Metopia Research Report — NFT Fragmentation Protocol Governance Solution
Introduction
With the booming of NFT concept, its related NFT derivative concept protocols have emerged, including NFT fragmentation, NFT liquidity protocols, NFT lending protocols, etc., all aiming to provide solutions to the pain point of poor liquidity of NFT assets. In this report, we will focus on the development of three representative fragmentation protocols, NFTX, Unicly and Fractional, in terms of protocol mechanism, current protocol data panel, and governance scheme, respectively.
Data Fundamentals
1. NFTX
Up to June 10, the total lock volume of NFTX exceeded $34M, with 2,440 active 30D users. 18,331 total NFTs assets in Vaults, with 239 total active Vaults.
Since the start of the June 2021 statistics, the protocol daily volume reached an all-time high of 5,209E on July 29, 2021 and a second all-time high of 2,511E on May 21, 2022, while the TVL has continued to grow, breaking through to new highs, up 125.43% compared to the beginning of the year.
Currently, the TOP 5 NFT tokenized assets in the liquidity pool are CryptoPunks(PUNK), Doodles(DOODLE), Mutant Ape Yat Club(MAYC), Meebits(MEEB), Forgotten Runes Wizards Cult(WIZARD). There are more than 15 tokenized NFT projects with liquidity pools over 100E.
2. Unicly
Up to June 10, Unicly’s total liquidity is nearly $4.90M, with a daily volume of $1.1K.
In May-June 2021, Unicly’s single-month liquidity grew by over 1000%, with a protocol liquidity peak of over $12.4M. After reaching its peak range in mid-21, liquidity has continued to decline, with a current TVL of $4.90M, a 60.48% decline from the peak.
Meanwhile, Unicly’s daily volume peaked in the May-June 2021 time frame, with a single-day volume of over $12.4M on May 14. Since 2022, Unicly’s daily volume has remained low, fluctuating within the range of several thousand dollars to hundreds of thousands of dollars overall.
Currently, the TOP 5 tokens of Unicly protocol liquidity are, ETH ($1.93M), UNIC ($647K), uJenny ($615K), uLoot ($400K), uPunk ($265K). The overall liquidity of fragmented tokens of the Unicly protocol is relatively low, and no significant turnaround trend is seen in the near term.
3. Fractional
Up to June 10, the total cumulative trading volume of Fractional reached $1.88B, with a total liquidity market value of $255M and a total of 1,316 created Vaults.
From the single-day data, the single-day trading volume reached the peak range in August-September 2021, with a single-day volume of $202M on August 22, 2021, followed by a gradual decline in the single-day volume, and the current single-day volume is only about one-thousandth of the peak; the single-day Vault creation volume also overlaps with the peak trading volume range, with a maximum of 108 Vaults created in a single day, but from October 2021, the daily Vault creation volume is only in single digits, which is also far from the peak period data.
According to Fractional official data, Vaults currently have a total market cap of 27.0K ETH and over 66K single holders. The top 5 vaults with implied market cap are PUNKS (4.4K ETH), My Alpha Leaderboard (3.5K ETH), Feisty Doge NFT (2.8K ETH), Ukraine DAO Flag NFT (277.7 ETH), White Rabbit (231.4 ETH). The market cap of the top 5 projects accounts for 23.8% of the total market cap.
Fragmentation Mechanism
1. NFTX
NFTX is a platform that creates a liquid market for NFT assets. NFTX provides liquidity broadly by allowing users to deposit NFT assets held in their wallets into the NFTX Vault and mint an ERC20 homogenized token — vToken. vToken represents the user’s claim to random NFT assets within the Vault and can be used to redeem specific NFT assets from the Vault.
NFTX Mechanism:
The NFTX tokenized liquidity protocol provides different facilities for each type of NFT user:
- NFT Collectors. can unlock more value from their NFT asset holdings through NFTX, tokenize their NFT assets and earn corresponding rewards through LPs and pledges, etc.
- Content Creators. are able to earn protocol fees in perpetuity and distribute NFT as vToken through AMM.
- Investors. NFT investors are able to track the price of specific categories of NFT through NFTX, and conduct reasonable value discovery of NFT Floor Price through the vToken casting mechanism, etc.
2. Unicly
Unicly is a community-managed and license-free NFT liquidity protocol for combining, fragmenting and trading NFTs. Similar to the NFTX component, users can place multiple NFTs into a Vault and break them down to mint ERC20 tokens — uToken. NFTs can be traded after minting fragmented tokens through the Unicly protocol, and the Unicly platform directly The Unicly platform provides an AMM Swap for users to trade or provide liquidity.
Unicly Mechanism:
Currently, Unicly is updated to V2, and the main changes in its product features are:
- A collection of NFT assets within a Vault can exist as individuals without sharding. When a user outside the Vault bids more than the price set by the Vault creator, an auction will be initiated.
- When a specific NFT asset in a Vault is auctioned, the proceeds are shared proportionally among the holders of the sharded tokens in that Vault.
