[Report] Renaissance Labs NFT Fractionalization Protocol Building and Owning NFT Liquidity

1. Project Name:

Renaissance Labs

2. The project overview:

Renaissance Labs Aurora Grant Update

A fractionalization NFT marketplace and community, designed to be owned by its active participants and contributors. We are updating the fractionalization process and the protocol’s design choice to ensure decentralization and majority community ownership overtime.

Table of Contents

High Level Token Allocation

The total token supply for four years will be fixed at a total of 40,000 ART. Airdrops, bonding, initial community allocations, liquidity events and deployment of community reserves allow the tokens to reach active users who can utilize the tokens in a variety of staking and liquidity provision scenarios. This allows them to access the 35% of rewards carved out for participation in the ecosystem.

The core thesis is that over the course of the 4 year token emission schedule, the most valuable participants- be it artists, curators, traders or liquidity providers, will earn ownership & governance of the protocol.

Staking and governance incentives are important to facilitate the mechanisms the protocol which will introduce in future versions. We take inspiration from elements such as Vote escrow mechanics and also Tokemak’s voting design to make governance participation much more

fNFT tokens

High level process and governance

Renaissance Labs has designed fNFT ownership to be as analogous as possible to fractional ownership of the underlying NFT. Thus, fNFT holders will govern the sale of the underlying fNFT as well as proportionally receive any profits from sale or external utility (e.g. airdrops received by the underlying NFT).

The remainder of the protocol’s governance will be in the hands of ART holders/stakers.

fNFT supply and distribution

The supply of fNFT is not fixed. In order to incentivize NFT holders to fractionalize their NFTs (the curator) the fNFT supply inflates at a set rate over each block to:

  • The NFT provider.

  • The ART treasury.

The curator sets the level that they take on a yearly basis at the time of IFO, whilst the piece taken into the ART treasury is set via ART governance votes.

Overtime the ART treasury to accrues NFTs across all fractionalized pieces across the platform; effectively promoting ART into an index representation of a multitude of NFTs across many chains.

In the future there will be other revenue share models that the Curator can implement to split trading, redemption and other fee accruals across to fNFT or ART token holders.

IFO Process

To begin an Initial Fractionalization Offering (IFO), the NFT must first be fractionalized on Renaissance Labs.

NFT Fractionalization

  1. Bridge the NFT to Aurora

  2. Fractionalize the NFT on Renaissance Labs.

a. Choose the following parameters:

· Name of the ERC-20 product fNFT (e.g. fPunks).

· Number of fNFTs to be issued (initial supply)

b. By fractionalizing the NFT, the NFT will be locked into the fractionalization smart contract, and the initial supply of fNFTs will be returned.

IFO Initialization

  1. To begin an IFO, the IFO creator must be holding 100% of the fNFT supply.

a. Choose the following parameters:

· Percentage of initial fNFT supply that will be available for the IFO

· # of fNFTs purchasable per unique address

· Price per fNFT in ETH (minimum reserve price)

· Duration of the IFO

· Whitelisted addresses, if applicable.

· creatorIFOlock (True/False)

b. If creatorIFOlock = True, the creator’s share of fNFTs and future ETH proceeds will be locked in the IFO smart contract until redemption of the underlying NFT occurs.

c. If creatorIFOlock = False, the creator can withdraw their share of fNFT and ETH prior to redemption.

d. IFO participants will be able to see whether creatorIFOlock is on or off (signal of trust).

  1. The IFO will conclude when all the fNFTs available are sold or when the duration of the IFO ends.

a. The IFO can be paused by the IFO creator before the duration ends, and resume in the future without affecting the remaining time.

  1. After the IFO concludes:

a. IFO participants can claim their purchased fNFTs

b. IFO creator can choose to create an liquidity pool pairing their share of fNFTs to the ETH proceeds earned from the IFO. This feature is available even if creatorIFOlock = True.

