Lessons along the wei

“A society grows great when old men plant trees in whose shade they know they shall never sit.”

In the original NFTX litepaper, published about five months ago, I wrote the following:

 “The current NFTX mission is to become a DeFi black hole for NFT assets [...] focusing above all else on what is best for the long-term appreciation of the NFTX token. [...] We invite anyone and everyone to join us in our mission. Over time, that mission will inevitably change but it's important that we begin our journey on the same footing […] so that we may move forward, not only as a community, but as an anti-fragile digital warband.”

Since launching NFTX, the project has taken off at a velocity beyond my wildest dreams. My personal experience as a founder has been a rollercoaster of elation, exhaustion, stress, pride, regret, hope, and love. There are so many things I wish I had done differently looking back (and which I continue to struggle with daily), but I also don’t know how I got so lucky in the quality of team members that now surround me—so, for that, I am very fortunate and optimistic.

I think one of the hardest things about creating a DeFi protocol is deciding on tokenomics, as they tend to have downstream consequences on almost every aspect of a project. The issue of tokenomics is also made more difficult by virtue of the crypto space being part ethos-driven and part profits-driven (unlike TradFi which tends to price projects purely on potential profits). Over the past few months, I have encouraged an increasingly profits-driven organizational culture. I won’t make excuses, but I believe this is an easy trap for young founders to fall into as larger investors come onboard and expect profits to be the top priority. 

I did not start NFTX to maximize personal wealth. I started it to earn enough wealth to enable me to build cool stuff with great people while encouraging widespread adoption and financialization of NFTs. The reason I made it clear in the litepaper that we would optimize for a high NFTX token price is because that inevitably becomes the market driven goal so, in my opinion, it may as well get embraced from the start. However, I don’t believe that profitability is the only way of achieving a high token price, especially during the early days of a project.

Some of the most successful DeFi projects have begun with little-to-no emphasis on profitability. YFI is a prime example of a token that has exploded in value over the last year while beginning its life being described by Andre as basically a social token for people to rally around and support the construction of exciting DeFi products. Another example is UNI which, although has the promise of future profits, still does not extract any rent from its users, and began its life (version 1) focussed entirely on ecosystem utility. 

One of the many internal debates we have been having regarding our v2 tokenomics is whether to encourage (or even force) pairing NFT liquidity (on Sushiswap) with $ETH or with $NFTX. There is some nuance because of how version 1 works, but basically the trade-off boils down to:

  • $ETH: more liquidity, less friction, less financial risk for LPs, likely more adoption

  • $NFTX: more dao liquidity available, higher $NFTX token demand, possibility of becoming an “NFT reserve asset”

It’s quite similar to the same trade-off between Uniswap v1 and Bancor v1, and most of us remember how that ended. But there have since been a number of projects which have succeeded at using their own token as a reserve asset (like Synthetix, Thorchain and Bancor v2). 

This is just one of the many debates we have been having, and I mainly bring it up to illustrate how fundamental and difficult tokenomics can be, and how the decisions often depend heavily on an organization’s mission and values. 

In many ways, NFTX version 2 is a recreation of version 1, but just done better. In terms of protocol implementation it will be somewhat of a fresh start, and in that spirit I (personally) feel like a fresh start is also overdue for the organizational identity—or, at least, the small role I play in defining it. 

So, to the question of where on the spectrum (between ethos-driven and profits-driven development) NFTX lies... I will, henceforth, be making an effort to guide the project to the left of the middle, i.e. more heavily towards ethos-driven development. I want NFTX to be about making dope products that have the potential to be profitable (for the dao) but not optimize for profits directly. This is a decision I arrived at personally, but which I also queried team members on privately and they all seemed to be in favor of basically across the board. 

Also—for the record—this post is by no means an official NFTX statement, and I’m very much hoping I don’t get a bonk on the head from Chop when I wake up for sending out newsletters without consulting. I just wanted to put my thoughts to paper and make them public, on a personal level.

Currently, it looks like we will be launching v2 with ETH as the reserve asset and will be implementing a passive migration from v1 (similar to Uniswap migrations). It also looks like we will be going with a 10% target redemption fee, of which 100% will be given to staking LPs (i.e. the NFTX dao will not be taking a cut or seeking any profits at this point in time). 

Building version 2 has taken longer than anticipated, which (I think) is basically always the case with tech projects. So I do want us to stay focussed on shipping and, to that end, I will encourage that medium-to-high level decisions continue to get hashed out by myself, Chop, Nick, and Kiwi,—but, we also plan on making such channels publicly read-only in Discord to increase transparency and empower community members to ask questions and make criticisms in the general chat. 

One last thing I will touch on is governance, which I now see as an onion with many layers. Actual protocol governance (e.g. contract upgrades and treasury management) all happen on-chain and require 24hr token weighted voting and > 80% relative support. But day-to-day governance ends up being more organic (and “messy”) as we actually talk through how to progress on protocol and product development. So, on one hand, we are like a big bureaucracy when you zoom out but, on the other, like a lean startup when you zoom in. 

As “founder” I’ll likely always have some added influence over NFTX decision making. So I basically see my role as taking it upon myself to get a sense of what others are thinking but also to weigh-in personally based on what I want for the project, and to then drive that vision into reality. This is different from how other founders might approach their role by aiming to implement exactly what the community wants. Everyone has their edge, and I do best when I’m pushing my own opinions forward, but at the end of the day I’m just a token holder like everyone else, so the community can (and should) feel free to disagree strongly with my opinions, petition we do things differently, etc. 

Sooo...  in conclusion… 

  • I do not believe profitability is the only way to bootstrap token value.

  • NFTX token price is so much higher than I would have hoped for six months ago.

  • In hindsight, I regret guiding the culture towards B2B use-cases and optimizing for profits—this was not my goal when I set out.

  • The NFTX core team appears to be onboard with being more of an ethos-centric project than a profits-centric project. I am personally onboard with this as well.

  • We will likely be implementing a more transparent discord setup with public read-only channels for team to discuss work, and where most decisions will be directed in a top-down fashion, but this setup will allow everyone to see what’s being said so that community members can play a more active role in critiquing decisions, presenting alternatives, and generally adding value to NFTX.

Wish I had some epic final statement to finish off on.. But mostly just wanted to send this out because I know a lot of people have faith in the project but have also struggled with the direction we’ve been drifting the past couple months. So this is me setting the record straight that I plan on recalibrating that direction going forward.

I’ll probably send out more thought pieces like this from time to time—but not tooo many, after all I’m just some guy fumbling his way through life and trying to learn a thing or two along the wei :P