- Fragmented tokens can be destroyed and holders can withdraw their ETH assets in the Vault at any time.
3. Fractional
Fractional is a decentralized NFT asset fragmentation protocol that allows NFT holders to mint tokenized fractional ownership of their NFTs, and the holders of these tokens are able to govern that NFT. Users can create an NFT Vault through the Fractional platform and mint 100% of their NFT sharded tokens. NFT owners can sell a portion of their sharded tokens through a Dutch auction, add liquidity to their tokens on an AMM DEX like SushiSwap, or give them away as gifts.
What sets Fractional apart from other fragmentation track programs:
• Fractional primarily targets high value NFTs and 1:1s.
• Fractional is focused on a less user-intensive buyout model.
• By setting curatorial incentives in the form of asset management fees to those used to incentivize owners to fragment their NFTs.
Fractional Mechanism:
Governance Solutions
1. NFTX
Governance tools & platforms: Discord, Forum, Snapshot, Aragon.
NFTX token holders have the right to vote on any decision of the NFT protocol, and the current NFTX governance process focuses on:
- First, there will be a preliminary discussion in the Discord community of NFTX (temperature test).
- Further discussion in the forum to finalize details.
- Proposals requiring a vote in the forum with a minimum of 5 votes and a quorum of 80%.
- Proposals can also be made via NFT’s Snapshot (https://snapshot.org/#/nftx.eth), with more than 50% of tokens voting in favor of XIP to pass, and for contract changes requiring more than 70% of tokens voting in favor.
- If approved, the proposal will be snapshotted and contract changes will be made via Aragon.
According to DeepDAO data, NFTX treasury funds amount to 20.5M, with 5.8K participating governance members, 376 proposals initiated, and 8.1% active users. According to the proposal information on Snaptshot, there are currently 26 NFTX core proposals (XIP), with proposals including, migrating trading pairs, expanding positions, and adjusting the treasury. The average number of NFTX tokens involved in the last 10 proposals is 64.4K tokens.
2. Unicly
Governance Tools & Platforms: Forum, Snapshot.
Unicly adopts decentralized governance and confirms voting rights by taking snapshots of users’ on-chain token assets:
- Unicly protocol governance. It mainly requires the UNIC community to vote for new uTokens to be added to the whitelist.
- NFT fragmentation governance. vault and fragmentation token holders can perform custom, flexible governance, thus enabling more complex DAO fund management.
Unicly is governed by proposal voting, mainly through Snaptshot, and proposal discussions in the forum.
According to DeepDAO platform data, Unicly treasury funds total $225.3K, 709 members participate in governance, 37 proposals are initiated, and the proportion of active users is about 17.5%. The proposals include, new uToken whitelist, UNIC token related, Unicly protocol development related, etc.
3. Fractional
Fractional’s governance is focused on the Vault, where holders of fragmented tokens have the right to vote on the governance of parameters such as the reserve price of the NFT locked in that Vault and the minimum number of quorum votes required to buy out, in order to make decisions and implement them. Other elements that can be changed through governance include, curator fee parameters, auction length of NFTs, etc.
Here, the governance of Fractional can be better understood with the help of a project on NFT fragmentation of Vault via Fractional — Azuki #40 Bobu.
3.1 Azuki #40(Bobu)
Bobu creates the sharded token $BOBU by locking Azuki#40 in a Fractional Vault, where all token holders can participate in the collective governance of a single NFT, Azuki#40.
Governance platform: Discord, official website.
- Bobu proposal voting and discussion will take place in Discord. Verified Bobu holders will be counted as 1 vote.
- Bobu token holders can vote for committee members, multi-signature wallet users, etc. by voting. Project proposals will be initiated by the committee members, and the part of the proposal that involves funds will be managed by the multi-signature wallet users.
- The Azuki team will guide the project governance in the initial phase and will then gradually open up the governance to token holders and the Azuki team will waive voting rights for all proposals.
Bobu Governance:
Conclusion
The NFT fragmentation protocol is an important attempt for NFT mobility solutions. Looking at the data dimension, the fragmentation track has now diverged. From last year to date, NFTX has maintained a good growth trend, Unicly has continued to decline after peaking in 2021, and Fractional has also implicitly lost its “dominance” in the fragmentation track last year.
In terms of governance, most of them use instant messaging type platforms (Discord, etc.) + governance type tools (Snapshot, etc.) to conduct proposal voting and proposal discussion. Most of the governance methods are through on-chain snapshots of users who hold fragmented tokens or protocol-native governance tokens, with the amount of users or tokens held as the base unit for governance voting, and token-holding users discussing proposals through platforms such as Discord, and finally formally launching proposals in forums or on Snapshot, and token-holders voting on governance.
The governance of the NFT fragmentation protocol is an important part of the fragmentation token application. Whether it is the decentralized governance of the protocol as a whole or the governance of individual Vaults, a relatively sound governance framework is more beneficial for the continued development of the NFT fragmentation track.
