nftperp LTIPP Application [Draft]
SECTION 1: APPLICANT INFORMATION
Applicant Name: Joseph Liu, Ryan Clark, Daniel Sapkota
Project Name: nftperp
Project Description:
An initiative from nftperp, the first perpetual futures DEX for NFTs, to create deep liquidity for perpetual futures against some of the most popular NFT collections in crypto.
Team Members and Roles:
8 development members:
- Joseph Liu - Founder, product lead X
- Daniel Sapkota - CTO X
- Ryan Sea - Solidity developer
- Yash Mehta - Full-stack and solidity developer
- Ryan Jun - Full-stack and backend developer
- Laszlo - Frontend developer/ UX UI designer
- Ayush Mehrota - Dev-ops engineer
6 non-development members:
- Ryan Clark - Chief Growth Officer X
- Vaso - Head of Business Development X
- JD - Product Manager
- Ali - Head of Growth Strategy/Operations X
- Solace - Community lead
- Danny - Media operations
- Glenn - Content manager
Project Links:
Contact Information:
Point of Contact: Joseph Liu, Ryan Clark
Point of Contact’s TG handle: @The0xJose, @helmass
Twitter: @The0xJose, @helmass_
Email: joe@nftperp.xyz, helmass@nftperp.xyz
Do you acknowledge that your team will be subject to a KYC requirement?: Yes
SECTION 2a: Team and Product Information
Team experience:
Founder - Joseph Liu previously worked in private equity, crypto native fund Varys Capital as a junior partner and Web2 product management. He helped several companies scale from 7 to 8 figures in annual revenue by working directly with developer teams. Joseph has also contributed to a multichain DeFi DEX aggregator and is a member of SweeperDAO, one of the largest blue-chip NFT collector DAOs in Taiwan.
Chief Technology Officer - Daniel Sapkota previously worked as lead dev at Goblin Sax. Prior to Goblin Sax Daniel had run a high-frequency trading startup in traditional markets. Taught Blockchain Technology courses at UNLV.
Chief Growth Officer - Ryan Clark previously worked with 1kx capital, ran the DAO operations and helped create Goblin Sax - one of the largest liquidity providers in NFT Finance. Worked in DAOs (riskDAO, Metacartel) and analyzed energy companies in equity research.
What novelty or innovation does your product bring to Arbitrum?:
nftperp is a decentralized exchange (DEX) for perpetual futures on NFTs, allowing users to take long or short positions on blue-chip collections with leverage. We were the first protocol to offer financial derivatives for NFTs, and with our v2, we have once again become the largest platform that enables traders to efficiently short or hedge NFTs.
Is your project composable with other projects on Arbitrum?:
Yes, nftperp has been designed to integrate seamlessly with other DeFi and NFT projects on Arbitrum, promoting synergy across the ecosystem. In the first month since we went live, we have already started working on a partnership with Elixir to create a market-making vault for nftperp’s DLOB, allowing any user to programmatically provide orderbook liquidity. Additionally, we have started working on partnerships with Upshot, Sudoswap, and more. We are open to partnering with more projects in the Arbitrum ecosystem.
Do you have any comparable protocols within the Arbitrum ecosystem or other blockchains?:
While there are other NFT markets and some futures trading platforms for NFTs, we can’t say there are other comparable protocols. We are the only NFT perpetual futures platform currently live and achieving significant volumes.
How do you measure and think about retention internally?:
To succinctly address how we measure and think about retention, it’s essential to outline our strategy that marries data analysis with targeted engagement efforts to foster user loyalty and drive growth. Here’s a condensed overview:
Measuring Retention:
- Cohort Analysis: We categorize users by their initial interaction date, tracking their activity to gauge long-term engagement. We use spindl.xyz here.
- Retention Rates: Daily and Monthly Retention Rates (DRR and MRR) reveal the percentage of users whitelisted and revisiting the platform, offering insights into our success in keeping user interest. Again, we use spindl.xyz to do this.
- User Segmentation: Differentiating users by behavior and demographics lets us identify which segments are more likely to stay engaged, informing our retention strategies.
Conceptualizing Retention Internally:
- Growth Lever: We see retention as a crucial driver of growth. High retention indicates a valuable platform for users, promoting organic growth and reducing churn.
- Product Optimization: Feedback from retention metrics guides our product development, focusing on features that positively impact user stay. We measure for A/B testing.
- Personalization: Insights into what retains users help us tailor engagement strategies, nudging new or inactive users towards high-retention features.
