FWA Is Rebuilding the NFT Market

Transcript

bankloation. I'm here with Adam. He goes by Rhynotic on Twitter. He's a creator of FWA. That's fake world assets on Ethereum. Adam, welcome to the show. Awesome. Thank you for having me. I'm excited to be on >> and I'm bringing him out of retirement. We also got Eric Connor. Eric, it's been a while. Good to have you back, my man. >> Hey, David. Good to be back. It's been too long. Eric, I'm tapping you in on this conversation because I know that you are a FWA enthusiast, so I think it'd be pretty cool to to have you uh on the show here. Also, energy is up in the crypto markets and so we're doing more conversations. Adam, tell me about fake world assets.

>> Yeah. Um, so for anyone who's listening doesn't know, it is a NFT purchasing protocol where basically there is a pool of assets that are priced by the depositors and they are backed by a certain amount of ETH and then anyone can come in and purchase something randomly from the pool and if they like it, they can keep it. If they don't like it, they can sell it back into 80 I think it's 90% of the depositor's bid and it's permissionless, decentralized, will go on forever. Uh there's some parameters I can change, but the goal is to try to get as hands off as possible.

Um the random numbers are pulled by chain link. Um it's kind of standard for anyone who's listening, but it's great. It's been going for about a month, month and a half. Um and I work at Token Works. Token Works is a onchain financialized studio where we make a project a month. Although when a project takes off like this one, we kind of run with it and work on it as long as it feasibly makes sense. And so um it's kind of where we are now. >> Talk to me just about the broad philosophy about like why you think FWA is cool, why it has legs, why it's captivated people's attention, why it's been successful, like what's the overall idea?

>> Yeah, I mean I think people love NFTTS. I know it's kind of a hot topic. Some people in ETH hate them, but um I've been an NFT maxi for for years. It's the main thing that keeps me interested. And so, uh, collectibles, we've seen Pokemon cards, um, especially in the last like couple years with, um, like Leoooos and whatnot, like people like getting a random asset. Like you like getting something, but um, that just kind of makes sense. And digital assets make more sense than that. Like a lot of these sites like Collector Crypt, Bezy, Courtyard, they're great. Teams are awesome. Huge inspiration. But at the end, you kind of end up with this physical asset that if you want to get it delivered, it takes two weeks and

it's authenticated and kind of all these things are sold by NFTs. And so like if there's digital assets that you want to keep, kind of makes sense to have it in this form. And um some people are saying it's kind of the evolution of like an openc type marketplace. Um we'll see. It's kind of still a little early to tell. Um, regardless, it's been really successful and fun and people really enjoy it. >> So, the consumer behavior that we're going for is like the whole gotcha thing. So, like you buy a Pokemon card pack, you get a handful of Pokemon's cards, one of them is valuable.

Sometimes one of them is very, very valuable. And that's kind of like the dopamine hit that people come back for. We're kind of rep replicating that consumer behavior with FWA. So you come to FWA and you like buy like like a pack or is it you just buy one NFT? >> You can buy multiple one. >> You can buy multiple. Sure. But then like you don't really know what you get and that's kind of the fun. That's that's that's the the fun speculative gaming aspect to it. Correct. >> Yes. And there are a lot of restrictions and >> you know because it's fully on chain so we use like a it's called um um a Fenwick tree to like keep track of all of the the positions and the odds of what you're going to get. And so we are kind of restricted in that sense. And

that was kind of part of the fun of building it is like what can how do we like work with these constraints to make something that people enjoy and still works. Um it's kind of resulting in what we have now. But >> can we just like pop open the hood just to understand this a little bit better about like how does an NFT come into the FWA system? ETH also needs to come into the FWA system. Not all of these NFTts are valued equally. Some are valued more than others. like some are incredibly valued. How does the system h how does just like mechanically how does all of that work?

>> Yeah. So, uh I mean part of my inspiration was like a unis swap v2 pool. And so for people who don't know what that is like when you add liquidity to a unis swap v2 pool you have to basically say I have this amount of asset and I have this amount of ETH and we're going to deposit and get LP tokens. And so you're kind of setting the value there. Um, and then obviously if you know if your asset rips there's like a permanent loss and if ETH goes up you make more whatever. Um, so kind of setting the price by backing just made a ton of sense for me and it's also part of that constraints that I mentioned earlier like we don't really know the prices of these NFTs. So, we don't know the price of a board ape or a punk or um

a 10,000 tokens NFT and that's because a lot of these marketplaces aren't on chain and so there's no way for to query OpenC easily and be like what's the price of this? There are some options. There's like NFTx that is like fractionalizing it. We could try to get a price but for the most part we don't know the price of these. And so it makes sense for someone to say this is the price and to prove that I'm going to back it by that amount of money. And so that's kind of um both a constraint and has turned into like a feature. And a big thing of these kind of uh Pokemon card sites like Collector Crypt is this buyback. And so they are willing to buy it back for a certain amount. And I think that also incentivizes people to participate because they know no matter

what they don't have to ship it. They don't have to get it delivered. They can just take back uh the money and they still kind of um even if they don't like the card. And so it user behavior. What is the incentive for somebody with an NFT to come and seed the asset base in the first place? Like why I've got an NFT. Why would why would I take it to FWA? >> And so and and to be clear like a lot of this is based on odds. Like there's a chance you deposit and someone purchases your NFT first first purchase and you lose your money. That's kind of like the pitch is um it happens. But on average as you if you continually deposit NFTTS like you are getting paid out what you list them at if you are

