#FIP77 Project New Wind

Governance
1

Authors

ChopChop (NFTX)

Caps (FloorDAO)

Marco (Merit Circle)

Summary

  • This is a proposal for a “merger” between NFTX and FloorDAO, in collaboration with Merit Circle. If approved, the result of the proposal would be a combination of the respective teams, products and treasuries of NFTX and FloorDAO (referred to as “Project New Wind”).

  • Project New Wind would have a governance token that the existing governance tokens for NFTX and FloorDAO would be exchangeable into (referred to as “New Token”).

  • As part of the merger, there would be a scheduled release of a novel NFT liquidity protocol, powered by Uniswap V4 and scaled by Base.

  • Relaunch of Floor V2 in the lead up to Project New Wind to seed initial liquidity pools with selected collections.

  • Governance of the New Token would be on-chain, with 20% of the total supply of the New Token being controlled by a smart contract that is subject to on-chain token holder governance.

  • An ownerless Cayman Islands foundation company structure will be incorporated to be adjacent to the DAO and to further the growth and development of Project New Wind, as well as ensure compliance.

  • Expected timeline for completion would be within Q3, in the scenario the proposal is approved without material changes.

  • An identical proposal is being made simultaneously on the governance forum of [NFTX/FloorDAO] and proceeding with the proposal is subject to approval by the token holders of both NFTX and FloorDAO.

Overview

This proposal seeks approval for a “merger” between the existing NFTX and FloorDAO projects, in collaboration with Merit Circle. This “merger” is intended to result in a new joint project that aims to become an NFT powerhouse. This will be achieved through bundling the forces of these complementary projects (hereafter referred to as “Project New Wind”, which will serve as a placeholder name until a rebrand is complete).

Project New Wind aims to combine the talent, products, and respective treasuries of FloorDAO and NFTX into one unified concept, with the assistance and collaboration of Merit Circle in a range of areas (i.e., marketing support, (re)branding, revised tokenomics, collaborations, offchain structuring and governance). With this integrated operation, we believe that Project New Wind would be well-positioned to lead a new era of NFTfi in the Ethereum ecosystem and promising scaling solutions.

Starting with the release of a novel NFT liquidity product scheduled to launch in Q3 of this year, the goal is to make Project New Wind the market leader in NFTfi infrastructure. We acknowledge the broad scope of these ambitions, but we strongly believe we can achieve these ambitions with the renewed strategy, synergies and connections we can unlock with this proposal.

In an effort to align the interests of all community members of both NFTX and FloorDAO, an identical proposal is currently live simultaneously on the governance forum of both NFTX and FloorDAO. As it’s key that both communities support the proposal, the process and goals discussed herein will be subject to the approval of this proposal by the respective token holders of each project. If for whatever reason this proposal is not approved by the token holders of both NFTX and FloorDAO, or if only the token holders of one project approve the proposal, the contemplated “merger” will not proceed unless the proposal is amended and thereafter approved by the token holders of both NFTX and FloorDAO.

Rationale

NFTX Background: In 2021, NFTX v1 was created by Alex Gausman (Gaus) with the vision to fractionalize NFT collections by pooling NFTs that shared traits. A basket of these fractionalized assets were used to create “NFT indices”. After launch, this concept had difficulties gaining traction because liquidity was thin and the understanding of these products in 2021 was scarce. With NFTX v2, a pivot was made into an NFT liquidity layer accompanied by a marketplace that allowed for buying, instant selling and the swapping of floor NFTs, making NFTX more user-friendly while maintaining the vision to solve liquidity issues in the space. NFTX v3, which has recently been launched, was developed to take advantage of Uniswap v3’s concentrated liquidity and price oracles (resulting in better integrations with other DeFi products like Wasabi and NFTPerp).

FloorDAO Background: FloorDAO was founded to solve the issue of coordinating deposits into NFTX. It was founded as a result of NFTX struggling to grow organically, because without 20+ items paired with ETH in a pool, the pools were not usable/yielding (spreads were too high). Most users could not afford to bootstrap a pool and impermanent loss was also a major issue. Earlier this year, FloorDAO announced a liquidity layer internally, an alternative implementation to NFTX v3 that unlocks mid-tier, rare and synthetic liquidity with greater incentives for LPs and drastically lower gas fees.

