LIquidNFTs
LiqiudNFTs/ AMM: NFTs with Liquidity Pool Backing
LiquidNFTs represent a new paradigm in the world of NFTs by combining the unique characteristics of digital collectibles with the liquidity and stability of DeFi protocols. Through Fungily, these NFTs are not just static tokens but are dynamically backed by liquidity pools, creating an innovative hybrid between traditional NFTs and decentralized finance (DeFi). What makes up LiquidNFTs:
Liquidity Pool Backing: Each LiquidNFT is associated with a liquidity pool (LP), which provides a guaranteed floor price. When an NFT is minted through Fungily, a percentage of the minted NFTs is automatically added to the LP, ensuring that the NFTs are always backed by real value. This LP backing is what differentiates LiquidNFTs from traditional NFTs, offering inherent liquidity.
Floor Price Based on AMM Mechanics: LiquidNFTs derive their value from an Automated Market Maker (AMM) system. The AMM algorithm determines a floor price for the NFT, which acts as a baseline value in the marketplace. This ensures that NFTs will never be priced below a certain threshold, providing both creators and buyers with confidence in the asset’s value.
Market Trading with Real Liquidity: Once the liquidity pool is established, users can buy and sell LiquidNFTs on Fungily’s marketplace. The price of each NFT in the market can fluctuate based on the supply and demand within the liquidity pool, giving it the same flexibility as other DeFi assets. Additionally, these NFTs can be listed for sale above the floor price, allowing for market-driven value adjustments.
Royalties and Fees: Each transaction involving a LiquidNFT on Fungily includes a platform fee (2%) and a creator royalty, which is determined by the creator of the NFT. This ensures that creators can continue to earn passive income as their NFTs are traded. Furthermore, Fungily implements a nominal buyer fee (3%) on NFT purchases, along with a $3 minting fee for each newly minted LiquidNFT.
Creator Control: Fungily provides NFT creators with full control over their NFT's journey. From deciding the percentage of minted NFTs to be added to the liquidity pool to setting royalties and customizing the liquidity backing, creators can ensure their NFTs are both profitable and sustainable in the marketplace.
LiquidNFTs represent a revolutionary approach to NFT trading by integrating liquidity pools and AMM mechanics. This brings a new level of stability and liquidity to the NFT space, making LiquidNFTs an attractive option for both creators and buyers. With Fungily, NFTs are no longer just digital art—they’re dynamic, tradable assets backed by real financial infrastructure.
Fungily NFT Swap
The NFT Swap on Fungily is a core feature that allows users to buy and sell NFTs from the liquidity pool using an AMM (Automated Market Maker) mechanism. The concept is to provide a decentralized way for users to swap their NFTs with tokens and vice versa while maintaining liquidity and ensuring that prices adjust automatically based on market dynamics. The NFT swap on Fungily uses a constant product formula to facilitate these transactions. This section explains how the Fungily NFT swap works in more detail.
Fungily NFT Swap Mechanism
At its core, the Fungily NFT swap allows users to:
Buy an NFT from the liquidity pool by exchanging tokens.
Sell an NFT into the liquidity pool in exchange for tokens.
This swap mechanism relies on the constant product formula to ensure that the price of NFTs adjusts dynamically based on the number of NFTs and tokens in the pool. This ensures that the liquidity is maintained, and the price is set by the available supply of NFTs and tokens.
NFT Swap Process: Selling NFTs into the Pool
When a user sells an NFT into the liquidity pool, the number of NFTs in the pool increases, and the number of tokens in the pool decreases.
Process:
Initial state:
x₁NFTs in the pooly₁tokens in the poolConstant product
k = x₁ * y₁
Selling an NFT:
The user wants to sell 1 NFT. The number of NFTs in the pool increases by 1:
x₂ = x₁ + 1.To maintain the constant product, the number of tokens in the pool must decrease. The new number of tokens in the pool is
y₂ = k / x₂.
Tokens Received:
The user receives the tokens that are calculated by the difference between the old and new token amounts:
As the user sells more NFTs, the price of each subsequent NFT decreases because the supply of NFTs (
x) increases, driving the price down.
NFT Transferred:
The user transfers the NFT into the liquidity pool and receives the appropriate number of tokens
Platform Fees and Liquidity Provider
Fungily includes both platform fees and Liquidity Providers in the NFT swap process.
Platform Fee: Fungily charges a fee on each swap (buy/sell) transaction, which helps sustain the platform and its operations. For example, a 2% fee could be charged on each buy and sell transaction.
Liquidity Provider: Liquidity Provider can earn lp percentage from trades. This means that whenever an NFT is sold, the Liquidity Provider automatically receives a percentage of the sale price.
Example:
Platform Fee: 2% of the transaction value.
Liquidity Provider Fee: 1% of the transaction value.
Fungily NFT Swap Process
Buying an NFT: The user exchanges tokens for NFTs from the pool. The price of the NFT increases as more NFTs are bought and the NFT supply decreases.
Selling an NFT: The user exchanges NFTs for tokens and adds NFTs to the pool. The price of the NFT decreases as more NFTs are sold and the NFT supply increases.
Price Determination: The price of NFTs is dynamically set by the ratio of tokens to NFTs in the liquidity pool.
Fees and Royalties: Fungily charges platform fees and allows creators to set royalties on their NFTs.
Fungily NFT Swap mechanism provides a seamless and automated way for users to buy and sell NFTs directly from a liquidity pool using the constant product formula. The price of NFTs is determined by the available supply and demand in the pool, and the platform includes fees and royalties to incentivize both the platform’s sustainability and the creators.
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