pricing them fairly. It was kind of the initial pitch and I think it it's still playing out but we're seeing people price NFTTS a little differently than I'd expect. But, you know, if you put in, let's say, um, a board ape and it's worth, there's an 80th bid on OpenC, so it's worth 80, and you come in and you deposit it for 80, you're going to, every time someone purchases from the pool, you're going to get a small amount of that. So, if you're um 1/100th of the NFTs in the pool, you're going to get 1/100th of every purchase. And that'll acrew over time. And on average, because the price to pull is the average of all of the um NFTs in the pool, you will earn the amount of ETH that you paired it with. And then when someone happens

to purchase your NFT, they will decide, do I want the NFT? Do I want the ETH backing? Do I want to sell it back to them? But if they do that, if it's priced perfectly, they'll take the NFT because there is a 10% haircut. Um and so that was kind of like how I planned it out as. But I think it's a pretty interesting way to sell your NFTs when there's very little liquidity that we're we're seeing. Um, also there's no reason you have to keep your NFT in the pool the whole time. Let's say you want to deposit it. Um, some ETH has acred, you're ready to pull it out. you can pull it out as long as the pool is not too hot, meaning that um there's too many purchases, which was a big issue in the beginning, not so much of an issue

now as it slowed down, but that's to keep the integrity of the pool and just like boring onchain stuff. And so um and also for the initial twoe period, there was um emissions of the token. So people were incentivized to deposit because of that and kind of built this network. Um one thing that interested a lot of people was how we launched the token. And so there was you actually couldn't buy the token for the first two weeks. The only way was by participating which I found super novel and interesting and I think a lot of people did too. Um and so that kind of had a lot of volume as a result. Now we're in this more healthy period where like obviously purchases are down. It's less hyped but we're still seeing activity and as a depositor like I mean the um the NFT yield is

still still quite like quite good. But again, you can hit that uh like the the turkey meme where it's like day 10,000 and then so some people are making money, some people are losing money, but it's still kind of like an unsolved game and some people are having fun doing it. But >> I think that's the mechanics of the protocol that we have gotten like pretty well thoroughly done. So, let me turn to like Eric here and just ask Eric. Eric, you are an FWA enthusiast. Why? What do you like about it? Why why are you so thrilled about FWA? I think first and foremost most fun I've had on chain in in years probably since the original NFT wave. I mean I think everybody knows I've been an NFT maxi for a while been sporting a punk for a while. Um

Adam made a good point. It was one I was going to make as well. There's a lot of inefficiencies in the NFT marketplaces. So, I think that's one of the biggest things people don't realize why there's been such a long bare market in NFTTS is like so many collections essentially went to zero because you can't even sell them, right? There's not even people looking for bids on the book of like OpenC and stuff. So with FWA, you at any point you can put it any NFT you have. Well, not any NFC, there's whitelisted collections. But most NFT collections that have any value, you can put out there and potentially get a bid on it if someone lands on it and takes it at any point. Um, why did it capture me though at first? Um, just a novel idea, something to finally do on chain. I

mean, DeFi is great and is everywhere on Ethereum, but it's relatively boring at the end of the day. I think, you know, it kind of caught the Gosha trend at a perfect point. Um, I'm sure a lot of people are aware, but on Ethereum and other chains, the Pokemon card thing's going crazy, right? You spend for 100 bucks, you pull a random card. Um, and that was going big at the time. And just bringing it to NFTTS that takes a trust layer out as well, right? Um, there are some like real world assets. I'm sure we'll get into at a point here, like Pokemon cards that are on FWA now. Um, but just I had a bunch of just like I had considered dusted NFTts at this point. even things that are pretty good like mi bits and um you know doodles that were once at a point of course I

bet you know multiple ETH each that are hard to even get rid of these days and I was able to put them out there and farm and you know earn FWA and still have out them out there now earning um you know pack ripping fees but and then I would also say the coolest thing is like to me FWA is like a protocol people can build on top of like I've personally built something called Gasha Battles which um like pits five people's pulls against each other and then they can whoever gets the biggest pull takes all five NFTts and there's been a ton of stuff built on top of this. There's been like mega rip where people pull a bunch of eat together and after like seven days or whatever it is, they rip like a 100 packs and I'll split the pool there.

There's just a lot of cool things that can be built on top of the base FW layer itself. So, I think it's bigger than just, you know, going on FWA. Fun and ripping a pack. I think we're going to see a lot of cool innovation. Like to me, this is where NFTs are going to be bought and sold. This is where NFTs are going to be launched. I'm sure Adam wants to talk about Flare launch as well. Um, and yeah, it's just like it's the first exciting thing I've personally seen on mainet in a while that's not just DeFi, right? So, I guess that's why it's kind of just caught my attention. >> Self- custody one, but it still has a usability problem. A seed phrase on paper is still a single point of failure. Phones get lost, devices break, backups disappear. Bit key is a

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Near.com is simply the best way to be onchain and be in control. get 20% of your trading fees back using the bank list link in the show notes, not investment advice. So FWA is both a like a consumer has has a consumer relationship. I can go to FWA and do the thing. I can go buy the packs, but Eric, you're also positioning it as like this is just like a liquidity infrastructure for NFTTS as well. This is like a building block for something bigger. >> Yeah, for sure. I mean because if you think about it like say I'm say I'm sitting on a few mi bits maybe one me has sold in the last month on openc or something like I can put five out there I can back them with the floor price.3 ETH or whatever if someone lands on it they might decide just to take it that

person maybe was never going to buy a mi bit right this gets into the interesting thing and Adam hit on this a little bit like how do you price these things I think generally on FWA we're seeing NFTTS back by less than what they're kind of going fair value on openc because I people want to sell them. Like people would rather than take the NFT than take the ETH. At least a lot of people. Although that's not fully fair because like the top NFT on FWA right now is a punk back with 300 ETH, which it is a top tier punk. It's a hoodie with a smile. Very clean. Like it's probably around that value. Um but if that gets pulled, someone has to pick. Do they keep the punk or do they keep the ETH?

