Introducing xNFTE: NFTEarth Becomes First NFT Protocol to Offer Real Yield From Staking and Revenue Sharing
2023 has been a year of exciting ups and downs and an overall eventful time since NFTEarth launched back in January! We’ve seen tremendous growth in our community and success with our initiatives and partnerships.
Despite overall NFT ecosystem headwinds that have been a great challenge for a young protocol, the team has continued to build with enthusiasm to enable access to NFTs for as many people as possible on Earth. For the past couple of months, the team has been hard at work to designing and building the next evolution of NFT protocol utility combining the native protocol token with revenue sharing and a brand new staking mechanism never seen before. Today, we are excited to release it to our community!
xNFTE: Real Yield designed for the long-term
The architecture for xNFTE takes inspiration from world-class tokenomic designs found in protocols such as Balancer and the veBAL staking mechanism, Stargate Finance and the veSTG staking mechanism, Curve Finance and the veCRV staking mechanism, as well as our first and long-standing Partner, Layer2DAO, with the xL2DAO staking mechanism. The only difference to these aforementioned staking programs is that NFTEarth has implemented a couple of new innovative features to further enhance the staking mechanism for the benefit of all users.
Since NFTEarth’s inception, the vision has been to find the most sustainable way of expanding the non-fungible ecosystem on blockchain scaling networks, while simultaneously creating the means to thrive as a community-owned DAO. Therefore, the governance proposal to revamp the tokenomics in an effort for long-term sustainability was created on Snapshot and passed with strong support, and this unlocked the possibility for the brand new revenue sharing program enabled via staking to be implemented in the NFTEarth protocol. This is an aspect the team views as fundamental to continued decentralization and long-term growth. Now, it is time to bring it to life through the implementation of xNFTE.
What is xNFTE and how does it work?
For some context, it’s important to understand some of the most successful governance and value accrual tokenomic models that have been built in web3 up until now. Curve innovated with veCRV - pioneering the concept of locking up tokens, and it worked exceptionally well for them and kicked off a massive amount of protocols moving to a ve (vote-escrowed) model. Lock your CRV tokens and get veCRV, which earns you rewards and governance control. Balancer then innovated on what Curve built with veBAL, where instead of locking a single token, token holders lock a liquidity position (LP) consisting of BAL / WETH tokens — and they also changed the duration of max-time locking from veCRV down to 1 year. The change to an LP token as the locking token means that as more tokens get locked, *liquidity increases* which is a fundamentally innovative and massive competitive advantage for any protocol that implements it — and absolutely ideal for any protocol looking to bootstrap long-term liquidity. The results of this change speak for themselves. The BAL token is currently one of the single most liquid tokens in all of crypto, with its liquidity nearly equal to the market cap of the token. See the image below from DexScreener and check it out for yourself. With xNFTE, we aim to expand on this concept that Balancer implemented, with a couple of slight improvements. We will be using the leading decentralized exchange (DEX) by volume on Arbitrum — UniswapV3 — and additionally our staking contract is also deployed to Arbitrum layer2 as well, opposed to Ethereum Mainnet because of the lower costs of completing transactions on Arbitrum. This creates significantly more opportunities to attract new users interested in becoming part of the long-term vision of the protocol and taking part in protocol governance.
So, why haven’t any other protocols done this? Especially any NFT protocols?
First off, the trend towards this type of governance staking mechanism is clear. This is the direction that many protocols are looking to move to, and Balancer has even introduced an entire initiative aiming to onboard new protocols to this type of “Locked LP as governance” staking mechanism. The challenge with building a staking solution such as NFTEarth’s with UniswapV3 positions up until this point is this: since these LP positions are created as ERC-721 NFTs — non-fungible tokens — this makes them inherently not composable with the type of staking contract designed for revenue sharing and ideal for a staking model of tokenomics. In practice, it means these LP positions simply can’t be used to be staked in a revenue sharing contract, whereas this is relatively simple with a UniswapV2 position as V2 positions are not NFTs.
So, enter AMM specialist Gamma Strategies. We’ve partnered with Gamma to help innovate past this obstacle in order to create composability of the UniswapV3 LP positions to enable them to be staked (in our case the LP pair being NFTE / WETH), by creating a tokenized representation of the NFT LP position which can then be staked to obtain an xNFTE position. Innovation enabled. The depositor of the UniswapV3 position on Gamma Strategies receives an ERC-20 token that represents their deposit, which can then be used to be staked, thus solving the issue of composability. They can create this tokenized position (termed a Gamma Vault) in a pre-determined and fixed liquidity range as well — that for our purposes here, is full-range liquidity, thus making the entire staking mechanism discussed so far a new reality.
