On Saturday, 9th January 2021, we welcomed Alex Gausman from NFTX.org into DEFINFTs Gems telegram chat. Alex Gausman is a 29 years old Canadian, he is also the founder and CEO of NFTX.org.
NFTX is a platform for making ERC20 tokens that are backed by NFT Collectibles. These tokens are called Funds, and (like all ERC20s) they are fungible and composable. With NFTX, it is possible to create and trade funds based on your favorite collectibles such as CryptoPunks, Axies, CryotiKitties and Avastars, right from a DEX like Uniswap.
In this post, we have compiled key questions and answers from the event.
Q1. Can you give a short pitch of NFTX.org?
A. Sure! In its most simple terms, NFTX is a platform that allows people to create NFT funds. Normally NFTs are traded individually, but this can be a hassle for big investors. For example, if a whale wants to make a bulk order of 200 Autoglyphs (a popular NFT), this is basically impossible. The reason it’s impossible is that all auto glyphs are unique, so there is no way to bundle them together in a way that is entirely fair and accurate. But what if we didn’t care about being 100% fair and accurate? What if we just wanted to be “close enough”… Well, that is what the NFT funds like AVASTR-BASIC are for. Right now the AVASTR-BASIC fund has over 400 Avastar NFTs in it. They are all unique and they are all worth about the same amount. If someone owns 20 AVASTR-BASIC that means they can ‘redeem’ 20 random Avastar NFTs from our site by burning their tokens.
So, let’s say Alice owns 10 AVASTR-BASIC and Bob owns 10 Avastar NFTs. What are the trade-offs? The downside for Alice is that she does not know which Avastars she will get if she redeems. All she knows is that she has at least 10 random Avastars. Bob, on the other hand, knows exactly which 10 NFTs are his. The benefit for Alice though is that she can move all of our AVASTR-BASIC tokens in a single transaction, or split them up until decimal fractions. It is also easier for Alice to sell her tokens if she decides to change investments because she can go to Uniswap and sell all at once instantly instead of putting for sale on OpenSea and waiting for a buyer. In essence, Alice can get the benefit of price exposure to NFTs without the hassle of individual purchases and lengthy wait times.
Q2. Do you have any past projects on record?
A. A couple of years ago I took some time off school to make an iPad app for children learning to read. It’s a good app, but it was not successful financially speaking so I went back to school to finish my degree. This is my first big crypto-related project! (Btw, here is the app if anyone is curious: https://www.maria.education/).
Q3. I guess you have been a fan of NFTs? How long have you been in crypto and NFTs?
A. So I got into crypto many others in 2017 when I made some money and then quickly lost it, haha. Since then I have stayed quite interested, especially as DeFi has taken off. It wasn’t really until earlier this year that I started following the NFT space more. I got quite into CryptoPunks and from there went down the rabbit hole so to speak.
Q4. Do you consider NFTX project a DEFI + NFT project? If yes, state why, and if no, also state why!
A. Yes. NFTX is a project that will help connect NFTs with DeFi. By allowing non-fungible tokens to get represented by fungible tokens, it will be possible for NFTs to be used in DeFi like other fungible assets. People in the DeFi space are also very interested in “TVL” which stands for total-locked-value and gets tracked by sites like DefiPulse.com and I am hopeful we can get a lot of value “locked up” — I believe we already have over a million dollars in NFTs stored in our smart contract.
Q5. What inspired NFTX and the idea of the NFT index fund!
A. I got really interested in CryptoPunks over the summer and am quite bullish on them so I bought more than one. Each time I bought one the price got pushed up a bit, but then I realized that when I sold the price would also get pushed back down. Essentially, they were not “liquid”. Since I was mostly buying the cheapest CryptoPunks available I thought it would be good if there was a tokenized fund to make it easier for investors.
I decided to make a fund called PUNK which would require locking up CryptoPunks in order to mint tokens. As I worked on this I realized it would be better to have a platform to make the process easier, and so I changed the project’s name from PunkFund to NFTX and modified the contracts so that they now can store information about multiple funds instead of just a single fund.
Q6. Can you give us a simpler text note of what NFTX is about? Give a very simple explanation ser? I understand you want to be the Uniswap and Balancer for NFTs, is this correct?
A. NFTX lets people turn NFTs into cryptocurrencies. So, if there is an NFT collection you like, let’s say it’s Ethermon NFTs, then you can come to NFTX and create an ETHERMON cryptocurrency token that represents the NFTs so that it can be traded on Uniswap. Every token can always get “burned” to give back one of the NFTs.
NFTs can be converted into ERC20s and traded on AMMs like Uniswap and Balancer!
And yes, in regard to Balancer and Uniswap. We are currently using both and will also likely be using Sushiswap in the future. But it’s still a topic of hot debate in our chat. The downside is that you don't know exactly which NFT you will get, but the benefit is getting to use Uniswap and other Dex’s and being able to trade in bulk.