they keep the they keep the E. That person who put the punk out there has to reby their pump essentially at 300 E. So you have to be very smart about your your pricing. Now since that's the rarest one, the lowest odds of being pulled. It probably should be a long time till that's pulled and I like how the protocol works. They should earn that back in fees by the time it's pulled. But we have seen someone put a punk out there and it got pulled on the ball like early on, right? So, it's just it truly is just kind of, you know, like like Adam said, it over time it all kind of evens out. There's winners and losers, but um you are taking a risk by putting stuff out there and at any point you could spin for point I think it's 08

E or something right now to spin. You could spin and and you could pull Punk. So, um it's cool. There's there's Pokemon there's a Pokemon card out there that's backed by like 20 E or something like that. Um, and I think this this is a topic we should just have at some point in this podcast, but um, you know, these these protocols like um, Collector who is who are custoing and construing these Pokemon cards and wrapping them, putting them on chain, I think we're going to see a proliferation of ironically real world assets on fake world assets on fake world, >> right? Which introduces a trust layer of course. Um I'm curious of Adam's thoughts on this if if at some point you know FWA would even think about custodianing or anything like that insuring. But um you know I I think

we're going to see like Rolex watches on this thing. I think potentially someone could put a house deed out there like anything that's tokenized to go on here. So that's why I think long term it's super cool. >> Yeah. Adam, how do you see like the growth vectors of FWA uh ahead for it? Or are you kind of just like hands off like this is a mechanism, we've built it. Uh maybe there's some, you know, tweaking and perfecting to do, but other than that, like you're gonna just like kind of set it and let it see what see what happens. >> I mean, obviously long-term goal is to be more hands-off, but right now is like the time to really be working on it. Um and we're going to keep adding new features, keep tweaking it. Uh I think Eric touched on the Flare launch

mechanism. Basically, all the NFTs we're seeing in the pool currently are NFTs that have existed already that have been around for years. just maybe they launched in the last year like if you're lucky but having new launches deployed into the pool I think is really interesting and incentivizes people to participate and there's a chance where you know a lot of these mint kind of phases for previous NFTs it's like a one day thing it's a one week thing max like there's a chance that someone launches a new collection through swear and it's there for a while and like you know also I think Quit mentioned on this and um he did a podcast but when you're minting a say there's a Isuki, you know, and this is the Isuki launch day and you purchase if you get a common Isuki that's like

not it's not a fun experience for you. You're you're shooting for that rare the rare golden ISUKI. Whereas here, if you get an Isuki at all, you're very happy. You know, if you pull an Isuki, like that's an awesome experience. You've gotten what you wanted. And so that kind of skews the perception as well. Like you're now excited to get the common um of the collection. and we'll see how it actually plays out when like collections start launching it. They maybe I'm completely wrong. But I think that will be pretty interesting. Um I'm building it so anything can be put in the pool. That's kind of why the backing can be as people call it like wrong, you know, having like 50 E of a on a 10,000 tokens NFT is cuz I don't really we don't know the price of these assets. Like if

someone is willing to back it by that and that's what they say it is, like it's hellish to try to figure out the price of a punk. And if you want to say, you know, if if we made it so you could only and say punks were 30 ETH and we're like you can only back punks by 30 ETH, no one's going to put in a hoodie, no one's going to put in an ape. No one's going to put an alien. And I think that's a bad decision. And so, uh, it's kind of the trade-off in that sense. We're still trying to think about how to price things more fairly. Like maybe there's a V2 where we do that, but for now, um, it's kind of just fair game.

But I think it'd be really cool to have more real world assets. Like we've already added these Pokemon cards. Um, we've there's no reason we couldn't add anything else that's tokenized that's a real world asset. Um, I will not be the one custodying them. I will never do that. I hate that idea. Uh, I'll leave that to the professionals. Like collector crypt is extremely talented and been doing it for so long. Hellish. That's why I'm sticking with fake assets. Like I want NFTts are so easy. you can preview own it. Um, but if there's demand and there's a better custodian than me, like there's no reason we shouldn't add it. And so, um, we'll kind of see. That'd be really cool. Anything that's token, I mean, there's so many things that are coming

on chain now that kind of makes sense. I know it's probably stopped a little bit in the last like I remember four years ago everything was coming on chain and so um but I think we're kind of more mature now and we have more um the infrastructure is there and so there still is like the the risk like what happens if um you know I go back to like my my shoe flipping days of like StockX and what happens if someone lets a fake through and what happens if um you know StockX goes bust and then like they don't actually have the shoe anymore. Um, that is a risk you're taking as well, but that's kind of why I would not be the one custodying things. And so, um, but let's say, let's say that happens. Let's say there's a like that 20 ETH Charizard that's in there. I

think it's a Charizard. Let's say everyone, uh, it comes out and it's like, oh well, the Charizard is bust. Um, it's a fake Charizard. The purchaser would hopefully still take the ETH backing and that still exists. And so, the risk is kind of on the person that deposited the asset rather than the the person purchasing it from the protocol in the future. Again, maybe it doesn't play out like that, but that's kind of like worst case doomsday scenario is um how I could see it going. But so the the way I'm looking at it is like it is just one single global AMM for NFTs. Like you have NFTs, a splattering of NFTs on one side and you have ETH on the other. And so this is actually just like ether being used as money for a splattering of NFTTS. And the way that the NFTs come in

is that the individual prices it according to what they think is correct. Can we talk about that mechanism that like organic mechanism what are the penalties for an individual and and I don't mean like protocol ascribed penalties but like why does the pricing mechanism work? So say I'm say I'm the punk hoodie owner and I fairly value my punk at 300. Say say that is fair. you know, God comes and says, "Yes, correct. That's fair." Um, what are the penalties if I were to actually value it at 350 or what if I were to actually value it at 250? Like, why does the market guide things correctly towards the actual fair value? How does that actually work?