After lengthy discussions about the future of both projects between the teams at both ETHDenver 2024 and online, a strategy to create a joint project was formed. Throughout these discussions, leaders from Merit Circle shared their experiences on various fronts and offered to support our vision of unifying the two brands. By combining forces between NFTX and FloorDAO, with support from Merit Circle, the intention is to create the largest NFTfi project in the NFT ecosystem and dominate this vertical, in both on-chain metrics as well as brand awareness.

A brand new liquidity layer will be the first core product of this “merger”, which is intended to launch between Q3 and Q4 of this year. Subsequent products to grow liquidity are intended to be developed in parallel, starting off with an NFT launchpad and marketplace. Passing this proposal will also mean that [we/NFTX] will halt further development of NFTX v3.1 and [we/FloorDAO] will halt mainnet activity and relaunch Floor v2 on Base (and other chains in the future) to support Project New Wind’s liquidity coordination efforts. Moving forward, we would direct all resources to the development and support of the new projects’ new liquidity layer. NFTX v3 would be inherited by the merged product and would remain fully operational to keep current (and to-be-migrated) liquidity available for all aggregation market places that support Reservoir, such as Blur and Magic Eden.

Effect

Opportunity

  • By merging the NFTX and FloorDAO projects, and having hands-on support from Merit Circle to help launch Project New Wind, we believe that we’ll be able to build a best-in-class team with deep NFTfi experience to create and dominate the next era of NFTfi.

  • With FloorDAO’s current plans to build an alternative liquidity layer for NFTs utilizing Uniswap V4, it makes sense to combine forces on creating the ultimate liquidity layer and subsequent products rather than competing with each other (which would lead to further fragmentation of liquidity in NFTfi).

  • Working together with Merit Circle means we’ll have direct access to the web3 gaming projects they work with (GameFi), a vertical that the existing team members have been very excited about and want to explore further as liquidity providers in the NFT space.

  • Merit Circle brings a lot of expertise to the launch of Project New Wind, specifically in marketing, go-to market strategies, branding, tokenomics, offchain structuring and governance. A good example of this is the release of Sophon, which came to fruition in a similar manner by collaborating with Merit Circle. Our main goal of this proposal is to leverage the elements that made Sophon successful and add other elements that will better suit the NFTfi market.

Risks

  • Combining teams might cause friction. However, the NFTX and FloorDAO teams have worked closely together before, and Merit Circle will have a supporting role only, which has demonstrated to be a success for other projects it has assisted.

  • A change in tokenomics and structure may have a (short-term) impact on the behavior of FLOOR and NFTX governance tokens.

  • While we aim to implement simple on-chain governance from the beginning with Project New Wind, the execution period for setting up the merger and the corresponding reorganization of teams requires a variety of offchain actions that are more easily facilitated without having to first implement comprehensive on-chain governance (which we aim to upgrade to later in Phase 2). The intention is to first complete Phase 1 of the merger between NFTX and FloorDAO and thereafter move to implement comprehensive on-chain governance by the token holders of the new, unified concept in Phase 2.

Funding request - Yes - Implementation Requires Funding

Executing this proposal will require nominal initial funding for costs incurred from Cayman Islands legal counsel and other Cayman Islands service providers (approximately $50,000) in connection with the formation of the offchain structure (see below), ongoing annual costs for the same service providers (approximately $15,000) in connection with maintaining the offchain structure. As a sidenote to the FloorDAO community; this proposal will nullify the legal and marketing budget approved pursuant to FIP#74 (such costs will not be incurred).

Moreover, this proposal will have a direct impact on the current treasury, as it requires the NFTX treasury, in its entirety, to be merged with the entire treasury of FloorDAO. As both the NFTX and FLOOR token will be replaced by the New Token, it also means that all theoretical value of the current treasury-held governance tokens of the respective treasuries of both NFTX and FloorDAO will be transferred into the New Token. Every holder of NFTX and FLOOR Governance tokens will be able to migrate (one way swap) their existing tokens into the New Token.

This proposal seeks for the migration window to be open indefinitely. Once the migration window opens, the New Token will be the only eligible governance tokens moving forward, and the old governance tokens of the respective projects will lose their governance rights. Furthermore, each project will transfer the majority of its liquidity paired with the existing governance tokens to this New Token within a 12-month timespan after the migration window opens for the New Token. If the proposal is approved, we therefore encourage anyone who wishes to participate in Project New Wind to migrate within 12 months of the migration window opening. Any token holder who does not approve of Project New Wind can vote no on the proposal, and if the proposal is approved anyway, such token holders can choose to stop partaking in [NFTX/FloorDAO] by selling their respective tokens prior to or after the opening of the migration window for the New Token.