Q7. Do you think NFTX will significantly improve the price appraisal and liquidity problems of NFTs? What other issues do you believe NFTX is solving?
A. Yes I think I think NFTX can help a lot at improving liquidity and price appraisal, but more so for some groups of NFTs than others. Currently, funds built on NFTX work best for NFT collections that have subsets of at least 10–20 similarly priced items worth 0.1 ETH or more. If items are worth less than 0.1 ETH, the gas costs can make it impractical to mint and burn, and if there are too few items or items all differ significantly in price, then it is difficult for the fund to work the way it is designed.
To summarize, I would say that NFTX funds are good for the most popular collectibles but are not (yet) applicable to most digital art. This is something we would like to pursue in the future though.
Q8. Any funding achievement and milestones you can share? Does the project have a platform token or tokens, and has NFTX offered some of these tokens for sale? Do you think there will be another token offering event for the platform token in the coming future?
A. Yes, so far we have 16 “D1 funds” on our homepage (nftx.org) and we also recently deployed our first D2 fund, PUNK, but have not yet added it to our homepage.
We are holding over 1000 NFTs in our smart contract already that are being used to “back” ERC20 fund tokens (the ones listed on our homepage). If anyone is curious to see these NFTs you can do so via the opensea interface at this link: https://opensea.io/accounts/0xAf93fCce0548D3124A5fC3045adAf1ddE4e8Bf7e
We also have a post about our new PUNK token on our forum here: https://forum.nftx.org/t/comments-on-punk/34
Q9. Governance an aspect you are considering, and in what way do you think you can introduce decentralized governance to the platform? How soon do you think governance will come along?
A. Yes governance is a big part of NFTX. Right now governance is achieved using Aragon where holders can vote on proposals that either pass or fail to depend on whether enough tokens are in support. All of our project’s actions happen via Aragon which allows us to manage treasury funds and deploy updates to the NFTX smart contracts. As the founder, I hold 10% of tokens which become slowly unlocked over 5 years, so I hope to use my tokens to guide the project in the right direction, but ultimately decisions will be up to the community and the stakeholders.
Right now governance happens at a high level using the NFTX token and applies to the entire platform, but I would also like to look into the possibility of some funds being able to govern themselves in the future.
Q10. Do you think Artists will welcome the idea of NFTX Index fund, and how do you intend to get this adopted in the NFT Art world?
A. I was worried that the NFT world may not like a DeFi-style project moving in on its territory, but I am pleased to say that everything has gone great so far and the NFT ecosystem seems to have really embraced NFTX as one of their own. As I may have mentioned earlier, we are focused more on collectibles currently than digital art, and I will admit that I am also more personally bullish on collectibles than digital art, but overall I think digital art has a lot of potentials and is growing rapidly.
Q11. Any roadmap you can share?
A. In terms of our upcoming roadmap, right now we will be most focused on deploying the remaining D2 fund pools (AXIE, KITTY, AVASTR, GLYPH, and JOY) and also upgrading our front-end. We are also in the process of bootstrapping our governance process. Most discussions happen in our Discord chat, but an increasing amount takes place on our forum.
Q12. What other NFTs sector do you find NFTX useful?
A. We are currently very focused on tokenized funds for NFT collectibles, but I do believe there is a LOT of opportunity in the NFT space and I would love to see NFTX branch out and expand as an organization over time to become a sort of umbrella project.
I think the NFT space is really just beginning and it’s hard to say what it will look like a year from now. For example, we may see more financial products being created as NFTs (like tokenized lease agreements), or we may see more “fun” stuff like gaming items or virtual “wearable’s” really taking off.
One thing that is cool about NFTX is that we can experiment with all these niches as they spring up and there’s a good chance we can provide value in the same way we plan to provide value to the collectibles niche (i.e. by allowing people to create funds).
Q13. Will projects with DEFI + NFT make the NFTX platform any better and why do you think so? Like storing DEFI tokens in NFTs?
For example, we had an AMA with Charged Particles @RobSecord recently!
A. It’s hard to say whether we will have ways to work with other DeFi+NFT projects, but I am hopeful. A funny story is actually that before I started working on NFTX I was actually working on a different project which is also DeFi+NFTs. What I wanted to do was make NFTs that can hold ERC20s (so kind of the reverse of NFTX, since NFTX funds, are about ERC20s holding NFTs). Anyway, I gave up on the project when I found out another team (ChargedParticles! by Rob, haha) was already working on it. In hindsight, I think I could have kept going because there are now multiple contenders (ElevatedArt by Steve is another project doing this now). But overall I’m pretty glad about how things turned out.