Yeah. So, you're incentivized to not underpric it because then it is more likely to be purchased. And so, there's no reason for you to put it 250 when it's three. Let's say even instead of God, there's a 300 standing ETH bid on crypto punks.app. Um, and so if you list it at 250, like there's a 99% any rational actor will decide to if they purchase it will take the NFT because they can sell it higher elsewhere. Um, so that's kind of already like solved in that sense. And if you overpric it too much, let's say you overpric it 350 or let's say double, you price it at 600 ETH, um it's harder to get purchased

from the protocol. But if it does get purchased, then the um the purchaser will most likely take the ETH because they're getting more money. Now, when it gets really close, let's say it's within 10%. And so if you back it by 300 ETH and it's worth 300 ETH and I purchase it and I'm a rational actor, I have to decide, do I want this NFT or do I want 300 ETH times 0.9 because there's a 10% haircut and that haircut currently all 100% goes to the protocol and buys the token. But you would get 270 ETH as a result. And so as long as the standing bid is within that 10% like you will

take the NFT. And so that's kind of the incentive to price it fairly. Um and we haven't seen that play out exactly but I think over time and with you know the correct incentives it will. But >> one other thing too um pricing it correctly. So pricing it as close as possible you earn the higher you back the more protocol fees you earn essentially. So like you are somewhat incentivized to price higher. um because you would get a higher cut of the protocol fees. >> Mhm. Well, the the um on the ETH side you get so let's say even if there's um you know it says there's 100 things in and it's $100 each item gets $1 regardless of the backing but there are um FWA incentives that go and are given

to um higher backed assets and it's like the square root of the price and so >> uh just in that sense but the reason you also back it accurately is because it lasts longer in the pool because the odds are higher or like you're less likely to get it pulled and so overall like you don't have to micromanage it as much and it's um all the incentives were there to try to get it to price uh perfectly and so there is still a world where maybe there's again a V2 pool that solves all these issues that if they're even considered issues um but pretty happy with how V1 is kind of still working after a month and like people are still playing with it. A big thing was like, oh, what happens after the, you know, we stop emitting tokens and

all of the supplies out there and the fact that there's any activity at all, like it's it's working and it's um it's still a pretty early for a hopefully multi-year protocol that will like if I get hit by a bus, god forbid that doesn't happen, but um it will still run and there's no there's no failure. The only I mean the single point of failure is probably chain link, you know, and that's a what is it$10 billion company right now and so >> yeah. Um, and that failure will just be you can't purchase and you can withdraw all your assets. And so, um, also, God forbid, >> a wind down, not a crash.

>> Exactly. But, knock on wood, if I get hit by a bus and chain link fails, um, it will wind down and so that's pretty good. Um, obviously, god forbid, there is some sort of exploit things on chain. Um, there already was an exploit in the first version that we had to pay back out because I didn't get it audited and then proved the concept, got it audited. We're now here. Um, things are wonderful. And so, um, can almost thank the exploer because, right, >> we found it day one instead of day 30. And so, um, yeah, >> and it's been cooking since. But >> what stops me from like going and looking at the whitelisted NFTts, finding the cheapest one, buying a cheap

one, putting it into the FWA pool, and valuing it astronomically high, like 10,000 ether. Like, why wouldn't I do that? I >> I mean, there's there's no reason you wouldn't. It's like that's we've we've seen that now. There's been this amount of me go at like 50. There's a punk at 300. Um, the risk you're taking though is if someone manages to purchase it from the protocol, you're buying it back from them at whatever you backed it with. And so, um, >> Oh, because you have to back it also with the actual real. Exactly. >> And so, if I put in a stupid NFT at $1,000 backing and then they sell it back to me, I pay I pay. You're basically You're basically buying it from them for $1,000. Yeah. And so, or,00,000 ETH. And then that ETH doesn't go to me.

It goes into the protocol. >> That ETH goes to them. Um, >> the winner gets the money. >> Oh, I see. and then the 10% haircut because like they don't get all of it because so but it's still worth it for them to take 90% of it that other 10% will buy the FWA token and go to the >> right so they so if I put in a stupid NFT at 1,000 ETH they see like oh I just got this stupid NFT but the protocol is offering to buy it back from me at like 900 ETH obviously I'm going to take that protocol collects uh 100 ETH and then me who deposited a thousand ETH and a stupid NFT I don't get my 1,000 ETH back, but I've been printing ETH fees along the way. And so, in theory, that

should have paid me out anyways. >> Yeah. And I do like to think of it more like the protocol not buying it from you, but you the depositor buying it back. I think it makes more sense. Um, but still like Yeah, exactly. And so, um, very cool. The thing I like about this is that to to Eric's point, like liquidity really dried up on in the NFT world and this is this is kind of like a universal buyer or just like a universal liquidity engine. So that you know if you if there's literally not an offer for you on OpenC, you can go to FWA and you can do something there. And it feels like if we had many more mechanisms like this, the NFT flywheel would have been a little bit more sticky and sustainable and like owners would have had just more