Tokenomics

50% of the supply of the New Token will be reserved for the FloorDAO and NFTX communities/token holders. The exchange ratio for the migration will be based on estimated fair value ratios between NFTX token and FLOOR token at the time of this proposal passing. Currently, this ratio sits at approximately 2:1, which would lead into a 33.3% claim for NFTX holders and 16.6% claim for FLOOR holders.

Token distribution for New Token will look as follows:

  • Team 20% (used for team/current contributors)*

  • Treasury 30% (used to fuel long-term growth of Project New Wind - platform incentives, LP incentives, reserves, strategic rounds if necessary, grants to future contributors etc.)**

  • Community 50% (reserved for NFTX and FloorDAO token holders to migrate NFTX and FLOOR tokens, respectively, to New Tokens)***

*Team tokens will be split among the team of contributors formed by NFTX, FloorDAO and Merit Circle’s treasury. The tokens will be subject to a minimum of a 6-month cliff upon the opening of the migration window and a 30-month linear vesting period thereafter. For the avoidance of doubt, all NFTX and FloorDAO team members with existing team vesting schedules applicable to NFTX and FLOOR tokens will be terminated and replaced with the vesting schedule for New Token described above (with the exception of Gaus, who will continue to receive NFTX tokens under his existing vesting schedule, which he will be able to periodically convert into New Token at his discretion).

**In Phase 1, 20% of the total supply of New Token (2/3 of the 30% allocation to the treasury of Project New Wind) will be controlled by a smart contract that is subject to on-chain token holder governance. The remaining amount (10% of the total supply of New Token or ⅓ of the 30% allocation to the treasury of Project New Wind) will be held and controlled by the ownerless Foundation. When and if this proposal is approved, the Foundation’s initial governing documents will mandate the Foundation to only use the treasury for the above specified purposes in furtherance of the development and growth of Project New Wind. In Phase 2, we propose expanding the scope of on-chain governance by amending the governing documents of the Foundation such that they mandate the use of certain programmatic, smart-contract-based controls over the New Token pool, ensuring that the token holders can give feedback to, and provide checks/balances against potential misconduct by, the human managers of the Foundation (see “Offchain Structure” below).

***NFTX and FLOOR tokens currently held by the respective treasuries of NFTX and FloorDAO will not qualify for migration to New Token. This includes tokens in protocol-owned-liquidity (POL) positions, which will be gradually unpaired and removed from the applicable liquidity pools over the course of the first 12 months after the migration window opens. If this proposal passes, all such tokens will be burned by the combined treasury of Project New Window, by transferring such tokens to the following burn address: 0x0000000000000000000000000000000000000000

The respective treasuries of FloorDAO and NFTX will be merged and put under a 4/7 Foundation multisig. The signers of which shall consist of leadership level operators from FloorDAO, NFTX and Merit Circle, for the foreseeable future. The multisig signers will enter into a multisig participation agreement with the Foundation, pursuant to which they are obligated to abide by – the multisig participation agreement will be published for transparency purposes.

Offchain Structure

We propose to incorporate a memberless (i.e., ownerless) Cayman Islands Foundation Company (the “Foundation”) whose memorandum of association, articles and bylaws (the “governing documents”) mandate that the Foundation must foster the development and growth of Project New Wind. In Phase 2, we propose expanding the scope of on-chain governance by amending the governing documents of the Foundation such that they mandate the use of certain programmatic, smart-contract-based controls over the New Token pool, ensuring that the token holders can give feedback to, and provide checks/balances against potential misconduct by, the human managers of the Foundation – as further described below.

Cayman Islands Foundation Companies are a popular choice for DAOs, protocol “foundations” and other crypto-/DeFi-/web3-related entities. The same features that make such entities useful in those contexts also render them suitable for Project New Wind:

  • Tax-free status within the Cayman Islands;

  • “Memberless” structure so that the entity need not be ‘owned’ by any person(s) and can therefore be operated for non-profit, community-aligned purposes;

  • Limited liability for managers and service providers of the entity (except in the event of fraud, crime, or the knowing and intentional breach of the entity’s rules);

  • Governance customizability capable of accommodating novel smart-contract-based rules and mechanisms; and

  • A jurisdiction with a longstanding commitment to fostering digital asset endeavours and an ecosystem of law firms and other service providers deeply embedded in the crypto ecosystem.