- Lifecycle Marketing: We integrate retention tactics throughout the user lifecycle, using targeted communication to maintain relevance and value for our users.
Data sources we use:
- Dune dashboard: Volume, TVL, DAUs, Txn count, OI, etc…
- Spindl.xyz for attribution
- Integrating with Wonderverse to improve discord retention
- nftperp-specific data collected through Google forums, etc.
In short, our retention strategy is a blend of analyzing user behavior, leveraging insights for targeted engagement, and continuously refining our platform to meet user needs, all aimed at nurturing a loyal and active user base.
Do you agree to remove team-controlled wallets from all milestone metrics AND exclude team-controlled wallets from any incentives included in your plan: Yes
Did you utilize a grants consultant or other third party not named as a grantee to draft this proposal?: No
SECTION 2b: PROTOCOL DETAILS
Is the protocol native to Arbitrum?:
Yes, both v1 and v2 were deployed natively on Arbitrum and we’ve maintained a strong relationship with the foundation throughout the development process. We have been part of the Arbitrum ecosystem since the launch of our testnet in September 2022.
On what other networks is the protocol deployed?:
nftperp is currently deployed only on Arbitrum One. Following a winning entry to the Big Bang Competition, we have also deployed on Blast.
What date did you deploy on Arbitrum mainnet?:
Our v2 contracts were deployed on Arbitrum on the 31st of January.
Here are the transaction hashes of contract deployment:
- 0x687b3ee272221654d17df644806dafe05ac0b3d3d750049ca8ca46599626ad78
- 0x05bf30d322de522649ad433126656902f852fcc1fe96d82fc24014c6156fd552
- 0x2a8beafdab845df0d18f968f814362067b9bad376eeb59d493d93da2d8223e1c
- 0x6084a79b94170fe8f983f0de61bc1d9df91c84882ca16765aadabcf17ee58112
- 0x945f0b7557122121b48148ef6b61f61bece4cb6094bc28ac98d16883b8d3e179
- 0x1ddab54c4dd53d23b128e2f6d0b88cb92cb6400a25e05018749e50cb70516daa
- 0x78b3ba811f7445e8922eea587727ef4f16ac24a948044ec8c1ccbfc00e58d7f9
The protocol is currently under gated access through a referral system. We can provide the grant council with access to the platform upon request.
Do you have a native token?:
nftperp doesn’t currently have a token. However, we have been distributing non-tradable voucher tokens ($vnftp), which will be converted to standard ERC-20 tokens upon TGE.
Past Incentivization: What liquidity mining/incentive programs, if any, have you previously run?:
During the initial phase (v1) of our protocol, we implemented incentive programs to boost trading volume, particularly encouraging trades that align the mark and index prices. Additionally, we awarded $vnftp tokens as rewards to top performers in both the v1 phase and the v2 testnet phase. These incentives were designed not only to foster engagement but also to retain community members by rewarding their active participation.
Current Incentivization: How are you currently incentivizing your protocol?:
nftperp has been running programs to incentivize liquidity on both the maker and taker sides of the platform. Our incentive program rewards traders based on their corresponding volume in relation to other traders on epoch bases. Additionally, we have allocated a pool of rewards for bringing users to the platform through referrals. We are currently working on opening the market making program to the public.
Have you received a grant from the DAO, Foundation, or any Arbitrum ecosystem-related program?:
Yes, nftperp has been awarded a grant by the Arbitrum Foundation, aiming to support the further development of nftperp and our v2. This recognition positions us as one of the foremost entities in NFT finance, committed to advancing the sector within the Arbitrum ecosystem. [Grant announcement]
Protocol Performance:
We deployed contracts on 01/31/24 and opened v2 alpha to the broader community on 02/19/24. Since the launch of the platform, we have seen over 11,500 ETH in volume, executed by 800 unique traders, and an average of 120 DAU over two pairs (Pudgy Penguins/WETH & Milady Maker/WETH). Our OI has been steadily increasing, currently standing at around 110 ETH. Lastly, the TVL has reached over 280 ETH, with around 50% being allocated in the insurance fund, which has earned 20 ETH in the three weeks since our launch from transaction fees (real yield). All metrics can be found in the Dune dashboard, which is periodically updated and always up to date. Any additional metrics can be added upon request of the council.
During v1, nftperp achieved over $600mn USD in trading volume in the 7 months the protocol was live. The protocol was launched as the first-ever perpetual futures protocol and financial derivative for NFTs. Until this date, there hasn’t been any other protocol able to achieve similar volumes
Protocol Roadmap:
Over the next 12 months, we will be focused heavily on growing v2 and will start building v3. In the near term, we will focus on opening up access to the protocol. We will transition the protocol from gated-access Alpha to a public launch prior to distributing any incentives/grants received.