assurances that there would be liquidity or a way for them to get ETH uh some way or another. And so I do think that under the success conditions of FWA like this is really good for the NFT industry. >> I like to think so. I mean some people don't like it because obviously it's a little gified. I think we've seen gamifi just not play. They can just not play. I know. I think it's it's a net positive. I think it's bringing fun back to NFTs and that's what I've been trying for the last couple like years. You know, like people love Punk Strategy. Punk Strategy had a moment for punks. Some people felt like it was still a net negative for crypto punks in general. Um some people felt like it was I don't a lot of opinions. I disagree, but I see their points, you know, especially a lot of

the more art focused people. Um, you know, but I think if you're against the financialization of art, maybe ETH is not for you. I don't know. That's my personal opinion. I think like you're kind of in like financializing it the second you mint it and the second you sell it on OpenC. Um, >> but I I see everyone's kind of point. But um, >> sure, >> I think it's an good. >> I think where this gets really interesting too is the eventual idea of custom pools. So, um, Adam and the F2A team have been talking about this, but you could instead of just this one global pool, people could potentially launch their own pool. Say I want to say I'm a punk whale and I want to start to get rid of my 30 punks, right? I could just have my own Eric punk pool, put 30

punks out there, back them with what I think the value is. Now, the the spinning price obviously goes up and you I don't know, Adam can probably speak to the customization here, but the odds would vary on your punks, but people could have a chance every spin to just win a punk, right? And as a punkle holder who has a bunch that are just sitting there doing nothing. Um, you could be earning fees on them. Of course, you could be selling them. You could be buying back their punks. But I even saw something somebody tweet about how like Yugalabs is sitting all these punks like 10% that they could potentially they really could never sell cuz it would just look bad on the market but they could potentially be farming through FWA through maybe a custom pool something like that um on those punks.

So it starts to get really interesting when you talk about that um square launch which I think is going to be a superior NFT launching mechanism as well um versus just you know putting out there cash grab and first person to sweep the collection you know gets the most value out of it. Uh so there's a lot of stuff beyond just you know the current um generalized pool that I think is going to be really interesting for the NT space too. >> And I'm trying to keep the the general pool as um as simple as possible as well. like there's a and obviously I considered like oh like maybe we have separate main pools that have price band so you can only like put something in in this price range or maybe it's uh only Yugalabs kind of assets but I think having the main pool as simple as

possible benefits everyone building on top of it and so we're seeing like a Gotacha battles or um the mega rip one or swap they it's simple it's easy to build on this main pool everything kind of there's 6,000 assets it's a bunch of collections is perfect. And then having these custom pools kind of solves the problem of like if I want to only pull and purchase like a punk again that purchaser can go in look for pools that are only punks and kind of go from there. And that me the pricing mechanism would work in the main pool too. Like the way it's set up if if there's only punks in the pool like it will be an average of everything in there. And so the code was already audited. It's really simple to just kind of make it a little more um granular just with one

depositor. and we're still working. We'll probably be past the first Square launch. We'll probably be not past the user pool, custom user pools out yet, but um we'll see. And I'm still tweaking it. Like maybe it makes sense. We've had some people say like they don't want actually the buyback option for custom pools. And so maybe there's a world where Yuga wants to deposit all their punks. They don't want to back them by ETH, but the they're still incentivized because all the money goes to them because they're the only depositor. And so kind of still workshopping that. Um, I have a couple iterations done that I'm getting audited, but they still might be tweaked. And, um, we'll kind of see. We'll see what happens. I'm really excited about the custom pools because I think it kind of

solves a lot of the issues from the main one, especially if all the fees from the the user pools flow back to the main pool and flow back to the token. I think it still kind of all is like a nice little ecosystem. But >> yeah, talk about the the actual token. So, FWA token, it was created at Genesis, but you could not buy it. you could only get it by actually participating in FWA. Talk about the way that the token came into the world and and its role that it plays in the app. >> Yeah. And so some of the reasons of why you could only get it by participating. Um I've launched probably 16 projects over the last two years. Um and there's so many external factors that go into like why a project failed and a lot of them aren't my fault. Um I mean you

could say it's my fault as like a mechanism designer but not my fault. And like I remember I launched one of my first token works projects was Top Blaster and it was uh 6.9% of token fees on selling the fees would acrue. Whoever top blasted and paid the most on average for the tokens would get them all. Really cool idea. I liked it. The site looked great. One hour after launch, Trump launched and just nuked it to zero. It might have even been dead before, but like there was no chance of it coming back. Um one of the tokens got sniped and it was called Cabal. It was on mainet. you had to convince an AI agent to um let you sell. So you had to basically like beg publicly beg and it would tweet and it would show and it would take it would take into account

like oh like what's the mark like is is the token trending upwards? Is um are you in profit? How long have you held? And it's like how compelling is your argument? Um really cool and like I think like we launched that in a certain market and it could go crazy. instead it went to like $2 million market cap which was still great but uh someone sniped 25% managed to sell after like 40 attempts which is still really cool. It took 40 attempts to sell as a sniper. Um it took Project's dead and so like as a result of someone who didn't really care and I people will disagree with this but there is a um a fine line and like it's kind of blurry what a sniper is and what an early participant is. You know it's

like if I see a product early and I buy it and I um I'm a believer like am I a sniper? Am I like or am I just a a savvy crypto trader? Like I don't really know. And so, um, I usually don't like I'm not upset at snipers. Like, I think like if I didn't know what this project was and I can make money, like I would probably try to buy it early, too. And so, in that sense, I think it makes sense to try to distribute your token to people that actually know what it is and actually are participating. And so, the best way to do that is to not let them buy. Like, don't let people buying that aren't buying. And there's different ways we could have done it. We could I've seen some other products pop up that are like giving purchase allocation

