushiSwap on Arbitrum upon the v2 launch of the protocol. Locking LP tokens would be implemented at launch of v2 - and the DAO reserves the right to transition to whichever network it deems best for the long-term growth of the strategic initiatives of NFTFi/LSDFi and NFTEarth stakeholders and community members.

Overall Cost


Minimal. This would be a adjustment of the existing token architecture.

To follow if this passes the vote: Several more DAO votes on the network to build liquidity on, other networks to expand to, and the core focus of the protocols value creation mechanisms going forward.

Details

Work with the LayerZero team to deploy an OFT for NFTEarth DAO and then apply for a Balancer Grant as part of being one of the early DAOs to initiate a ve8020 program for NFTEarth liquidity on Balancer.

Balancer's 80/20 Initative

https://medium.com/balancer-protocol/the-8020-initiative-64a7a6cab976

https://medium.com/balancer-protocol/80-20-balancer-pools-ad7fed816c8d

https://medium.com/balancer-protocol/liquidity-after-bootstrapping-ffc7856d5c8e

Copyright

Copyright and related rights waived via CC0.