The Need for NFT Vaults
OptyFi’s flagship product is a multi-chain, AI powered yield aggregator that allows a user to generate optimal returns on DeFi assets according to a predefined risk tolerance. Our long-term vision however, is to provide this opportunity across every decentralized asset.
The first major expansion of our product line is here. In the coming weeks we will launch our first of many NFT Vaults!
Until now there have been tools such as NFTX and floorDAO that provide users with options to passively invest in market Beta, which means profits are tied to the average performance of all tokens. Existing models will often hold the floor of a collection, so this does not offer a user upside potential beyond the average movement of the collection. Fractionalization allows people to obtain partial ownership of select NFTs, but it does not address the need to conduct copious amounts of research in order to make an informed decision. Over the past few months OptyFi has been quietly developing a way for you to gain safe, simple, and passive exposure to Alpha.
I recently wanted to buy a car NFT listed at 0.2 ETH in order to try out a blockchain game, but the gas fee in Ethereum was around 20% of the price. Assuming a similar gas fee on the sale, I was expecting to take a 40% loss on this investment without any price movement, and we have still not factored in sale fees from both the platform and seller.
I’m already out of my comfort zone as an investor at this point. I feel restricted to high-value NFTs so that there is not as much impact from transaction costs, but this kills the diversification of my portfolio as I am not able to provide an allocation to many. Then I begin to peel back more layers of risk to worry about:
- Liquidity — Will I be able to sell my NFT quickly without price impact?
- Does this project have good fundamental growth prospects?
- How strong is the community, or does it contain many speculators?
- How do I know the specific NFT I am interested in is priced correctly?
- How do I price the asset when I wish to sell?
Am I susceptible to bias? I’d be willing to bet the owner of a Frenchie is susceptible to overpay for a Fancy Frenchie NFT..
NFT Vaults that hold a portfolio of NFTs — driven by DAO appointed curators.
An NFT vault can provide liquid, passive exposure to NFT themes such as Gaming and Metaverse — one category that has a huge buzz behind it right now. The pooled capital from users allows a vault to acquire NFTs from many projects, thereby allowing for diversified exposure while mitigating the impact of transaction costs. Furthermore, discussion among a community will prevent individual investment bias. Vaults serve to greatly reduce overall initial investment costs, whilst having those remaining in the form of vault fees be reinvested into algorithmic optimisation of returns; critically, vault fees serve two purposes:
1. Cover transaction costs
2. Fund data-driven algorithms to inform decision making
To illustrate point 2, consider meebit #11275 shown below. The Meebits floor price at time of writing is 4.18 ETH, but do you know what fair value of #11275 is?
The most accurate valuation an informed user can perform on this asset is likely to take all of its underlying traits (Type: Elephant, Hair: Bald, Shoes: Neon Sneakers, Shirt: Logo Tee, Earring: Gold Earring, Hat: Wool Hat, Gray, Pants: Athletic Shorts, Black, Glasses: Frameless), analyze recent market pricing of close comparables, and list this NFT at a competitive price.
The bottom line here is that the NFT market cannot possibly be efficient; in fact it is most likely rampant with bias. Information Asymmetry exists between market participants because it takes extensive resources to acquire the necessary information. Humans are in a position to make a good decision, but certainly not in a position to make an optimal decision.
The aforementioned market inefficiencies expose opportunity for those who can see it. Gathering pricing and trait data from the blockchain and feeding it into a model allows NFT Vaults to detect and capitalize on these pricing inefficiencies. Through Machine Learning we can predict the theoretical value of Meebit #11275; therefore, if a less informed market participant lists this NFT for less than fair market value the NFT vault strategist will pick it up.
The ideal balance between human vs AI decision making probably lands somewhere between the two extremes; by allowing expert curators (strategists/PMs) to extract further insight via data-driven ML tools, we create a passive opportunity for users to invest in a vehicle where experts equipped with cutting-edge tech are maximizing returns on investments. Vault deposits are never directly handled. Here is how it works:
Genesis Vault — PUNKS (March 2022)
The first Vaults will be the kings of the space — CryptoPunks and Bored Ape Yacht Club. Genesis Vault is CryptoPunks, which is expected to launch at the end of March. The following Vaults will be based on themes and will include Art, Gaming, Metaverse Land, and Music.
So, how can we decide who to appoint as a strategist that determines which CryptoPunk to buy?? We think by aptitude! We are hosting a Data Science competition to choose a strategist, and the winner will be rewarded 5000 $OPTY retroactively (to be claimed after token launch).
Launch Plan (subject to change)
DAO’s, Funds, Whales, and other sophisticated entities can benefit from spinning up their own NFT Vault in the future. As such an entity, you will be able to whitelist users, strategists, and collections of your choosing, while defining and collecting performance fees. This allows for safe and controlled community-driven investments through OptyFi’s infrastructure. If you are interested in this product, please reach out to Curtis#7448 on Discord.
How to access the Vaults
Our CryptoPunk Vault will allow access to Whitelisted users only for the first 10 days after launch. OG’s of the OptyFi community will form the whitelist, which means all SuperYIEDLers and PowerYIEDLers + any members referred by these individuals until the launch date. There will be a capital raise target, and the Vault will not accept funds beyond this amount. If this target is not reached, public access will open after the 10 days have elapsed.
At OptyFi we believe that decentralized assets will enable incredible innovations, and this is one of many to come.