I am optimistic about ChargedParticles, Elevated Art, and other DeFi + NFT use cases that have not yet even been discovered. I also think the time now is particularly good for NFTX, and that was just lucky, to be honest. I am very fortunate with how enthusiastic people are and I am super excited about 2021. I think it will be a truly historic year for the NFT space!
Q14. The surprise question, any revenue model for the NFTX platform, I see you created this yourself for a start? What’s your share in it, saw some percentage figures on NFTX Twitter, NFTX token metrics? If not, can you share NFTX token metrics?
A. Right now there are no fees on NFTX, but it is possible for us to add mint and burn fees. Basically, the ERC20 tokens increase and decrease in supply as demand goes up and down, and we expect most of these fluctuations to be addressed by arbitrageurs that see an opportunity to make a profit. When these arbitrageurs mint or burn, we can take a slice of that spread via a fee without noticeably degrading the UX for investors. Unfortunately, that revenue model is not passive so it’s kind of difficult to reason about figures. I will admit we do not have a clear blueprint on where the majority of cash flows will come from but I am optimistic that if we can succeed in capturing a lot of TVL (total locked value) that we can find ways to monetize. For example, one idea is to use our NFT reserves to offer randomized packs and gift cards. Many projects in the past have not focused on achieving cash flows and that has always been a pet peeve of mine. NFTX is fortunate to be well funded, so our runway is good, but I absolutely want to pursue cash flows as a top priority for the project.
So 10% of tokens are vested for me and get unlocked slowly over five years. The nice thing about this is that even though the tokens are locked, I can still use them for voting on Aragon, and that way I can help guide the project. 60% of the tokens were distributed during the community raise to people who “donated” ETH and NFTs via our bounty program. 10% is being used for providing liquidity to the NFTX/ETH pool on Uniswap currently and the final 20% is being held for future expenses, rewards, and farming!
Q15. Nowadays security is very important for today’s users. Then, can you explain the security that your protocol uses? Is there insurance for investors?
A. Security is quite important but we also want to iterate quickly and these goals can conflict. I paid to have an audit conducted by LevelK before launching NFTX and it came back with a lot of recommendations but no critical vulnerabilities. I was eager to launch the project so I have not made their recommended changes and would like to incorporate them into version 2.
Our smart contracts use an “upgradeable proxy” which allows us to make changes, so we can make changes by voting and this upgrades the contract to a new version. I’ve already made a few changes since launching and these are all public, but I would also like to get another audit done (especially before liquidity mining) to be extra careful.
In the worst-case scenario, if NFTs were stolen, I think we would be able to negotiate with hackers to buy them back since it’s difficult to sell them all. But we will do everything to avoid that situation from coming about.
Q16. What is the size of the current development team?
A. I build everything all on my own. It took me about 5 months (I started learning solidity in June 2020) and the hardest part was probably just making all the decisions about tokenomics and financing myself. I decided that I would get 10% of the tokens over 5 years (so 2% a year), and I wanted enough to support myself to work full-time, so the community raises started at a project valuation of about $3M — which is the equivalent of $60k/year for me assuming it was successful. I had the raise increase as well though in case people were willing to pay more, and we ended up raising about $5M in ETH and NFTs.
I don’t think having lots of money and big teams is necessarily a good thing in all cases. I think we raise enough money and I don’t think more would really help. We are in the process of hiring an operations manager (Chop Chop) and he will be the second member of the core team. If I could guess I would say that the core team may have 4 or 5 people a year from now, but hopefully many more active community leaders that take interest and help support the project.
Q17. Where do you think the fund tokens can be best integrated? E.g. set protocol or piedao?
A. I will be excited to see our funds integrated with either (or both) Set protocol and Piedao, as well as other projects like DEXTF. Since our funds are permissionless there is a chance we may even see multiple protocols competing to create ecosystem-wide index funds that use our tokens.
In case people don’t know what I mean by that, right now we have index funds for individual NFT collections (like PUNK and GLYPH), but we don’t have a fund that combines them all into a single token. I would like to see a token like this made because I believe many people would like to have a single index fund token for the entire NFT space.
Q18. Why is PUNK so expensive?
A. Recall that PUNK is an index fund that combines 5 other punk funds. One of the funds it combines is the PUNK-ZOMBIE fund and that one is currently at a price of about 80 ETH, so this pushes the price of the PUNK index fund up. However, we are thinking of moving the decimal on this fund because this is already a common question people are confused about. So we might do a split to make each PUNK equal to 1000 PUNK so it’s clearer that it’s a fund price and not a direct NFT price. Still discussing this though.
To find out more about NFTX, please see:
Website — https://nftx.org
Blog — https://blog.nftx.org
Twitter — https://twitter.com/NFTX_
Discord — https://discord.gg/hytQVM5ZxR
Telegram — https://t.me/nftxofficial
Github — https://github.com/NFTX-project
NFTX token on dextools:
PUNK token on dextools:
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