Introducing CFT 2.0
Interoperable NFTs for Craft is not a matter of if, but wen. The Craft team has been thinking hard about how we enable it, what use cases this can potentially bring, and how we can expand beyond the ICON metaverse in order to compete in the realms of other L1’s such as Ethereum, Solana or Avalanche.
We have already scoped out the details on how to build this interoperability solution, and have narrated a few visions of possible interoperable metaverse. However, we’re also realistically thinking about the incentives for external collections to come to Craft. We want to make the cross-chain transfers meaningful, not just for the sake of technology. We feel monetary incentives is probably the most lucrative and effective to get the job done, but we also don’t want to just throw money at projects for short term goals. On top of all this, we’ll also need a sustainable economy, to keep supplying enough incentives and maintain a healthy ecosystem.
With that said, we have gone back to study the $CFT token economics model, and quickly identified a few flaws, some due to the original design and some were caused by malicious actors.
Current $CFT Distribution Flaws
The current $CFT distribution is unfair and problematic. People are able to earn huge amounts of $CFT tokens with little money at stake by wash trading, constantly putting new pressures to $CFT price. The distribution process is also painful — it is somewhat manual, requiring weekly screening to weed out wash trades by human verifications. This is not only labor intensive but also centralized, requiring an authoritative entity as a critical dependency. This is currently being done as means to stop some bleed and prevent $CFT from being farmed and dumped. To further protect the platform from wash traders, we need a more scalable solution, especially with our ambitions to go cross-chain and handle more complex and larger NFT volumes in the future.
Idea: Craft meets veCRV and LooksRare Liquidity Mining
The concept is to reallocate our weekly $CFT distributions toward active and engaged NFT communities. In addition to earning fees by staking $CFT, we’ll be building a delegation system where staked $CFT can be used as voting power. This will allow users to delegate their votes to Craft collections, which can boost their liquidity mining rewards.
We aim to achieve the following goals with the redesign,
- A fair and decentralized $CFT liquidity mining distribution to active NFT communities
- An efficient and effective solution to prevent wash trading
- Onboarding external collections with clear and sustainable incentives
- Create an incentive loop to drive a fuller economy
Under this design, we expect $CFT allocations to only go to popular collections with active members’ continual support with staked $CFT votes. A form of proof of stake.
In this new scheme, collections by default don’t receive $CFT liquidity mining rewards. Collections will need to have at least 2M $CFT votes to become eligible for allocation, which will then be distributed to their collection’s buying & selling volume.
Wash traders with fake collections likely won’t receive such support, and will effectively be excluded from allocation. Cheating by using popular collections also won’t be economically beneficial as there will be platform fees and royalty fees to disincentivize these actions.
Ultimately, we want to strike a balance for a fair distribution, rewarding not only high trading volume collections, but also collections with active engagements from their supporters. We plan to provide
- A guaranteed minimum $CFT distribution for collections above the minimum threshold of 2M votes. This puts active collections in a decent position to receive rewards.
- Additional rewards to be competed for based on your delegation.
Rewards will be distributed every day and automatically to these two pools
The base pool (40% of daily rewards)
This pool is split evenly and distributed to all collections with 2M votes. This positions active collections to receive baseline rewards, and this also prevents heavily skewed distribution toward top collections.
The war pool (60% daily rewards)
This pool is split pro rata based on the actual delegations. Collections above the minimum threshold of 2M votes will be eligible to share this pool. This encourages collections to stay competitive and keep their community to stay engaged. The more support you get, the higher your rewards will be.
Here is an illustration of what the repartition might look like. Smaller (but active) collections continue to receive baseline rewards. Popular collections create a healthy competitive environment for additional rewards. Dormant and wash trading collections will not be rewarded, thereby reducing $CFT selling volume.
NFT projects are often deployed as an independent collection. For brands that run multiple NFT projects with multiple collections, it becomes increasingly more difficult to rally for support. We also think it’s fair to collectively count all votes toward a brand. For this, we’ll be developing a grouping feature, where brands will be able to consolidate their collections and people can vote to a specific brand, rather than to individual collections.
What we can expect for Craft
This update has many implications for Craft. Firstly, we’ll no longer need to vet wash trades, as rewards will be capped per collection/brand, and proof of stake is necessary as a prove of participation for each collection and brand. With platform fees and royalty fees in place, as well as expected higher trading volumes, this will make wash trading economically unviable. Without enough skin in the game, wash trading should no longer exist. Secondly, the team plans to release a Craft Grant Program, aiming to incubate smaller NFT projects with $CFT delegations. This is a great opportunity to help newer and smaller collections to build on Craft, as well as providing monetary incentives for external collections from other L1’s to bridge to Craft. With the revamped $CFT model, we expect this economy to sustainably provide rewards on an ongoing basis. Last but not least, we also foresee a bribe system similar to Convex Finance, where collections/brands have their own delegation programs to earn additional votes. This is also evident in our P-Rep system, where some validators have creatively designed new ways to earn more votes.
We’re still validating $CFT 2.0 with data simulations, we will demonstrate these data on a spreadsheet shortly. We’re also actively collecting feedback from the community at the moment to fine-tune this idea. Once we’re satisfied with the result, we’ll be submitting this to the upcoming Craft governance proposals. Stay tuned.