Right now we only offer 2 pairs (PPG/WETH & Milady/WETH) and have OI caps in place. Before we open up access we must test our new ADL process, which was designed in collaboration with Chaos Labs, the leading economic security firm in crypto. We expect to achieve $50mn in volume, 250 DAUs, and 100k txns during this time. Beyond our push for public launch, we will be focused on listing new pairs. nftperp v2 is designed to scale and capture attention. Our delisting process, also designed in collaboration with Chaos Labs, is critical to be opportunistic around listing new pairs to capture narratives. Our ability to support interesting trading pairs should help drive significant trading volume on the platform and attract net new users. We have started planning v3 and expect to commence development at the end of 2024.
Audit History & Security Vendors:
nftperp underwent three security audits and one economic audit to ensure the efficiency and robustness of the protocol. Auditors include Cantina, C4, and Three Sigma. We have an ongoing engagement with our economic auditor, Chaos Labs. Our latest security audit can be found in our docs.
Security Incidents:
V1 did not experience any security incidents, however, it did run into scalability issues related to protocol design. As v1 gained traction, the protocol accrued bad debt. The underlying cause was driven by an imbalance between longs and shorts, due to an overwhelmingly bearish NFT market and a lack of direct counterparties on the protocol. After this was discovered, we sunset v1, returned all margins to traders, and offered an option for compensation to v1 users who had unrealized PNL at the time. This included being offered $VNFTP tokens or being reimbursed ETH from the v2 insurance fund. V2’s CLAMM (concentrated liquidity) + DLOB (decentralized limit order book) model was explicitly designed to mitigate these issues and scale. Most importantly though, we have Chaos Labs on retainer to ensure we adhere to best practices.
SECTION 3: GRANT INFORMATION
Requested Grant Size: 750,000 ARB
Justification for the size of the grant:
nftperp is building in a niche, yet growing vertical of NFT derivatives. Crypto derivatives volume has dominated spot in recent years and currently, NFT derivatives only make up ~5% of spot NFT volume. We think a giant gap in the NFT derivatives market is waiting to be filled.
As the first perps protocol for NFTs and the only one with meaningful traction, nftperp is uniquely positioned to help NFT derivatives volume flip spot. This comes with challenges.
Attracting meaningful and agile liquidity across our books is of the utmost importance. Given the current size of the market, it is quite difficult to find professional market makers deploying towards NFTs. While nftperp has onboarded professional market makers in the DLOB, we realize the need for an agile professional market maker who can deploy liquidity across new pairs.
Finally, as the L2 landscape for yield grows more competitive, we must offer compelling incentives to our users and market makers. We have seen good traction and are diligently working to increase volume on the platform. We believe that our desired grant size will enhance our expansion efforts on Arbitrum.
Grant Matching:
We are already providing incentives to our community weekly and have outlined incentive programs across various parts of our protocol. These incentives total more than 10% of our network and are meant to continue for the foreseeable future.
Grant Breakdown:
- Active Liquidity Incentives: 66.67% (500,000 ARB)
- Passive Liquidity Incentives: 25% (187,500 ARB)
- Taker Incentives: 8.33% (62,500 ARB)
Funding Address:
0xc45dcC13b7D2ceA2f266B5F8d269c88030EDA56F
Funding Address Characteristics:
The grant will be stored in a multisig wallet with a 3/4 setup. The incentives will be distributed on monthly epochs to all eligible participants.
Treasury Address:
- 0xCB6Ba3125ED313FC147f1d46E7b092e81Bb009dD
- 0x2FA72D7B456Ffcf3bD2Cc1076e420fb498E86D56
Contract Address:
0xc45dcC13b7D2ceA2f266B5F8d269c88030EDA56F
SECTION 4: GRANT OBJECTIVES, EXECUTION AND MILESTONES
Objectives:
Our aim is to continue to grow the protocol by providing a best-in-class UX for traders. As such, we are optimizing for agile liquidity on our books. This will allow us to be opportunistic around listing new assets, which will grow our user base and the Arbitrum ecosystem. As new emerging chains are launched, we aim to ensure that Arbitrum remains the center of our ecosystem. This grant will be instrumental in:
- 500,000 ARB: Increasing liquidity on the DLOB
- These rewards will be made available to all users who provide healthy liquidity to our DLOB, in order to deepen liquidity where we’ve found it to be most impactful
- Incentivizes will be distributed based on a similar formula we’ve developed for future $VNFTP rewards, where time and depth of liquidity factor into the rewards distribution
- 187,500 ARB: Increasing liquidity on the CLAMM will allow passive LPs to help reduce slippage, add depth to the books, and drive more transactions on Arbitrum and trades in size.