to people that participate in a project but I think for us it just made sense of like oh you can cash out as ETH or you can cash out as FWA and that's like a way to buy it. We also want to incentivize activity and try to like um they call it like the obviously the cold start problem of like how do you get incent like bootstrap protocol to start like getting deposits and start getting people to play and the token kind of just like plugged all those little holes and so um Also, it's really fun to have a token. Like, I think if you're making a crypto project, like, why not try to make it as decentralized and work on its own? Like, that's the whole reason we're here. And so, we could have not had a token and there's a lot of platforms

that don't, but um I think having a token and acrewing value to it is like the crypto forward kind of way. And so, >> yeah. >> How does it actually acrue value? >> Um, and so again, a lot of this is on chain. this has been like from day one in the docs and um it's all dependent on usage like it's the token's probably worthless like who knows but um again the fees from the platform all go to buy FWA and distribute it to um various parties and so initially all the fees were going to work and now the fees 100% of the protocol fees so you know the 10% haircut uh there's a 1% fee on purchases and I think there might be a 1% fee when you take the NFT portion

Um, but all of those fees kind of go to buying FWA publicly and all it's one ETH per block. So it does it automatically again. If I get by a bus, it'll still work and distributes back into the system. And so right now we have it set. So I think 40% goes to purchasers that day and 30% goes to depositors that day and 30% is burned. And I I could be wrong on this number, but something like that. Okay. So there's a perpetual incentive to do the thing because there's always flows to buy FWA and that goes to like flowing to people depositing NFTTS or doing purchases but then 30% is also burned and so that's like put into the pocket of the value of

the token >> and again that is this is fully dependent on people participating in and anyway like people deciding that they want one of these NFTs and they're playing >> um it all goes away if people stop purchasing like and we're trying to like kind of >> align with that But there's obviously no no buybacks at the token if there's no volume. And so um just to like be drive that home. But um yeah, I think it's like the people that are holding the token kind of believe in the platform and believe that um this like protocol is is working and can work and um can work even better, you know, and like it's the fact that 100% fees go to buybacks.

They don't go to buy back and burn all of them, but um what initially was kind of emissions tokens getting like almost minted. They were fully like in the the claim contract, but I'd call it emissions was now replaced by tokens getting emitted from buybacks, like demand of the platform. Um it kind of all just like works. And so we'll um I'm still tweaking all these numbers, too. Like that's kind of where I want to be handsoff, but it's too early. like it's a month in and it's hard to say how everything kind of plays out and we're not really we're in like a little mini kind of bull. Hopefully it's this is the start of a bull if I had to you know praying. Um my my my ETH long that I made in May um right at 2330 finally I'

I've been whole underwater for so long has finally I made $3,000 on this trade after 3 months and I closed it immediately and I was down so much but I was like I actually like I held it long enough and I knew it could come back and so uh again hopefully this is the start of like >> a little the big one but um >> if that's the case like I think like having a decentralized kind of protocol like this that's user owned through the token and um >> it's um and it's been nice that like we've been able to experiment for the last two years. We've been launching tokens. Um we we run with the ones that make sense. We kill the ones that don't.

Some people like that, some people don't. We're very transparent with how it works. But um it's nice that like right before a a bull hopefully we have a big winner and like you know we we've been we already made a bunch of revenue in the first two weeks and we're now just kind of like heads down working on it and um we do make money off the the token trade. That's kind of the where token work still has revenue is um there's a 1% by sell tax that goes but that's configurable and like can go down as well. Um, but >> Erica brought up flare. Uh, what is this component of FWA? What what is flare?

>> Yeah. So, um, it's it's actually it's flare. Like, think of fair but with a W because it's like I'm going to meme it forever. Um, all the memes are are running great. It's funny. People call it I didn't call it flu. Like, I had an intention for that. People pronounce it as that. Um, which is funny. I think it's great. So, I kind of run with it. But anyway, Square launches are net new NFTts that are launched in through the platform. And so um we saw it first with uh Jack Butcher launched a collection called um rappers and so it was 80 NFTts. We backed them with 0.01. It was super low and basically launching NFT collections through the protocol. Um, and the reason I think this is interesting is kind of what I

said with the I think it was the Isuki example. Like if you get a common rapper, you're still happy. You're like, "Oh my god, I finally got the collection that I wanted." And so we're hoping that this helps distribution as well. And there's a lot of pro there's problems with artists launching in the pool that I think Flare solves. And so first you have to back it. You have to back it by ETH. And a lot of artists can't do that. Or they're like, "Ah, I kind of want to just release art. I don't want to have to put up ETH as well. Um, and then also just distribution in general, I think is like we saw in 2021 a lot of these gas wars, a lot of these like how do I get these NFTts not only in collector's hands, but also in like a fair public distribution.