V2 Crowdfunded IFO

If the NFT-of-interest is not in possession, a user can begin a crowdfund campaign. Users will post a detailed pitch on which NFT they wish to purchase and fractionalize, along with the target amount of ETH necessary. Interested users will fund the campaign, and their addresses and amount funded recorded. Once the campaign is fully funded, Renaissance Labs will purchase the NFT, fractionalize, and distribute the fNFTs accordingly. This feature is in development and expected to arrive for V2.

IFOs take a fee that is routed to the Renaissance Treasury. The fee % can be voted on a set by the DAO via governance. This allows flexibility in managing the supply and demand dynamics of NFT origination.

fNFT Redemption

fNFT redemption occurs when the underlying NFT is bought out of the vault. Redemption can occur from either a third-party bid or a buy-out triggered by an fNFT holder. The price of sale for both scenarios is determined by the following hierarchy:

  1. Reserve Price governance

a. fNFT holders will govern the minimum bid ask price via continuous weighted vote.

b. fNFT holders can vote on increasing/decreasing the current reserve price on a % basis (range TBD).

c. To establish a quorum, over 51% of fNFTs must vote. The reserve price will be updated when a quorum is met, and will require another quorum to enact future reserve price changes.

  1. Initial Reserve Price

a. If quorum of fNFT votes is not met, the reserve price will remain as the initial reserve price, calculated during the Initial Fractionalization Offering (price per fNFT x fNFT supply).

  1. Time-Weighted Average Price (TWAP) (Version 2):

a. A liquidity pool must exist for the specific fNFT-ETH pair.

b. The liquidity pool must be over a liquidity threshold (TBD)

c. If the above conditions are met, the TWAP of the fNFT will be used to calculate a reserve price.

d. If the TWAP-calculated reserve price must be greater than the reserve price voted on by fNFT holders to come into effect.

Given the risk of re-entry points and possibility of flashloan hacks manipulating the price, (3) TWAP will be on hold until the V2 release.

Once redemption occurs, fNFT holders can trade in fNFTs for their respective share of the ETH sale proceeds. Redemptions take a fee that is routed to the Renaissance Treasury. Similar to the IFO, this fee % can be voted on a set by the DAO via governance.

ART Token

The ART token represents governance and voting power for the Renaissance Protocol (more details of this in the below paragraphs). Through this the ART token also controls the assets within the ART treasury including stable coins, fNFTs accrued and other revenue streams.

It is important to note here that the token does not have direct recourse to future earnings, although a proposal and vote to redistribute these to ART token holders can be made at a later stage. As the product moves to later versions, revenue share from the whole fractionalization lifecycle can be implemented contingent on DAO voting.

Staking & Liquidity Incentives

fNFT Liquidity Directors

In order to participate in voting and liquidity emission governance the ART token needs to be staked.

Voting occurs within an epoch (weekly) and a set amount of tokens that week will be directed as extra emission rewards to particular fNFT LPs. This allows artists or collection curators to incentivize liquidity and also trading volumes to their fractionalized pieces.

This looks to replicate the role of real world Art directors and curators, whose role is to promote and showcase pieces of collections that have been curated. Renaissance’s token design has the benefit of being much more participatory and distributing the power across to many parties instead of a few individuals. Artists can work together to support each other and coordinate their voting powers to earn more governance within the ecosystem.

The set rate of emissions per epoch will be determined at a future date.

Dual Staking & fNFT pools

The protocol will look to introduce rewards for holders of both fNFTs and the native ART token. ‘Dual staking’ is a particularly useful feature for multiple reasons:

  1. The protocol rewards holders of fNFTs and ART tokens and their continued holding and usage of the core product offerings. Renaissance also wants fNFT holders to actively participate in the overall governance and end-to-end fractionalization process- which requires holding both classes of tokens.

  2. For the protocol in the future, when fNFT liquidity has thickened and larger indices or basket products can be created, can incentivize a pool of fNFTs for lending and borrowing.