- Goals of dynamic distribution model for CLAMM incentives.
- Rewards will be distributed based on the volume a CLAMM position fills and the quality of their orders, such as tight spreads and consistent order book depth. The aim is to reward those who enhance the trading environment the most.
- For those who consistently contribute to market depth and liquidity, there will be additional rewards, acknowledging their ongoing commitment and valuable role in nftperp.
- Goals of dynamic distribution model for CLAMM incentives.
- 62,500 ARB: Onboarding new on-chain users through taker incentives.
- Goals of dynamic distribution model for taker incentives.
- This model aims to strike a balance between aggressively pursuing new user acquisition and maintaining a rewarding environment for high-volume, loyal traders.
- New users receive a bonus in addition to the usual rewards at the start. This special boost makes it especially appealing for newcomers to begin trading with us.
- After the initial boost, new users enjoy gradually decreasing extra rewards for their first few months. This encourages them to keep trading even after the welcome period.
- Beyond the welcome rewards, all users earn tokens based on their trading volume. The more you trade, the bigger your slice of the monthly token pool.
- Goals of dynamic distribution model for taker incentives.
Execution Strategy:
As highlighted above, nftperp will be incentivizing liquidity on the CLAMM + DLOB and will be incentivizing takers.
- 66.67% of the grant will be distributed to any makers providing liquidity to the DLOB in three tranches, each one over the subsequent month (25% throughout month 1, 50% throughout month 2, and 25% throughout month 3) based on spread, uptime, and depth. These will be distributed based on our internal formulas developed to distribute VNFTP to the most honest/active users providing healthy liquidity.
- 25% of the grant will be distributed to those providing liquidity in the CLAMM or the insurance fund, based on a dynamic distribution model that incentivizes more capital-efficient positions.
- 8.33% of the grant will be distributed to takers monthly, based on volume.
To incentivize stickiness, within our incentive design, both for takers and market makers, we’ve tailored our programs to not only attract participants but also encourage their sustained activity on the platform. Here’s how each program is structured to achieve this goal:
- Maker-specific incentives
- The grant of 66.67% (500,000 ARB) of the total is divided into three tranches, distributed over the first three months.
- These will be distributed to all makers on our DLOB, encouraging competition by incentivizing tighter spreads, more uptime, and deeper orders.
- Taker incentive program
- New users receive a significant initial bonus on top of standard rewards to make their first experiences lucrative and engaging. This is managed through a higher baseline reward for the first month or trading period, automatically applied to all new taker accounts.
- The rewards for new users gradually decrease over several months, incentivizing them to continue trading to maximize their rewards. Implement a decremental reward scale for the first few months of trading, ensuring users are gradually transitioned to the standard reward system.
- Rewards are distributed based on trading volume, ensuring that more active users receive a larger share of the rewards pool.
- CLAMM incentives
- Providing liquidity on the CLAMM and is dynamic and based on range width and volume as a function of time.
- This encourages a competitive LP environment, challenging users to come up with more effective concentrated liquidity strategies.
- Distribution Mechanism for ARB:
- Approach: We are committed to a fair and transparent mechanism to distribute ARB.
- Resource Allocation: Funds will be directed to our multisig address arb1: 0xc45dcC13b7D2ceA2f266B5F8d269c88030EDA56F.
- Duration & Execution: Over 10 months, we will consistently release ARB incentives using the infrastructure we’ve already established for our internal rewards program.
- Incentive Distribution and Tracking:
- Historical Success: nftperp has a track record of effectively distributing taker incentives. We’ve established the logic behind this and have set up leaderboards for takers to monitor and compute their rewards.
- Expansion of Logic: As briefly discussed earlier, we’ve designed the foundational logic for DLOB making and LP incentives. A leaderboard for $ARB incentives will be provided in order to enhance visibility.
- Infrastructure:
- We’ve developed APIs and SDKs to optimize interactions with our contracts. These tools cater to traders, market makers, and keepers, ensuring efficient operations and promoting innovation within the nftperp ecosystem.
- Marketing:
- Strategy: To augment awareness and user engagement post-grant, we’ll launch a comprehensive marketing campaign centered on the ARB grant.
- Channels: The campaign will span across various platforms, with a heavy focus on working with NFT communities.
