The current governance problem as outlined by Caps:
Here’s a problem with the current Core vs Emerging collection votes we’re doing rn. Core projects have long-term value growth whilst new/rising projects have higher risk but insanely high upside. Both should be considered in their relative groupings. If we don’t make that distinction then we have a couple of problems:
1. Large holders will feel forced to vote for hype projects for marketing/community reasons above treasury growth. For instance, if bloco/vitriol/others vote for Loot; even if they determine it to be better for long run treasury growth than Milday, they will a) attract personal flack and b) stifle the incredible community momentum.
2. Core projects that may have serious long-term upside with strong yield will be left out. If we run Core with Emerging and every time new communities will win the hearts and minds and large holders will have to make that awkward decision in point 1.
A solution to this is for the @Collections Crew to run two distinct votes.
1. Core Collection Additions
2. Emerging Collection Additions
TLDR; Top 50 NFT collections including some outliers with clear fundamentals
Core collections should mostly be judged via market cap, volume, and more qualitative assessments on adoption. At minimum, these are projects with multiyear potential as holdings that should be able to withstand cycle and narrative shifts. A list of factors worth considering are listed below:
- $100 million plus in market cap, preferably sustained over 90D. In relative terms, approximately 50bps share of total NFT market cap.
- Among Top 50 NFT collections, ranked by market cap and sustained over 90D
50bps total share of all NFT volume, preferably sustained over 90D
- Preferably >1 year old, starting from date of mint close (eg. “rediscovered” projects should be treated with skepticism, unless proof asserting otherwise).
- In lieu of age, projects that have undergone one ‘cycle’ should also be allowed consideration. This can be gauged in a macro sense, in terms of larger crypto or NFT cycles, as well as in the micro sense, with the collection having gone through its own hype cycle and blow-off top (eg. Loot and Toadz).
- Extremely high FUD rating, especially on “durability” factors
Very few collections will satisfy all of the above, but each of the Core collections should tick at minimum two of these boxes and ideally more. In certain cases and at their discretion, the collections team should ignore the above when obvious factors supercede (eg. Meebits or Ape Lands, established projects launching new projects and/or derivatives). Given these metrics, it would be hard to find any collection outside of the top 50 that merit attention.
We expect the core standards to shift. For instance during a prolonged bear market in NFTs, certain of the above metrics may be too high to satisfy or require heavy editing. Alternatively, in a massively expanded market cap of NFT assets (think 1 trillion USD plus) both dollar and relative amounts might become outdated. These should be actively reassessed and tweaked as necessary.
Punks provide a solid example of what a good “core” asset looks like:
- Over $1 billion in market cap on a rolling basis, consistently in the top 3 on any given metric (volumes, market cap, share of both) over long time frames.*
- Essentially zero execution risk, value proposition is already clearly established and accepted*
- Survived multiple adoption cycles, has broad adoption both within crypto and popular culture at large with multiple reference points for each.*
TLDR; high yield assets (high double/triple digit yields) with strong speculative value (potential triple digit percentage appreciation) over $10 million market cap
Emerging encompasses practically everything that falls outside of the “Core” metrics. However, a few critical points should be noted. As most blue chip assets age and appreciate, velocity tends to decrease meaning less yield for vaults. With emerging assets, this dynamic is flipped with highly volatile asset prices and extremely high yields (triple digit percentages being not uncommon).
- Emerging asset choices should be able to yield, at minimum, very high double digit if not consistently triple digit APRs.
- High potential to appreciate multiple x’s in total collection value
- Assets lower than $10 million in market cap (<5bps relative total marketcap) are likely too small to be considered, either from size of collection or traction, unless strong evidence to the contrary.
- Preferable <6 months since mint out OR has not undergone a full cycle per above definitions.
A second critical point for emerging collections is there should be an optional path toward deaccessioning assets, whether to derisk holdings or offload unnecessary liquidity. Ideally, every emerging collection should have a relatively clear path towards becoming a Core asset. Struggling collections, or those that have failed to reach significant market cap thresholds or adoption with declining yields, should be aggressively reconsidered on as-needed basis (with potential full deaccessioning on the table) in concert with the policy team.
Wizards provide a solid example of what a good “emerging” asset looks like:
- approximately $50 million in floor cap when admitted, showing some degree of traction with space to appreciate*
- High double-digit yields based off of strong floor volumes.*
- High quality team and roadmap with proven execution. A successful FRWC game would easily pave the way to another 10-20x in value in assets.*