BEES.Social has come up with another groud breaking innovation in the DeFi Crypto world. They call it the “asset backed NFT”, because that is exactly what it is. It’s an NFT backed by real assets and can be staked in a liquidity pool for yield farming. In this article from Vince Wicker he goes into great detail on this new development.
Asset-Backed NFTs Will Free Us All in DeFi
If Financial Engineers and Cryptocurrency Developers had a love child, they’d call it “Decentralized Finance.” Today that love-child (fondly called “DeFi”) has over $50 billion total locked-in value and is creating millions and millions more in value for those who operate in this sector of crypto.
The version of DeFi we see today is a result of accelerated technology evolutions, punctuated from time to time with amazingly intuitive adoption-focused revolutions. The entirety of this work has been done in the service of creating solid, workable, decentralized financial use cases.
BEES.Social is excited to announce another adoption-focused innovation to DeFi. This innovation should help projects, capital providers, and a brand-new class of DeFi consumers enjoys the impact of staking and yielding. This innovation is an implementation of Non-Fungible Tokens (“NFT”s).
In undertaking its research, the BEES.Social community understood that projects that set up liquidity pools and liquidity pool capital providers needed a way to make the long-term staking of capital appealing.
In deploying this concept with BEES.Social, projects can grow their liquidity while capital providers can move their capital around the DeFi landscape, virtually unencumbered by any limits. This is how it works.
NFT’s — The Short Take
NFTs hit the cryptocurrency market with a splash in 2020, first as unique one-of-a-kind collectibles and then as minor components of other DeFi projects. So while you can use the links provided for “NFT 101,” we will provide this background info for what will happen in BEES.Social.
When you own an NFT, you own an ERC-721 Ethereum token. With that type of token, any smart contract could identify the specific token you own. However, if one had ownership in a “regular token” (an ERC-20 token), one would not identify specific token ownership. Ownership, in this case, would be represented in “shares” or “percentage holding.”
An ERC-721 token is an NFT and, by definition, identifiable and “Non Fungible.” On the other hand, an ERC-20 token is “Fungible — it looks like any other token.
Impact on The “DeFi Stack”
Thee list of DeFi concepts we use in BEES.Social is called our “DeFi Stack.” What follows is a simple listing of those concepts and, ultimately, how BEES.Social will add NFTs to it.
In liquidity pools, traditionally, as capital is added to the pool, the smart contract running the pool returns a “claim ticket” to the liquidity
provider. This is usually called a Liquidity Pool Token. For Uniswap V2, this is a UNI-V2 token. In Balancer, it would be a BPT token. Both BPT and UNI-V2 tokens are ERC-20 Tokens.
Regardless, a liquidity provider can use their liquidity pool token – that represents their share of the liquidity pool — and use that as a “deposit ticket” for use in a yield-farming pool.
The yield-farming smart contract will have a feature that will allow the liquidity token holder to place their deposit ticket — a representation of the original capital placed in the liquidity pool — in this contract in a process called “staking.” In return for staking, tokens will be earned that will have some value to the liquidity providers.
In BEES.Social, liquidity pool providers who “stake” in our yielding pools, called “Hives,” can not only earn tokens called Seedz, they also have the ability to leverage (without collateral) their deposited capital to earn even more Seedz in another innovation from Bees.Social is called “Beast Mode.”
Staked liquidity providers participating in projects launched on BEES.Social agree to lock their “deposit” tickets for 12 months in return for Beast Mode leverage. This is done to compensate capital providers for the opportunity cost of not removing their capital to use elsewhere. Other yielding-focused projects use similar inducements to incentivize capital providers to retain their position in each project’s liquidity pools.
These inducements are done for one reason, the more liquidity a project can hold in their Automated Market Maker bonding curve, the more appealing it becomes to those who want to trade in their token.
A project with $300 million in liquidity and a $6 million market cap would mean that the holders in the token could trade in and out of the token without a material impact on the token’s price. Contrast this with a token with $755.00 in liquidity and an $8 million market cap (this is a real example), where even one trade of 1,000 tokens could destabilize the token’s price.
Liquidity matters. Long-term liquidity matters even more for the longevity of a token and the project it represents.
Wallets — not Tickets
Before this point in the “stack,” a liquidity provider had a “deposit ticket” or a “claim ticket” that signified their ownership. After staking, however, ownership of the liquidity provider’s stake was only tied to the digital wallet that initiated the staking transaction with the smart contract.
In short, the liquidity provider’s wallet and the records kept by the staking smart contract (the liquidity provider’s “total staked value”) are the sole method of tracking and claiming ownership of that staked value.
Lockup Aversion & Lost Liquidity: Regardless of “inducements,” there has always been an initial level of friction with capital providers when asked to lock up their capital for 12 months. These capital providers prefer their capital to be portable and useable for other purposes.
The only challenge with that is that — by current definition — portability would mean that one would have to unstake and remove their capital from the liquidity pool, reducing the overall appeal of the project “sponsoring” the liquidity pool.
“Un-See” The Private Key: Some do not mind the lockup. Those capital providers — many who know and trust each other well make the personal decision to sell their wallets — tied to the staked value — to another investor, OTC. While this is neat, it’s not clean.
- If we assume that the valuation of Beast Modes and leverage have been priced into the sale, one factor remains. The private keys of the digital wallet.
- Were you to set up a Metamask wallet and stake capital, the only way you could transfer that wallet to someone else would be to provide the wallet’s private keys.
- The reality is, however, at any time, the original owner of the wallet could use those private keys to re-open and liquidate the contents of that wallet. A private key something tough to “un-see;” making the concept of “trustless” in cryptocurrency null and void
Transforming Staked Capital Into an NFT
The innovation started by asking (and answering) these questions:
- What if there was a way — after a liquidity provider staked capital — that they receive a token that represented their staked value, including their earned and purchased leverage?
- What if there was a way for one to stake capital without the worry of a lockup that would impact capital portability — but never unstake their capital from a liquidity pool?
- What if there was a way that someone could stake capital multiple times using the same wallet take advantage of “earned leverage” each time?
- What if there was a way to stake capital and use a unique token associated with their staked value to stake in another pool, to use in another project, or to use as collateral for a loan?
In its new “Super Hives” launched in the Summer of 2021, BEES.Social will deliver an NFT to every liquidity provider who stakes capital in its staking pools (“Super Hives”) as part of the staking transaction. Here is an example of a Live BEES.Social Asseet Backed NFT on Open Sea
The NFT will be visible in a liquidity provider’s digital wallet (e.g., Metamask), and in NFT marketplaces such as OpenSea.io, transferrable (i.e., securely sold). These NFT represent the value of the liquidity provider’s staked value.
Answering Questions That Will Never Be Asked Again
Thes questionswill never have to be asked again because of this feature in the BEES.Social Super Hives:
- “Why do I need to lock up my capital for 12 months?”
- “Can I add capital again to my wallet and get the ‘Beast Mode’ bonus?”
- “Can I sell my stake without un-staking because I like the project?”
- “Can I reduce the amount of my stake without completely unstaking?”
- “What can I show to this other project to prove that I have $70k staked?”
Where Can I Get an NFT to Stake?
The first Super Hives were launched in production July 3, 2021.
The NFT Super Hive concept will be open-sourced and provided to the BEES.Social GitHub as soon as it is released.
This Article from Vince Wicker Was Originally Posted Here: https://medium.com/bees-social/asset-backed-nfts-4e09269b2d88