And so I think by launching through Fware, what it does is it lets people come in and say, I want to back these NFTs, let's say there's a thousand of them, um, and they want to sell them at 0.05. 05 they say all right I want to I want these to launch through for 005 if is there anyone interested and then collectors can come in and say I will back you know 1 5 10 whatever the limit is um and they put up 005 ETH when it gets fully backed the collection is launched and all of those thousand NFTs get added to the pool with the backing and then let's say someone purchases one of these NFTs from the pool they can say I want the ETH or I want the NFT If they take the ETH, the NFT goes back

to the launch contract and goes to the person that backed it. And so they said, "I want it for 005." They got it for 005. They're happy. Or let's say, "Hey, I'm the purchaser. I like this new NFT. I am going to keep it." They keep it. Then the ETH that it was paired with goes back to the backer minus the 1% pool fee because you can't really avoid that. If we ever launch a new pool, we'll make it so it doesn't have that, but uh 99% of the money goes back to them. How does the artist make money? The artist makes money by the fees that it acrus while it was in the pool. And so, like I mentioned earlier, you could deposit an NFT, it gets purchased the first purchase and like you are out of luck. But with a large enough amount,

the variance kind of evens out. And so on average, let's say for a,000 NFTts at 0.05 would mint out at 50 ETH, the artist should get around 50 E in fees um all things considered. And so the artist gets the full amount that they were hoping for. Um the backers that backed it get a chance hopefully a higher chance of getting it if the purchaser doesn't take it um with a minimal risk. And then hopefully the distribution is really good because it goes to people who purchase from uh FWA. And so there's kind of a a bit of chance of like what I actually get and um there's a chance that someone purchases from there and decides to keep it is probably higher than the average thing in the pool. And so it kind of helps the ecosystem as

well. Um we'll see how it plays out. Again, the first one will probably launch by this podcast. This could be um hugely dunked on as a result, but um I think it's going to be pretty good. So the first one we're launching as well, which should be this weekend, is um it's a test collection. It'll be 111 NFTts backed by 0.25 ETH. Um and they'll act as almost like beta NFTs. You can activate them and get first access to deploy these custom user pools. And so we'll kind of like let people play that way. Um and they're little cute fuzzy things that we made. And so we'll price them at 0.25. I think the interest is there. Um after that the first like artist launch will be Sterling Crispen who has made this awesome save Ethereum

collection where the goal is to back up the you know block the early blocks of Ethereum onto Ethereum and kind of save all the data that's that exists. And it's kind of like a recursive thing. Um, and they're these onchain little cards that have people's faces that are in the space and um, they're pretty cool. Make a trading card game, too. I don't know. We'll see. I'm excited for both. Um, but we'll kind of see what happens. I think the goal is to get activity and get people purchasing. That's kind of the uh the key. Like if if no one again if no one's buying NFTs and no there's no one bidding on NFTs and no one's purchasing from FWA, it's bad. It's it's bad for the ecosystem. And so, um, incentivizing as much as we can for

people to collect and to purchase NFTs from the protocol, like that's the goal. And so, by doing these Flare launches, we're hopefully adding NFTs to the pool that people really like at prices that we've seen people are willing to back it at. And so, it should be a net positive for the whole ecosystem. But yeah, I think it eliminates a lot of the issues we saw in like 2021, 2022 with NFTts. I mean, what you saw was I mean, a lot of cash grabs, first of all, like instant sellouts and the artist just walking away, right? That this takes that away because the artist isn't getting paid to eat right away, right? Um they're getting fees off the backing of the collection essentially in the FWA pool.

Um and it might take a long time for like all these NFTts to sell, right? They're in the larger pool. Um people have to spend and land on them and all this stuff. Um, so and it also it's a better distribution like um for the artists. They're getting put in this larger pool. There's a lot of users using FWA that maybe didn't know about the artist that has a smaller like Discord community. Um there's less of like uh just rush to trying to snipe mints and get on white lists and all these things. So I you know it still requires the NFT market to be hot for any launch to do well or for NFTTS in general to sell out. Um, but I think it takes away a lot of the issues we saw with Mints in 2021, 2022, which led to I mean it was like an IPO like craze. It

led to too many scammers, too many cash grabs and eventually just drying up liquidity, right? And in the end that that led to the downfall of NFTTS for the last, you know, four years until hopefully now. Um, seem to be bouncing back a little bit. But >> I like the mechanisms. I'm interested to see how it'll play out. um you know and NFTTS at least Robin Hood NFTs right now seem pretty high um with FWA on Ethereum mainet things seem to be bouncing back so um getting a new launch mechanism could be a nice catalyst as well so definitely excited >> yeah launch mechanism I think these are these are definitely the right the right words it does it feels like one of the things that that pump did is it really homogenized and standardized the the token launch process and there was

somewhat of that in the NFT space but it was all opt in like the 10,000 NFT PFD, but really that was it. >> Um, >> and so what I what I like about this is like there's one central place to have a standardized launch for an NFT. And that like just orderly market structure makes things more scalable, more easy to reason about, more easy to think about. And I think that has like potential just just for just palatability and like an understanding in the market. And so like having an NFT launchpad where like liquidity is there no matter what that NFT is or what it does I think is actually pretty bullish. Bankless Nation, we've built something for you.

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I've been following him for years, and this year we started recording weekly podcast episodes. Each one, we get into his portfolio, what he's holding, the market structure, entry targets, fair market value of Bitcoin and Ether, and where we are in the cycle. There's new episodes that are released every Wednesday. They're 30 minutes, they're short, they're punchy. I think this crypto cycle is harder to navigate than most. So, let's do it together. Go subscribe to this podcast. Search the DeFi Report wherever you get your podcast YouTube Apple Spotify or find a link in the show notes. There's a new episode waiting for you. Now, >> Adam, what's next for FWA when we shut down this podcast here in a bit? Uh, what are you going to go work on? What's the shortterm road map?