The Foundation would be managed by its director(s) – initially, a sole director, however the sole director may also appoint (an) additional director(s). The Foundation may from time to time retain independent contractors or other types of service providers, which would include the respective teams from NFTX, FloorDAO and Merit Circle. The provision of services by these teams for the Foundation are managed by the director(s).

Like all memberless Cayman Islands Foundation Companies, the Foundation would have a supervisor overseeing the actions of the directors (the “Supervisor”). The Supervisor has a duty to the Foundation to ensure that its rules are enforced and can hold the director(s) liable for any misconduct. The Supervisor would be a professional corporate services company in the Cayman Islands.

In Phase 2, we propose that the appointment and removal of directors should be subject to veto by the token holders. Meaning that the token holders can block any appointment or removal of directors of the Foundation. Additionally, the Foundation’s amended governing documents would allow the token holders to appoint an emergency council or supervisor to, respectively, oversee any critical smart contract systems or the Foundation in times of crisis. For example, if the director(s) of the Foundation ‘go rogue’ and breach their duties (such as the governing documents of the Foundation), the emergency supervisor could, if appointed, be given the legal right, pursuant to a combination of Cayman Islands statutory authority and the Foundation governing documents, to enforce the rules of the Foundation and sue the director(s) who violated them. The token holders would also have the ability to appoint and remove members of the Council.

Communication

Proposed points of discussion.

  • All unforeseen topics that may have not been mentioned in this proposal.

  • If either DAO doesn’t agree, the proposal will not pass. For the proposal to pass, there needs to be a quorum and majority threshold voting in favor of both projects. In this scenario, depending on acquired feedback, a new, adjusted proposal could be proposed.

Quorum (For forum)

Due to the impact of this proposal, both forum & snapshot times have been increased to run for 7 days instead of 2.

  • Minimum Quorum: At least 5 votes

  • Passing Threshold: More than 66.6% (2/3rds) must vote in agreement for the XIP to Pass. For changes to the NFTX contract, more than 70% must vote in agreement for the XIP to pass towards onchain voting.

  • Yes, execute Project New Wind
  • No
  • Abstain
  • Amend
0 voters
1 Like
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Hey all

Prefacing by saying I’ve been both a FLOOR and NFTX holder for many years now. Long enough to see the buzzing community in NFTX with projects like gem and sudoswap coming out of it. Before doing the initial bonding event for floor I even did a call w the team giving some advice, and am probably the largest non-team market buyer and locker of floor tokens to participate in the floor wars.

Overall the proposal does a great job in setting the future for things like team motivation, dev talent, product vision, marketing, etc. Its clear that although we’ve retained good dev talent, we haven’t done so hot on the marketing front and merit circle can help solve that.

But I feel we’ve completely ignored token holder value and have only focused on a good outcome for building product and team value. This comes at an unreasonable cost to both NFTX and FLOOR holders, when the exact same outcome can be reached without unhealthy dilution and tokenomics changes.

Some facts:

  • The NFTX treasury is $20M
  • The Floor treasury is $11M
  • Token holders (NFTX and FLOOR) have over $30M of hard assets (NFTs, ETH, USDC) backing their tokens
  • Every NFTX token is currently backed by $55 according to marx above
  • Every FLOOR token is currently backed by over $8 (including dilution from flayer… which we no longer will own?). Can share a spreadsheet here if needed.

Now, if this proposal were to pass:

  • NFTX and FLOOR holders would have to share 50% of the supply of newToken. The proposal says 2:1 NFTX:FLOOR
  • NFTX holders would end up with 33% of the total supply of the new token. The new treasury would now be $31M and NFTX holders would only have $10.2M of assets now backing their piece of the pie… down from the current $20M.
  • This is an instant destruction of 50% of the treasury value per nftx and completely unfair
  • The other $10M ends up with team, merit circle, floor holders, new dao emission recipients, etc.
  • This could be even worse, as gaus mentioned in discord that the new structure would mean the new token has no backing at all.

Just based on this alone, I don’t think its fair to put this proposal to snapshot - we need to get the exact tokenomics down before voting, and we can’t sacrifice that much backing value to try this experiment. It’s a yolo with the entire treasury.

