NFT PERP: YOUR ONE-STOP SHOP FOR EVERYTHING NFTfi
There is no way to short NFTs at the moment. NFT traders can only buy low and hope to sell high (and ape holders don’t have a way to hedge their position).
The Catastrophic collapse that hit the entire crypto space following the FTX scandal was largely termed the ‘Contagion’ considering the spiral of the ripple effects it brought with it across the entire industry.
Where we had Bitcoin dipping to prices below the $16,000 mark for the first time since the post-COVID-19 traction garnered by the flagship cryptocurrency from a few years ago.
A daze so big, it had investors scampering in search of safe havens, scouting for the next best option to hedge their funds, and looking to take advantage of the next big thing to make up for the losses.
Even worst, leaving the morale of centralized crypto exchanges completely shattered!
As the closest variation to traditional crypto assets, NFTs started to gain more traction than they ever had.
And in no time, NFT finance — or NFTfi as popularly known — started to kick off to newer heights.
But one problem soon emerged; there was no way to hedge NFTs and being an Automated Market Maker on conventional NFTfi platforms is quite competitive.
Given Bluechip NFTs are pretty expensive, the issue of hedging your NFTs like you would a traditional crypto asset on a perpetual trading contract became a worry for conventional crypto traders.
WHY DO WE NEED AN NFT PERPETUAL TRADING PLATFORM?
With the credibility of these Centralized Exchanges, also known as CEXes, at an all-time low — given the trend of events in the space as at the time of writing this piece — it suffices to say that there has never been a greater need for DeFi perpetual exchanges than now.
Because DeFi — or decentralized finance — disrupted the traditional financial ecosystem with the advent of Automated Market Makers, it is only natural that a newer consensus mechanism for providing liquidity to the emerging decentralized ecosystem known as NTFfi will spring up… And vAMM is that tech.
More importantly, the extent of on-chain pricing that could be applicable without a trusted third party is highly underrated. Given that, it would be pretty amazing to have a platform that could provide some cool liquidity functionalities for on-chain valuation.
HOW DOES NFT PERP COME INTO PLAY?
Simply put, NFT Perp is a Non-Fungible Token Perpetual Trading hub that tracks the floor price of NFT collections and allows traders to go long or short on these Bluechip NFTs, with any amount in $ETH.
Just because you won’t be needing real NFTs to participate in perpetual trades on NFT Perp, traders on the platform are provided — for the first time ever — the opportunity to interact with an NFTfi hub entirely with traditional assets like ETH.
Blue chip NFTs like Bored Apes and CryptoPunks are far too expensive for the retail community to get involved.
- NFT Perp
This next-generation DeFi trading hub introduces a new paradigm as an extra layer of nesting to the already existing diversification of NFTfi from conventional DeFi exchange platforms, known as Virtual Automated Market Makers — or vAMM for short.
Why is NFT PERPS So Special?
About a year ago, Paradigm released a paper called Floor Perps that describes a kind of;
Synthetic NFT that tracks the floor price of a given project and can be minted by locking up NFTs from that project.
A few months later, a bunch of degens decided to take the ideas from that documentation to heart, and a few months after, NFT Perp became the brainchild of that thesis!
Now, back to NFT Perp and how this new way of providing liquidity to Non-Fungible token — or NFT — holders will help change the game for the better…
As a DeFi protocol and on-chain derivative with a bespoke price mechanism like a bonding curve on multiple levels, NFT Perp provides NFT holders access to liquidity and protection against fluctuations in the floor price without requiring them to give up ownership of their NFTs.
More interestingly, as an all-inclusive NFT perpetual futures trading platform, NFT Perp provides other market participants and non-holders of Bluechip NFTs with leveraged long and short exposure to the floor prices of these otherwise expensive NFT collections, just like it would to the actual owners of these NFTs.
The platform’s true floor price is defined as a tamper-proof NFT price oracle with robust statistics backed by trade from investors in a given NFT collection.
Hence, the protocol offers vAMM features that fuse together the decentralized modus operandi of traditional AMMs into a more innovative and less competitive ecosystem, while taking advantage of the virtuality of the space.
However, there are three things to keep in mind when dealing with this emerging DeFi ecosystem which includes a market where;
- no liquidity provider is needed.
- there is the absence of an order book.
- one trader’s gain is another trader’s loss.
THE NFT PERP DYNAMIC MODEL
There are four elements to the platform’s dynamic model that every established and prospective NFT holder might find interesting.
THE CONVERGENCE EVENTS
A convergence multiplier event is triggered when the price of a perpetual futures contract deviates from the oracle price of the underlying asset by more than 5% for more than the duration of a single finding round which is pegged at 8 hours.
This convergence multiplier effect which is introduced to match the execution price of the contract to that of the Oracle price, upon initiation, resets the virtual liquidity to the center of the bonding curve.
DYNAMIC K CONTRACTION/EXPANSION
Although, a little too complex, the dynamic constant contraction & expansion model is set in simply to allow the platform to handle varying levels of open interests with low slippage.
DYNAMIC FUNDING RATE
Just as traditional funding rate takes into consideration such metrics as the position size, contract mark price, and the Oracle price, funding rates on NFT Perp go another level deeper to focus on the total ratios between longs and shorts as well to better balance open interest.
FLUCTUATING LIMIT
This fluctuating limit is my personal favorite among the list of the platform’s features as it is a metric that sets a limit between +2% or -2% change in contract price per block, protects the protocol against manipulations via flash loan attacks and insurance fund draining during periods of high volatility.
It’s that simple!
Want to find out more about this innovative NFTfi hub for collectors, creators, and spectators alike?
Check out the links below.
Website | Discord | Twitter | Documentation | Blog