>> Um, I just got the contract back for the launch stuff. So, I kind of got to come the auditor, go through, make the changes that um need to seemed pretty good, but uh they had some recommendations try to get that out. And then for our launch zero and then hopefully for our launch one hope be sterling. And then another thing I want to kind of work on and kind of take my hands off as much as possible is like the NFTs that are added to the main pool. I don't really love that I can pick and choose. Um and just like if FWA holders think 10,000 tokens are bad for the ecosystem like maybe there should be able to kind of take them out. And so brainstorming that a lot of it is just like sitting on the

changes more than actually doing them of like what feels right what um you know the mechanisms itself like how do we tweak these and that's kind of a hard um like if I sit down and really try to think about mechanisms like I can't but they'll kind of just like come to you and so um just kind of keep chugging along on that it's nice that um you know we have a pretty like solid short-term road map and so there's just always something to work on. Um, but you know, >> got to throw a podcast in here and there. >> Oh, we appreciate the podcasters appreciate you throwing a podcast in here.

>> What's interesting here is just all the building on top and the composability of Ethereum just showing be very beneficial. Like we're we're seeing a lot of I don't know if David you've seen Emblem Vault, but essentially this is a thing that you can wrap NFTts from other chains and bring over. So like that's how the Pokemon cards are coming over, right? Most of these are on Salana um or other chains. You can now wrap them, bring them over to Ethereum, put them in FWA. So I think this is driving a lot of innovation around composability across chains and real world assets. I mean I have a hot take that in like two years most of the most valuable assets on fake world assets are going to be real world assets. I just think like if you can if you can pitch to like quote unquote

normies I hate the term but if you can pitch to them hey like you know instead of oh you can get this NFT which maybe they don't they don't like its heard bad things about NFTs like everyone wants a punk I guess but other NFTs who knows where that's going um if you can pitch hey you can spend for 50 bucks and win a $100,000 Pokemon card or you can win a Rolex or you can win a title to a health like whatever things could get weird right I don't know uh I luxury good sellers like I don't know a Louis Vuitton or a Prada or something um could tokenize authenticity and we could see those go into insured vaults on cryp collect like and you could spin and uh you could win a Louis Vuitton bag like I don't know there's just so many things

that could happen with this um real world asset layer that are being tokenized and of course there's an element of trust there but as someone like collector crypt gets bigger um you know and more trustworthy like at the time hardens that stuff, right? But um yeah, all these like new things that are popping up like involve and and just you could bring them over to Ethereum and then you know, Adam, I'm sure you guys have I've talked to you a little bit about going to Robin Hood. I'm sure you guys have plans for other chains, too. But just be able to bring these assets from chain to chain because I think >> like I love mainet Ethereum, right? Like in my heart that's that's where I started and I still got a soft spot for it. But there's no denying like the UX of layer 2 chains is way better, right?

fees are cheaper, but like FWA had to launch on mainet Ethereum because that's where punks live. That's where highv value NFTts live. But if we slowly start talking about composibility layers and wrapping and vaults to bring over to other chains, that opens a whole another aspect here because now all of a sudden NFTs don't have to live on one chain. I could bring my punk over to Robin Hood. There's an FWA on Robin Hood. Um it's cheaper. It's, you know, it's quicker. Um all these things. So there's just like to me there's unlimited potential here um that go well beyond just you know spinning for NFTs that are on the mainet and I'm not against moving it to different chain like I mean we're obviously like I said mainet makes sense for the the the home of the token and the protocol because that's where the

NFTs are >> um but also I mean just like people are building on top of us like we built on top of um on chain link and on unis swap v4 and so anywhere there's like a a unis swap v4 actually I don't even think we need unis swap v4 on the chains that we deployed We'll need chain link um because you can just we can bridge the token over um with like layer zero. We've seen many people do that like um Adam from um maybe surf code repeat is his Twitter um but he launched friend pet like years ago and he's since bridged it over to mainet and has renamed the token on mainet and it's like a different project there but it's the same token which is pretty cool. um like there's no reason we couldn't bridge um FWA token to all these chains,

have a deployment there and benefit from the speed because that's probably the biggest thing too is it takes about a minute to purchase um because we're waiting for some chain link callbacks and some other stuff behind the scenes and so not the end of the world but uh could be way more fun to do it instantly and um it's definitely there. It'll although I'm pretty firm on it won't leave the EVM, you know, it's >> like I'm not a big I mean Salana's fine. I I trade on Salana. I participate in Salana. I like building on Ethereum. I think it just makes sense and so >> we'll probably die on that hill. But um yeah, I mean think about the crazy stuff. I mean you could if it's a Robin Hood say, you know, there's tokenized stocks there. I saw today someone's like making a Nvidia 3x long token on ch on

Robin Hood chain. You can move along wallets like you could have, you know, stocks inside of this theoretically, right? You could have a custom pool where you spin for, you know, the top prize is a thousand shares of Tesla and the bottom prize is one share of GME, right? And you're you're doing gosha spins for stocks, right? Or like there's leverage stock tokens in there. It's like when you start thinking about what could actually go in here, um it gets really interesting. >> Adam, thank you for building cool stuff on chain. Well, I think there's definitely a missing need for that uh these days and hopefully this is the first of many apps like this, bringing fun back to onchain stuff and thank you for being being the first.

>> Awesome. Thank you for participating everyone and you guys for being interested. Um well, we'll see what happens. So, it's pretty exciting so far. But >> Eric, it's good to talk to you my man. I think we'll probably talk a lot more now that energy is back into the cryptosphere. So, this is perhaps also the first of many. >> Definitely good to be back. Thanks, David. Bank of Nation. Y'all know the deal. Crypto is risky, but not risky enough. The institutions are here, so we're going even further west. This is the frontier. It's not for everyone, but we are glad you're with us on the bank's journey. Thanks a lot.