Some additional takes / questions:

  • Why is merit circle not providing any money but getting a large piece of the pie. They also have a large treasury and can put some skin in the game.
  • What happens to the floor wars? Many have bought and locked expecting that to go on
  • The floor dao funded flayer expecting to own 100% of it, after this they may end up with less than 25% of it, are they cool with that?
  • In both cases (floor and nftx) large mints / allocations were just granted to contributors in recent votes. Will those get clawed back given that “current contributors” now get 20% of new wind?
  • NFTX holds a large amount of the FLOOR supply, coupled with the FLOOR team votes basically anything can get forced through governance there. Seems unfair / conflict of interest for both teams to be participating in these votes, whats the plan for that?
  • Is this considered a change that needs 70% passing in the nftx dao?

Suggested change to the proposal: Make no changes to circ token distribution while reducing fdv, still merge the projects, get merit circle involved for marketing, remove all sell pressure before new wind launch, maintain the backing

Here’s how we could do it:

  1. No changes to token distribution and reduce fdv
  • This proposal says dao held nftx and floor is basically burnt so we still burn it
  • Don’t mint any new tokens for the new DAO
  • Current contributors to both projects (NFTX and FLOOR) already have NFTX and FLOOR tokens, their tokens will migrate anyway as user held supply so we don’t need to mint 20% more supply for them.
  • For example see the recent “Floor Labs” proposal which just minted 235000 FLOOR (nearly $2M at 1x treasury rage quit value). Why do we also need another 20% dilution on top of that for the same contributors to build the same product this was minted for?
  • On the NFTX side it is similar. A recent proposal gave Javery $45k of NFTX based on the may 4th price of ~$16. That’s 2800 tokens or $150,000 of NFTX at backing value that is already considered circulating and will migrate. No need to again double dip simply because the token is migrating. Similar proposals and votes have happened for all contributors I think.
  • If a certain contributor does not have enough NFTX then we can handle / vote on a case by case basis, but nowhere close to 20% more supply should be needed.
  • Outcome here is a lower total supply from the burn, and more solid tokenomics as people know new supply wont hit the market, and no change to the book value / backing value as new supply isn’t being minted for DAO and Contributors.
  • Effectively circ floor and circ nftx will own 100% of new wind
  1. Still merge the projects
  • The 2:1 ratio feels randomly selected. It should be made more accurate.
  • Process should be as follows: calculate the treasury value of nftx, calculate the treasury value of floor, merge the two treasuries, issue each project their proportional share of the treasuries as new wind
  • If any contributors are on pre funded sablier payments, those should be ported to the new project and continued
  • Launch new wind (flayer) and nftx v3 marketing w merit circle and get to winning
  1. Get merit circle involved for marketing
  • The problem here is merit circle is getting a large grant for unknown results
  • Good thing is MC has a large treasury
  • We offer MC the right to buy into the treasury with up to $3M at 1x book value payable as 50% MC tokens and 50% eth or usdc.
  • This is great for MC because its equivalent value because they’re swapping for a worst-case backed asset, but they get a big chunk with no slippage and can collaborate to make this a huge win
  • Another win for MC because they pay in 50% MC tokens. This is great for them because they convert a non backed asset (protocol held mc) to a backed asset (new wind w a treasury of usdc, eth, nfts) at 1x backing.
  • If they take all $3M they would own 10% of the total supply of new wind
  • Additional grants for work completed can happen too, just like any contributor
  1. Remove all sell pressure before new wind launch
  • Many floor and nftx holders may look to sell at 1x treasury value which creates an artificial ceiling on the price of new wind and sell pressure right out of the gate
  • Best outcome would be to launch new wind with nobody looking to sell
  • To make this happen, both NFTX and FLOOR can offer a rage quit pre merge. Or even better, spend the next few months doing buybacks to destroy supply below the book value, socializing the book value gains across the stayers… resulting in a higher portion of new wind per remaining holder.
  1. Maintain the backing
  • Legal should amend the proposal to ensure the token is still treasury backed in the worst case if holders want it
  • This will reduce the risks with holding new wind or buying into it
  • If its not possible then holders should be 100% aware of this and have the opportunity to get their treasury backing at least once before migration

This route should satisfy every stakeholder. Team still gets to build together, merit circle is still involved, holders are not diluted heavily, token price goes up across the board, new products get launched. It’s pure wagmi.

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Below are copied discussions from NFTX’s forum discussion. For full context of the discussion on NFTX please see the canonical forum post here: XIP#56 Project New Wind - Proposals - NFTX

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