NFTX
1/26/21
$NFTX
Price: $92.14
Market Cap: $38.7mm
FDV: $60.0mm
24hr Volume: $3.39mm
Overview
NFTX is a protocol working on the financialization of NFTs (Non Fungible Tokens). If you are unfamiliar with NFTs, I suggest you check out Linda Xie’s “A beginner’s guide to NFTs” to better understand how they function.
NFTX is a platform that financializes NFTs by creating ERC-20 tokens that are backed by NFTs. The ERC-20 tokens NFTX creates are called funds. There are two types of funds, D1 and D2. D1 funds can be thought of similarly to WBTC. D1 funds have a 1:1 backing between a single NFT contract and an ERC-20 contract. D1 funds help bring liquidity to the NFT asset class, as the majority of these NFT collectibles are rarely traded and can have wide variations in price. D1 funds financialize NFTs similarly to the way $GLD has financialized Gold in traditional financial markets (more liquid and accessible). D1 funds will increase liquidity and price discovery for the NFT asset class. D2 funds can be thought of as index funds in traditional markets. For example, if a traditional investor wants to gain exposure to healthcare stocks, he/she can go buy the Vanguard Health Care Index Fund (VHCIX). Instead of having to go buy 10-15 individual health care stocks, an investor can simply buy VHCIX to gain the exposure they wanted to health care stocks. D2 funds work in a similar way. D2 funds are Balancer pools that combine D1 funds. D2 funds offer investors more diverse exposure without requiring users to hold multiple tokens. D1 funds seek to bring liquidity to the NFT asset class, while D2 funds seek to provide an easier way for Non NFT Collectors (regular crypto investors) to gain exposure to NFTs.
Value Capture
The proposed value capture for NFTX is a fee on all NFTX mint and burn operations. The hypothetical fee from the whitepaper is 2.5%. The thought is a 2.5% fee would be manageable given how illiquid NFTs are in general.
Token Supply
Total NFTX token supply is 650,000 and the distribution is as follows:
10% vested over 5 years for founder
30% distributed for NFT contributions
30% distributed for ETH contributions
10% earmarked for NFTX liquidity
20% earmarked for farming
Investment Thesis
I find NFTX to be a compelling investment for the following reasons:
Investing in the financialization of NFTs
Investing in the growing popularity of NFTs among Crypto investors
“Shovels & Pick axes” type bet
Community Driven
Needed Product
NFTs in their current form are a cool, collectible that has value, but it is difficult to determine and capture that value. The reason for this is NFTs have not been financialized and therefore are highly illiquid. As NFTs rise in popularity & value, it is only natural for NFTs to be turned into financial assets. NFTX allows an investor to bet on this trend, due to the fact NFTX’s D1 funds bring liquidity to NFTs.
In the Fall of 2020, we saw NFT popularity sky rocket among Crypto investors. While some of the excitement has worn off, it is clear that NFTs remain popular and are here to stay. Especially given the recent rise in the popularity of NBA TopShot and $760k CryptoPunk sale, we are likely to continue to see crypto investors grow interested in NFTs. NFTX allows investors to bet on the trend of growing NFT popularity among Crypto investors.
NFTX is a “shovels and pick axes” type bet. NFTX’s proposed value capture is based on a fee for every NFT mint & burn. That means the more NFTs that are converted into ERC-20 tokens, the more value accrual for NFTX. Due to this, NFTX is a more convex bet than just owning NFTs out right. I view this similarly to investing in commodity producers when wanting to express a long view on that particular commodity (eg Longing Gold miners for more convex exposure to a long Gold thesis).
NFTX is entirely community governed. While a vision for NFTX’s future has been released, the decision making power is in the hands of NFTX token holders.
NFTX plays the role of a NFT AMM, something that does not currently exist.
Resources
https://linda.mirror.xyz/df649d61efb92c910464a4e74ae213c4cab150b9cbcc4b7fb6090fc77881a95d