  3. As an extension of (2), for fNFT holders placing their tokens into a lending and borrowing pool effectively bearing recourse to the slippage risk of the protocol. The treasury, and its value which is implied into the ART token, in a sense here also functions as a default fund. Staking ART + fNFTs is similar to posting margin.

To add to the point of creating index or basket products, having a deep pool of different fNFT assets to use as ‘lego’ blocks is important for structuring new and more exotic exposures.

3. Links on the website, and social media:

Website: https://beta.renaissance.art/

*Please mind that this is in beta production. We’re making major UI / UX changes this month

Twitter: https://twitter.com/NEARenaissance

TG: Telegram: Contact @renaissancelabs

Discord: Discord

4. Project Status:

The past months have been testing for all of us in the NEAR ecosystem to say the least. However, with the help of the Aurora grant, we’ve completed our V1 contracts for single NFT fractionalization and single IFOs and had them audited by HAECHI Labs. The audit found no issues. The V1 contracts are deployed on Aurora Testnet. If you have NFTs on the Testnet, you can test them out at https://beta.renaissance.art/nft-marketplace. With the downturn of the markets, we’ve decided to launch with more functionalities to include collection fractionalization and collection IFOs with the V2 contracts.

***Please note that we’re making major UI / UX changes with the V2 launch.

The following are the UI / UX changes being updated:

  1. Landing Page

  1. Collection Fractionalization

  1. Singles Fractionalization

  1. 3 Easy Step - Fractionalization Demo




Weekly Renaissance Lab Reports and Podcasts:

We hold AMAs and NFT podcasts (in Korean) on Twitter Space weekly:

S2 EP.8 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1548605858917261312

S2 EP.7. Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1543483775807471617

S2 EP.6 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1540939936097939456

S2 EP.5 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1538489396022095873

S2 EP.4 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1535943339174150144

S2 EP.3 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1533320361156042753

S2 EP.2 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1528376749511553024

S2 EP.1 Weekly NFT & NFT Art News https://twitter.com/VasariDAO/status/1528299655842639873

EP.7 The Status Quo of Traditional Art Market Pt.2

EP.6 The Status Quo of Traditional Art Market

Ep.5 About PFP NFT - Boundry of PFP, is PFP bubble?

EP.4 Does Art NFT need a utility? - The position between art and utility

EP.3 Would you introduce your job as, NFT trader vs Defi Farmer?

EP.2 Cool Cats vs Real Cats

EP.1 BAYC vs Lambo

:man_scientist:t2: Renaissance Labs Report #9

https://www.notion.so/renaissancelabs/Renaissance-Labs-Report-9-d1954be6071c4ed6a0c827e89600d442

:man_scientist:t2: Renaissance Labs Report #8

:man_scientist:t2: Renaissance Labs Report #7 and :man_scientist:t2: Renaissance Labs Report #6 were sent out as mails. Please contact me if you want PDF files of the reports!

:man_scientist:t2: Renaissance Labs Report #5

:man_scientist:t2: Renaissance Labs Report #4

:man_scientist:t2: Renaissance Labs Report #3

:man_scientist:t2: Renaissance Labs Report #2

:man_scientist:t2: Renaissance Labs Report #1

5. Highlights:

We are committed to democratizing all assets. With investors in the 10s and 20s looking to invest in alternative assets, NFTs have only surfaced its potential in the last year. As the market expands to a more permissionless and tokenized world for IPs, investing needs to be more democratized. We are the renaissance of new investing.

6 Likes

Great work Vinci!

3 Likes

Thank you very much for excellent report and progress.

Could you please add your dapp on:

2 Likes

Will add the dApp on dapp radar and DeFi Llama.

Can you clarify on the “shifted logo”?

1 Like

Yes, sure. When I open the page https://beta.renaissance.art/ on my laptop Near, Aurora and Frax logos are partially invisible.

Ah, with you, we’ll fix this. Thanks!

1 Like