Part II of our Case Study series is here!
Hello Geniuses, today we want to follow up on our previous chat around the ArtDEX Case Studies.
Since that post, we’ve had the experience of trying a few native drops directly on ArtDEX. We haven’t finished up all of our case studies, but at this point we have some findings that we’d like to publicly review.
Since that post we’ve also released ArtDEX v1.1 which includes minting & extra shortcuts that make it super easy to sell on ArtDEX.
Today, we’re going to start with a postmortem on the Shepardz drop and then move into what we’ve developed based on lessons learned.
The Shepardz drop was mostly a success for Genius Contracts. We were able to hit almost 8,000 XTZ in volume in the first 24 hours of trading, and new users were able to quickly onboard to the SalsaDAO ecosystem and start staking NFTs with SP. With a 10% fee on the pool, we generated almost 1,000 XTZ in extra revenue from users buying and selling Shepardz to each other.
We also learned some tough lessons during the Shepardz drop. As we were watching trades come in, we noticed that external users had spun up their own Shepardz liquidity pools and concentrated their liquidity around the current trading range. With more concentrated liquidity, these users were able to take volume away from the core Shepardz pool.
Now, this is fair play in GC’s eyes, but creators doing an exclusive drops on ArtDEX will need those fees to keep their project going.
One other issue with the setup was that fees went directly back to the pool instead of the creator’s wallet. This means that the extra 800 XTZ gained in fees is essentially more liquidity for users to sell against. Again, this is fine at GC’s scale, but we recognize that creators will want this fee in XTZ rather than more leftover NFTs.
These were the two glaring issues with the Shepardz drop, from the perspective of the seller. Still, the Shepardz drop shows the power of ArtDEX: savvy users who actively manage liquidity pools within popular trading ranges will be able to capture more fees, similar to UniswapV3.
Let’s move on to the new features we’ve developed to address these issues.
We’ve introduced the concept of Poolbound NFTs, which are modified FA2 tokens that are only allowed to trade within a specific ArtDEX pool.
The idea around locking an NFT to a specific marketplace is not new, but ArtDEX is the only place where you can own your marketplace, meaning you are taking full control of your sales. One interesting side effect of Poolbound NFTs is that they can still be transferred, it just costs one delta and must pass through the ArtDEX pool.
We’ve used Poolbound NFTs in both the Lotto and SP Gems drops. As you’ll notice, no one has made any other pools for these NFTs so the fees are being fully allocated to the creator. This is a very helpful feature that can maximize a creators revenue for drops on ArtDEX.
Fee Siphoning & Redirection
Fee Siphoning is a new feature that arrived in ArtDEX v1.1 that is enabled by default on all new pools. This means that the trading fees accrued will be sent directly to the pool owner after each swap, instead of being kept in the pool as liquidity. So you’ll always get fees in XTZ, rather than coming out with extra NFTs instead.
Naturally, the first thing we did with Fee Siphoning was to build on it.
Fee Siphoning to a smart contract enables Fee Redirection, a feature currently used in the Lotto Pools. Fee Redirection means that the owner of the ArtDEX pool is a smart contract, and the fees move around using contract code.
For the Lotto, all trading fees accrued in the pool go directly into the lotto prize. Using Fee Redirection with a smart contract enables many new use-cases.
We realize that the above two features tilt the sale heavily in the favor of the seller. To balance this, we’ve been using Liquidity Locks in both Lotto Pools and SP Gems.
Liquidity locking means that no one, not even GC, can withdraw either XTZ or NFTs from the Lotto or SP Gem pool.
This means that the only way to acquire Lotto Tickets & Gems is directly from the pool, and the users can always sell their item back into the pool because the liquidity is locked, and “unruggable”.
Changes to price, fee, and delta are also locked.
This is similar to the MTTR/WTZ liquidity on SpicySwap, which has been locked and available for trading for more that a year.
These new features and updates will be combined and packaged into the upcoming ArtDEX Operator contract. The ArtDEX Operator is your personal smart contract that can mint, create pools, and manage sales.
The Operator contract will enable new features like Poolbound NFTs, Fee Redirects, and LP Locks. Combining these features and building them on top of ArtDEX is how we plan to increase utility and sale flexibility for creators.
With the Operator we will be targeting a new market, looking towards early-stage projects/groups that are trying to bootstrap incentive mechanisms & communities on Tezos.
This is a bit of an expansion to our general strategy, which as of now is focused on individual artists.
That’s all for today. The release of the ArtDEX Operator marks a subtle but important shift in GC’s targets and growth strategy. We are excited to travel down this new road.