As the goal for the NFTEarth staking mechanism is to broadly expand liquidity, and not focus on optimization of fee capture, the positions created through Gamma are full-range UniswapV3 positions — which makes them function in a similar essence to UniswapV2 positions in terms of the weight of each token in the liquidity pool. Expanding on this a bit further for clarity, this means the positions will always seek to maintain a 50/50 ratio of tokens in the pool, different than many concentrated liquidity positions that are created from UniswapV3. So, what Gamma does explicitly is: enable the functionality desired (a transferrable representation of the pro-rata share of UniswapV3 LP position of NFTE / WETH… to the xNFTE staking contract in order for a user to create an xNFTE position and participate in protocol revenue sharing and governance). Users can deposit directly to the NFTE / WETH position in the Gamma UI, or via smart contract, and then the user that completes the deposit receives the token receipt which serves as the representation of their amount of shares in the Vault, pro-rata, to the total in existence for this this unique LP NFTE / WETH UniswapV3 position. This token receipt created by Gamma is then what can be used to reliably and precisely track the size of user positions and amounts staked to know precisely what each user share of xNFTE is at all times.
Important note: Users can still choose to add to the UniswapV3 pool for NFTE / WETH on Arbitrum outside of the Gamma Strategies partner protocol solution, or even create a Vault position on Gamma and choose *not* to stake in the NFTEarth staking contract as well.
NFTEarth is the first protocol to build this innovative UniswapV3 staking mechanism into its revenue sharing and governance strategy in all of web3, and also the first to do so on a layer2 network, enabling the power of protocol governance and value accrual for significantly more users than if deployed to just Ethereum Mainnet…where costs to create and manage positions is prohibitive for the vast majority of people around the Earth.
In a single sentence, the more liquidity you provide and the longer you stake it, the greater your percentage of revenue sharing and governance power!
How does the revenue sharing aspect from the DAO work?
NFTEarth is a DAO that seeks to highlight and catalyze the growth of non-fungible technology across the Earth. The protocol has already created several streams of income, with multiple more in the works, that will form the basis of the revenue sharing to be distributed to stakers. These current sources of income are:
- LP Provisioning
- NFT Marketplace Fees
- NFT Collection Mint Sales
- NFT Collection Royalties
- Fortune Game Fees
What else is coming?
50% of all revenue generated (excluding only revenue in the form of the native NFTE token) will be converted to WETH (if received in a different form of asset) and sent to the Vault for stakers to claim on a weekly basis. The amount of each staker’s claim is pro-rata to all other stakers in the xNFTE staking contract. When you stake in the xNFTE contract, the total amount of xNFTE you receive depends on 2 inputs: the amount of NFTE LP position you stake, and how long you lock up your position of NFTE LP tokens. The longer you lock up your tokens (up to 1 year maximum), the higher your proportional share of xNFTE and the larger your percentage claim of protocol rewards and voting power. Some of the additional revenue streams to be added staker rewards include: the web3 decentralized chat app in development and the domain name service in development. 50% of all revenue generated from these NFTEarth products will be distributed to stakers.
Claiming Process for Stakers:
Stakers of NFTE LP positions — synonymous with xNFTE Holders — will be eligible to claim their pro-rata share from all protocol revenue allocated to staking rewards in the form of WETH, claimed from the Fee Distribution Vault (a contract deployed on Arbitrum that works with the xNFTE contract), and this will be claimable on a weekly basis at 00:00 UTC Thursday.
You can stake your tokenized LP position from Gamma Strategies and claim your rewards right in the NFTEarth app: https://nftearth.exchange/staking
xNFTE Contract Details:
A user’s xNFTE balance is determined using the amount of NFTE LP (liquidity pool) tokens they have staked and the duration of the stake: staking more NFTE LP tokens for a longer duration will yield a larger xNFTE balance. This keeps voting power in the hands of users with the greatest commitment to the protocol’s long-term success.
Staked NFTE tokens cannot be redeemed from the contract until the end of the staking period. If a user claims their NFTE LP tokens at the end of the staking period, the associated xNFTE balance will be burned. Users can choose to extend the duration of their stake at any time.
NFTEarth has implemented the contracts used by Stargate Finance with their staking mechanism veSTG deployed on Arbitrum One as the staking contract and their FeeDistributor contract as the Vault for the rewards distribution mechanism.
The 3 Contracts You Need To Understand to Grasp the xNFTE System:
- Gamma Vault (Tokenized NFTE / WETH LP Position) Contract Address: 0x82496243c0a1a39c5c6250bf0115c134ba76698c on Arbitrum.
- xNFTE Contract Address — where you deposit your NFTE LP position obtained from Gamma Strategies: 0xE57bd15448C3b2D1dBAD598775DD2F36F93EBf90 on Arbitrum. Once deposited, you will have an xNFTE balance.
- FeeDistributor — for xNFTE stakers to claim rewards - Contract Address: 0x9138a2e628f92a42397b3b600e86047ae49aca98 on Arbitrum.
DAO Governance Iteration Moving forward
NFTEarth governance votes on Snapshot will from this point forward be held based on xNFTE positions instead of just NFTE token ownership. This best aligns the long-term incentives of NFTEarth stakeholders with the vision of the DAO.
We are ready to evolve our DAO into its next iteration and catalyze non-fungible activity across blockchain scaling solutions! We hope you are excited for xNFTE and the future of NFTEarth!
About NFTEarth
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