1155.tech - NFT Innovation on Canto
1155.tech - NFT Innovation on Canto
Long-form research reports published by the HFA Research Team. 100% Free.
All of our Canto coverage thus far (1st report, 2nd report) has been surrounding the RWA product suite being built out under the Neofinance moniker. Today we’ll be changing that up a little bit as we discuss 1155.tech, an NFT-focussed protocol which launched on the Canto blockchain just earlier this week.
Addressing the problem
NFTs in their traditional form have suffered from a few pertinent issues:
Royalties
Liquidity
Distribution
Thanks to the end of OpenSea dominance and the emergence of alternative NFT trading platforms like Blur and Sudoswap, royalties have become very easy to avoid and paying them is effectively voluntary at this point. Creators do try to enforce them softly via virtue signalling but this is far from optimal.
Equally, while Blur has improved liquidity for NFTs and they tend to be liquid during upswings, in quiet markets NFT illiquidity is still an issue which plagues collectors and active traders alike. In many cases, this can lead to a negative feedback loop whereby a holder wants to sell, can’t sell, complains to the project and becomes resentful when they can’t provide a solution → degrading the community the creator worked so hard to foster.
On a final note, free distribution is still a pain point for artists. While musicians have Spotify, streamers have Youtube and influencers have TikTok, artists do not have a dedicated platform for distribution and "real-life” activations tend to be very expensive and network-gated. While one could argue there are Web2 and Web3 platforms (e.g., SuperRare) which have attempted something similar, no clear category-defining winner has emerged thus far.
1155tech
1155tech is an Atrium owned and incubated project native to the Canto blockchain which seeks to solve some of the issues inherent to NFTs through the use of a bonding curve.
Using a mechanism reminiscent of that used by friend.tech, users can purchase keys using NOTE (Canto’s T-Bill backed unit of account). Each key represents a different art market (different NFT) whereby users can burn their key to mint the associated NFT. The process works in reverse too with the NFT holder burning their NFT to get their key back which they could then duly sell back to the bonding curve. The pricing curve being used here is linear where price = supply + 1 and keys are created and destroyed as they are bought or sold into the bonding curve. This means that the key/NFT supply is effectively infinite and only bounded by the marginal price a buyer is willing to pay.
This graphic shows the mechanism in a visual fashion (h/t Brian Morris):
The fee structure consists of a 9% platform fee divided as follows:
3% to the Creator - ensuring long term income
3% to Key Holders - aligning incentives
3% to Core Devs - to ensure the economic sustainability of the platform
With fees being shared between all parties and the revenue sharing logic being onchain and immutable, all parties are well aligned. Traders who seek to avoid royalties and trade their NFT elsewhere are sacrificing cashflows. Equally, by locking NOTE into the bonding curve while the key is being held, 1155tech ensures liquidity is always available should a holder wish to sell their NFT. The protocol effectively charges buyers/sellers for accessing liquidity. The protocol also includes a surcharge for utility whereby an additional fee is applied to mint and NFT and therefore be able to display/use it.
With the royalty and liquidity issues clearly addressed, the distribution question really depends on the traction they are able to generate. The team’s vision is that 1155tech will become a relevant platform for art distribution as collectors and traders will come to 1155tech to view their portfolio, check the activity feed and discover new art with the leaderboard establishing social validation for new work.
While we are only 1 day in, the traction thus far has been promising with over $134k NOTE volume traded so far:
1155tech seems like an elegant approach to solve some of the issues which NFTs have struggled with. While it is impossible to judge its success at this early juncture, what we can say is that it is good to see a Canto ecosystem taking form, an ecosystem which goes beyond the emissions-driven circlejerk we saw earlier this year. It is also worth mentioning that traction of products like 1155tech can be accretive to the Neofinance ecosystem as they provide exogenous demand for NOTE and guarantee a positive Net Interest Margin (NIM) for the Canto Lending Market (note that NIM = 0 if all outstanding NOTE is staked as cNOTE). On a final note, there are rumours of a 1155tech airdrop at some point down the road…
If you enjoyed and want to see more content like this, feel free to check out the Humble Farmer Army premium discord here.
You’ll get access to:
Weekly Premium Content
An Exclusive Community
DeFi Yield Strategies
Degen Farms & New Launches
DeFi Education & Analysis
And Real-Time DeFi Alerts
Humble Farmers Rejoice!