- Risk Management:
- As we expand and implement new incentive structures, there’s a need to ensure that our systems remain robust and secure. We’ll continuously audit our contracts, especially those newly introduced, to mitigate any potential vulnerabilities. Periodic reviews of the distribution mechanism will also be conducted to ensure fairness and transparency.
Specify the KPIs:
- Total trading volume (ETH): This KPI directly reflects the liquidity and activity level on the platform, indicating the success of initiatives aimed at increasing trade volumes and user participation.
- Daily active users (DAUs): DAUs serve as a strong indicator of the platform’s health and user engagement. An increasing trend in DAUs suggests successful user acquisition and retention strategies.
- n. of unique traders: The growth in unique traders highlights the platform’s expanding user base and market reach, essential for sustaining long-term growth and diversity in trading strategies.
- n. of trades: This metric gauges the platform’s utility and attractiveness to traders, reflecting increased trading opportunities and platform stickiness.
To ensure transparency and verifiability anyone can verify through nftperp’s public dune dashboard.
Grant Timeline and Milestones:
Given the initial performance of v2 and aiming for straightforward milestones over a 3-month period, a grant distribution plan involving 750,000 ARB tokens can be structured to ensure each phase of funding directly supports growth targets.
- Total grant: 750,000 ARB
Initial Disbursement: 200,000 ARB (26.67% of total)
- Immediate funding to kickstart DLOB maker, CLAMM, and taker incentives.
- To be distributed throughout month 1 to all users
- Justification: Essential for establishing liquidity foundation and enticing early user engagement with ~100-150 DAUs, substantial trade volume, and unique traders.
Month 2 Performance-Based Disbursement: 250,000 ARB (~33.33% of total)
-
Further support to foster liquidity uptime, depth, and spreads. Bolster the platform’s taker, CLAMM + DLOB incentives.
- 10,000 ETH trading volume
- 175 DAUs
- 800 unique traders
- 25k trades
-
To be distributed throughout month 2 to all users
-
Justification: Supports early-stage market stability and liquidity, rewarding performance while ensuring adherence to operational metrics.
Month 3 Performance-Based Disbursement: 300,000 ARB (~40% of total)
-
To increase the platform’s taker, CLAMM + DLOB incentives.
- 15,000 ETH trading volume
- 250 DAUs
- 1,000 unique traders
- 35k trades
-
To be distributed throughout month 3 to all users
-
Justification: Accelerates engagement and market position solidification through deeper incentives.
How will receiving a grant enable you to foster growth or innovation within the Arbitrum ecosystem?
At nftperp, we aim to solve:
- Inclusive access to premium NFTs: A core objective is to democratize access to blue-chip NFTs. We believe that such valuable assets shouldn’t be exclusive to a few but should be accessible to a broader audience, including retail investors.
- Facilitating NFT shorting mechanisms: The current NFT market lacks efficient tools for shorting or hedging positions. Addressing this need can introduce a whole new dimension of trading strategies and risk management for users.
- Optimizing trading profitability: A trader-friendly ecosystem is essential. We are striving to ensure that traders on our platform aren’t burdened with high fees, allowing them a fair chance at profitability.
- Enhancing scalability and UX: The imminent launch of our v2, which merges a decentralized limit order book with an AMM, aims to tackle known scalability issues while enhancing user experience.
The grant is instrumental for nftperp as it enables us to concentrate on pivotal areas that require incentivization. Specifically, the grant will empower us to kickstart the v2 flywheel, a critical step in our development roadmap, ensuring we maintain our momentum.
Do you accept the funding of your grant streamed linearly for the duration of your grant proposal, and that the multisig holds the power to halt your stream?: Yes
SECTION 5: Data and Reporting
Is your team prepared to comply with OBL’s data requirements for the entire life of the program and three months following and then handoff to the Arbitrum DAO?:
Yes, we are fully prepared to comply and provide in-depth, transparent reporting as required.
Does your team agree to provide bi-weekly program updates on the Arbitrum Forum thread that reference your OBL dashboard?:
Yes, we are committed to regular updates and transparent communication with the community.
Does your team agree to provide a final closeout report not later than two weeks from the ending date of your program? This report should include summaries of work completed, final cost structure, whether any funds were returned, and any lessons the grantee feels came out of this grant. Where applicable, be sure to include final estimates of acquisition costs of any users, developers, or assets onboarded to Arbitrum chains. (NOTE: No future grants from this program can be given until a closeout report is provided.): Yes
Does your team acknowledge that failure to comply with any of the above requests can result in the halting of the program’s funding stream?: Yes