Fungible Non-Fungible Tokens

Fractional NFTs?

Have you seen this, have you heard about this?

Because once Ethereum whales decided it was a good idea to pay millions of dollars for "art" "on the blockchain" someone realized that might be a bit too expensive for the average person. They had a grand vision: let's break a single NFTs up into multiple pieces so anyone can still own a fractional piece of the NFT in question.

Brilliant!

Time-Shared NFTs.

Seriously, weird, but interesting nonetheless.

Of course fractionalizing an NFT into multiple pieces means that each one of those pieces has an equal interchangeable value. Thus through the process of fractionalization a non-fungible token becomes an entire fungible currency that represents the NFT as collateral. Seriously, think about it. Crypto is taking us into some absolutely insane places.

Airdropping as a marketing tactic.

I was theory-crafting this idea a bit further yesterday when I realized something pretty crazy. Magitek, my own token that I'm working on (not really) basically tries to get the attention of other communities and build hype by burning their token and hopefully pushing up the price of that token so that the community has a financial incentive to pay attention to Magitek and perhaps even throw some value into the protocol.

But how do you airdrop an NFT community?

Like... how would we go about airdropping Punks holders on Ethereum? This is not a simple task, because the actual value of the individual NFTs are not known and are highly subjective (in addition to being vulnerable to wash-trading and other forms of manipulation). Burning the NFTs directly is not really an option, and even if it was it could backfire because the supply of some of these NFTs is already so purposefully limited (there's no room for further deflation).

Anti... factional... NFTS?

So what I realized yesterday is that we could do the opposite of fractionalizing an NFT, and instead head in the opposite direction. Rather than taking 1 NFT and fractionalizing it into it's own fungible currency, we take a set of NFTs as the basis for an airdrop.

In effect, the set of NFTs we use (say Punks or Bored Ape Yacht Club) would be reverse engineered and consolidated back in a fungible currency that gets airdropped to the entire community.

But why?

Because then Magitek can not only create a new currency and airdrop it to an existing community and build a bunch of hype... but then Magitek can start burning that fungible token and pumping the price of a token that's almost guaranteed to have some level of adoption due to the underlying community it was airdropped to in the first place.

See, these are the kinds of ideas that venture capitalists (and even the vast majority of crypto devs) could never even fathom... because how are they going to make money off of it? It's so far into the realm of perceived altruism and giving away value that ideas like this don't even register on the radar of 99% of these guys.

But I'm not really concerned about capturing value for myself. I'm much more concerned with building reputation, branding, marketing, interoperability, and communities coming together within the space. That's where the real value lies. Not in some premine that centralizes the project right out of the gate and makes me rich. Just look at Ragnarok and 3Speak; perfect example of how to do it correctly and still build a ton of value for yourself.

So how would it work?

Pretty simple really. Say we want to airdrop Punks holders. There are 10k Punks, we build a currency that has an opening token amount of say 1 billion and then airdrop those one billion tokens into the wallets of the current holders of the NFTs. In this case that would be 100k tokens per NFT airdropped. Of course these are all arbitrary numbers and can be manipulated in any way we see fit.

The biggest problem with this idea is that airdropping a token without a market is, shall we say, worthless. If the only way to cash in value for this token was to burn them for Magitek (TEK) coins then that's exactly what would happen and the airdrop and currency we created wouldn't live up to its full potential.

Luckily, this problem has already been solved with AMM yield farms. The problem with AMM yield farms is that they require, you guessed it, yield. Normally that means printing inflation, which in turn mints more coins and theoretically dilutes the value of the underlying asset. Although I would argue that the liquidity we generate with this yield would be more than worth the cost (as I have argued countless times before).

There's also the issue of governance at this point. The decision to print money to incentivize a yield farm is a governance decision, and if the devs who built the token are the ones making that decision, it will immediately turn off the community they are trying to tap into.

Rather, it should be up to the community itself to vote with their stake in a DPOS manner with the tokens that they've just been airdropped to make decisions like this one. Again, something like this would generate a lot of hype within a community that feels as though they are just being gifted free value and agency within some cool new thing that they've been grandfathered into.

Fees (yuck)

If you're going to airdrop people on Ethereum... fees are a huge burden. This opens up the question as to if the token we're airdropping onto the NFT community is even built on the same network as the NFT itself. It is possible to implement this kind of thing on a side chain/clone or even a totally separate network, but still allow the public/private key encryption to work on the cheaper solution (especially if they are both EVM).

We've seen LEO do this already with Lite Account onboarding. Anyone can use Metamask to sign a transaction using their private key without actually needing to put that on chain (meaning free). That's because the only entity that actually needs this info is the LEO server itself, and doesn't need to be verified by Ethereum for an arm and a leg in the process. Users can prove they own something without actually putting that information on-chain. This is especially relevant for things like governance votes, where value isn't even being transferred. It's even more relevant for someone logging into a centralized server. Transaction don't necessary have to be on chain to gain utility.

Conclusion

Just spitballing here a bit. NFTs have already been converted into fungible assets via fractionalization. Why not try the opposite by making them fungible through anti-fractional consolidation? Might be interesting.

posting by heybodycrypto