Summary

PieDAO has been discussing the idea of a $PFP pie in various forms for many months, but various issues with how the pie would be constructed have prevented us from formally organizing the product. This proposal being posted on behalf of the TEAM ( @Adrian.A, @BlockEnthusiast, @antodp, @Gabo, @hamball, @naan, @RichAndCreamy) how has lead the efforts to move the product forward in a realistic and timely manner.

Full Discussion link: https://forum.piedao.org/t/nft-index-creation-updated-pfp-index-proposal/1273/5

Motivation

The NFT space is large and broadening quickly. As a DAO, we started exploring this investment space with our pie, $PLAY which has a focus on metaverse gaming. Earlier iterations of $PLAY included small amounts of PFP coins such as $PUNK and $MASK, which were eventually removed during processes to narrow the scope of the product. However, we believe that the initial inclusion of these assets was an early indication of interest in a now-large PFP / NFT art space that is emerging as its own sector, with markedly different dynamics than gaming projects.

Specification/Scope

In the first proposal to build a $PFP pie, the mechanism that was suggested to fund the underlying assets was a pie made up of shares from NFTX floor-priced vaults. However, it became clear that this approach was not currently possible due to issues with liquidity, which would prohibitively limit both the maximum size of the pie and the diversity/quality of assets it could contain. While this kind of approach may be possible in the future as organizations like FloorDAO release their products to supplement liquidity, the team has decided to propose an alternative model to the $PFP pie.

Proposed Model

In the model the team is now proposing, the pie would take the form of a closed investment fund, with the DAO organizing an initial funding round where participants could deposit ETH into a smart contract during a specified period and receive tokens in proportion to their contribution.

Assuming a successful fund raise, a $NFT fund administration and curation group would then use the ETH collected to purchase NFTs meeting a clearly defined set of criteria developed with input from the DAO.

NFTs would be purchased at ‘floor’ prices from collections with sufficient supply and liquidity to allow the tokens to be easily valued, purchased, and liquidated. With the evolution of the space toward multifaceted utility that extends beyond use of an NFT as a profile picture, the team anticipates expanding beyond PFP projects and including other high-value NFTs with long-term potential.

If a minimum amount of ETH is not reached during the initial fundraise, contributors would receive a refund.

After a predetermined amount of time, the NFTs purchased by this fund would be liquidated, and any holders of the $NFT token would be distributed a proportional share of the ETH that resulted from the sales.

Depending on implementation cost and complexity, we may also choose to open the fund at regular intervals before the liquidation period to allow new capital contributions and/or token redemptions. These would occur at a valuation determined through a methodology developed by the team and published at the time of the initial fundraise (rather than calculated through an oracle or similar automated technology).

The team believe this approach will result in a product that is:

• Safe
• Understandable
• Easily traded and accessible
• Comparatively inexpensive to build vs. oracle-based alternatives
• Quick to launch, meeting demand from new users flooding the NFT space

As a bonus, a new product type will be added to PieDAO’s technical portfolio, which can be used in a wide range of scenarios that involve assets that are non-fungible, illiquid, and/or difficult to value.

Risks & Potential Mitigation

Risk	Description	Potential Mitigation
Curators / Project Team	Use of human curators introduces risk of poor investment decisions or malicious actions	Multisig authentication for fund wallet; veto / comment period for investment decisions
Market Risk	NFT market is highly volatile; many projects go to zero value in bear market conditions	Well-defined asset allocation strategy that includes blue-chip / established collections
Collection-Specific Risk	Risk of rugs, IP violations, malicious or poorly-written contracts	3rd party and/or PieDAO audits of contracts for projects included in index; require doxxed founders and/or legitimate companies operating collection
Legal	Model is a departure from PieDAO’s other products and may have different liability implications for PieDAO and project team	Legal opinion / advice on fund structure

Team

Role	Team Member(s)
Project Lead	Hamball
Project Management	Naan, Rich
Finance	TBD
Periodically refresh / maintain analysis	TBD
NFT Diligence	TBD
Marketing	TBD
Consultants / Advisors	Block
Liaison w/ Development Team	Adrian
Development Team	PieDAO core dev team

Next Steps/Closing Notes

While the team recognizes that this model has changed significantly from the original proposal, we believe that it is important to get a product released to capture the growing interest in the NFT sector from investors who would like to diversify their options. We expect that the DAO will have questions, but we believe that this method of construction is the best possible in the short term. Since this method has a built-in end date, it allows for reevaluation in the future as the technology to power other solutions is developed.

If this proposal is approved, next steps would be to:

• Define the technology and UX to be used, and establish a product development roadmap and timeline
• Establish revenue mechanisms and incentives for the DAO, technology contributors, marketing/BD, and the administration and curation team
• Obtain legal input on the model to ensure acceptable liability for PieDAO and the administration/curation group
• Create the criteria for selection of NFTs, valuation methodology, and other guidelines and policies according to which the administration team will operate

Do you support this proposal to continue the efforts on this NFT pie creation?