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articleReport, introduced the NFTX operating mechanism and token economy.
NFTX is an innovative product that makes NFT investment more convenient. It has developed rapidly in the past two months. Even Simetri, a paid research agency under the blockchain media Crypto Briefing, recently released a report on NFTX.
Report
, calling it Featured Product of the Month.
Before delving into the design flaws of NFTX, it is still necessary to briefly review the operating mechanism of the product. For details, please refer to the following two articles:
How to make NFT investment more convenient? Analyze NFTX operation mechanism and token economySimetri Selected Report: Analysis of the Characteristics and Potential of NFT Index Fund NFTXD1 is the base fund. The ERC-20 tokens and NFT collateral assets are minted 1:1. For example, if a user has five NFTX basic CryptoPunk fund tokens (token code: PUNK-BASIC), they can exchange these five PUNK-BASIC tokens for any five primary Crypto Punk NFTs at any time. Punk-Female corresponds toherefemale type
CryptoPunk token, PUNK-ZOMBIE corresponds to the zombie type CryptoPunk token, PUNK-ATTR-4 corresponds to the CryptoPunk with four characteristics. For details on Crypto types and features, see
(20%) PUNK-BASIC
(20%) PUNK-FEMALE
(20%) PUNK-ATTR-4
(20%) PUNK-ATTR-5
(20%) PUNK-ZOMBIE
here
PUNK-BASIC — 5 ETH
PUNK-FEMALE — 6 ETH
PUNK-ATTR-4 — 6 ETH
PUNK-ATTR-5 — 20 ETH
PUNK-ZOMBIE — 83 ETH
. Anyone who holds any type of NFT can join the fund pool to cast funds, and exchange any NFT in the pool with D1 fund tokens.
0.96 PUNK-BASIC
0.8 PUNK-FEMALE
0.8 PUNK-ATTR-4
0.24 PUNK-ATTR-5
0.06 PUNK-ZOMBIE
D2 is a compound fund. Tokens in D2 are composed of underlying fund tokens in D1. For example, D2's PUNK-CORE fund can be composed of five different D1 CryptoPunks (PUNK-BASIC, PUNK-FEMALE, PUNK-ZOMBIE, PUNK-ATTR-4, PUNK-ATTR-5). Each D1 fund component accounts for 20%.
The creation prices of the above five tokens are:
As above, the starting price of the PUNK-CORE fund based on the average price is 24 ETH. PUNK-CORE contains 20% of each D1 fund, and the average price of each D1 compound fund is 4.8 ETH (24 ETH * 20%). The average price of each constituent fund is 4.8 ETH divided by the price of a single fund to obtain the number of separate funds for each Punk-CORE held. Each PUNK-CORE token contains five separate fund quantities:
problem analysis
The problem with NFTX funds stems from the pricing of D1. All NFTs within D1 are valued at the same value. In fact, each has price variations within the same type. For example, the price of NFT in PUNK-FEMALE ranges from a dozen ETH to a hundred ETH.
In this case, no one will add above-average female type CryptoPunk to the PUNK-FEMALE D1 pool. Once high-priced NFTs are added to the fund pool, arbitrage opportunities will arise. Keep trading, redeeming until you get a female type CryptoPunk of above average value.
As the individual underlying assets in the pool increase in value, this type of arbitrage is incentivized, and eventually the pool is left with only cheap assets.
For individual investors, buying a single female-themed CryptoPunk NFT is better than investing in PUNK-FEMALE Fund tokens. Because the value of the fund will go down as a whole.
Simplify the problem. For example, there are two NFTs worth $1,000 in the PUNK-FEMALE D1 fund pool, and the total value of the fund pool is $2,000. Now, the price of A falls to $500, and the price of B rises to $1,500. At this time, someone will buy similar CyptoPunk assets worth $500, and then join the fund pool to obtain PUNK-FEMALE tokens. Exchange PUNK-FEMALE tokens for assets in the fund pool, there is a 66% probability of obtaining female-themed CryptoPunk NFT assets worth $500, and a 33% probability of obtaining assets worth $1,500. Liquidity providers can continue to exchange back and forth in the fund pool until they get $1,500 in high-value assets and leave the market with arbitrage. In the end there are only two $500 low-value assets left in the pool.
solution
This makes it impossible to maintain long-term value for token holders and fund liquidity providers, and the main profits will be taken away by arbitrageurs. In order to maintain the balance of asset value in the fund pool, it is necessary to constantly adjust the fund asset parameters, which increases the complexity of establishing the fund.
Another problem with NFTX is the distribution of NFTX tokens. A large number of them are owned by CryptoPunk and the founders. No funds are set aside to fund future development of other team members and the community. Lack of financial funds is another problem for the future development of NFTX.Upshot Onesolution
The above problems stem from the gap in the valuation of NFT assets. There must be a solution to these problems, but we are still in the early stages of the development of NFT derivatives.
To motivate users to continue to provide accurate data and NFT valuations. Such products that use group wisdom combined with AI algorithms are very likely to form the infrastructure of NFT, which is equivalent to ChainLink to DeFi. Without such products, NFT index products are difficult to perfect.
outlook
Asset valuation will be an important part of NFT index products. The token economy can be used to motivate users, the index rewards contributing users, and users continue to provide accurate asset valuations.
outlook
refer to:
