Please describe your proposed solution.
Much of the existing Cardano NFT services and infrastructure are centered around financial aspects. Marketplaces, lending protocols, staking platforms and statistics websites are all focused on the financial aspect. However, most NFTs are primarily digital collectibles, not financial products. Yet there are almost no services built specifically with collectors in mind. Tapping into this unexplored niche within the NFT space, Collectibles Exchange aims to provide a comprehensive and complex platform for the swapping of non-fungible Cardano native assets.
Current data from taptools.io indicates that less than 10% of NFTs within the top 25 Cardano collections by market cap are listed on marketplaces. This implies that a substantial majority of NFT owners are not seeking to liquidate their assets into ADA. Yet, there is an untapped interest among holders in exchanging their assets for other NFTs, whether within the same collection or across different ones. If even a fraction of NFT owners were to engage in swap transactions, the Cardano network could see a significant increase in transaction volume.
Our proposal is to develop a service that facilitates the swapping of any non-fungible asset for other non-fungibles, thereby addressing the relative illiquidity of NFTs compared to fungible tokens. This would also create multiple new opportunities for trades and transactions, enriching and contributing to the Cardano ecosystem. To facilitate exchanges with greater flexibility, we want to allow for more complex trades and swap conditions. This could include trading multiple NFTs for one, trading one NFT for multiple, and so on.
All of the implementation methods presented below rely, for now, on manual transactions for swaps. However, our medium to long-term goal is to create a system that can automatically match new swap offers with existing swaps in various swap pools deployed by projects and collectors. In this way, the individual swap pools become akin to liquidity pools in a conventional DEX for fungible tokens. For partially on-chain and off-chain offer models, we aim to develop an infrastructure that collects data from individual Swap Pools, uses data aggregated from marketplaces and statistics services, and automatically sends counter-offers to Proposers.
To our knowledge, Collectibles Exchange represents a pioneering initiative, not just within the Cardano ecosystem but across the entire blockchain industry.
We have already established the technical feasibility of the solution through a working prototype developed in recent months - The NFT Swap Pools [<https://github.com/NFT-Guild/NFT-Swap-Infrastructure-Templates>].
Implementation
We propose three distinct modes of implementation: fully on-chain offers, partially on-chain offers, and off-chain offers. Each method has its unique appeal and use-case, catering to different levels of user engagement and familiarity with the platform.
All offer types will eventually result in an on-chain transaction. We view the main purpose of developing partially on-chain and off-chain offer systems as ways to attract and familiarise users with the platform, or as ways to engage users who are uncertain about the kind of trades they are open to. If we don’t build these options, there is a high chance that users will hesitate to lock up their assets in the smart contract of a yet unproven platform. As the platform gains momentum, we might decide to offer strictly on-chain offers, given their numerous advantages.
Fully on-chain offers (Phase 1) :
A Proposer visits the platform website, connects their wallet, lists an NFT, and sets the trade conditions. Once the swap conditions are set, the NFT is held by the smart contract until the conditions for unlock are satisfied, or the Proposer cancels the offer. Once the list transaction is finalised the offer is displayed on the service front-end, alongside the desired NFT or NFTs requested in the trade (the unlock conditions).
A Fulfiller can view the offer and initiate the swap by sending a transaction with the requested NFT(s) to the smart contract, which validates the transaction and completes the swap.
This method works best in situations where the Proposer knows in advance exactly what he is willing to exchange for his asset and is not interested in counter-offers.
We envision the service eventually incorporating a price discovery mechanism similar to an oracle, capable of assisting the Proposer in setting up the trade, determining its conditions, and potentially making trade recommendations based on real-time aggregated data for price, traits, and other criteria from marketplaces and NFT statistics services like <https://www.jngl.io/> , <https://cnft.tools/> or https://www.taptools.io/?Top%2025&NFTs .
In short, when creating an offer, a user (Alice, the Proposer) would specify the NFT they're offering, and the NFT(s) they want in return. The smart contract locks Alice's NFT until someone accepts the offer or Alice cancels it. If another user (Bob, the Fulfiller) wants to accept Alice's offer, they interact with the smart contract, which checks if Bob is the owner of the desired NFT(s). If he is, the smart contract facilitates the swap, transferring Alice's NFT to Bob's wallet and Bob's NFT(s) to Alice's wallet.
A typical user interaction for fully on-chain swaps:
Alice wants to trade her NFT A for NFT B. She lists NFT A on the exchange and specifies that she wants NFT B in return.
Bob owns NFT B. He finds Alice's listing and is interested in NFT A.
Bob initiates the trade through the exchange UI, which interacts with the swap contract.
The smart contract validates the transaction.
If the validation passes, the contract swaps the NFTs between Alice and Bob's wallets.
Alice now owns NFT B, and Bob owns NFT A.
Both Alice and Bob receive a confirmation of the successful swap.
We've already created a smart contract with complex on-chain validation conditions for NFT exchanges. The Swap Pools smart contract we've developed [<https://github.com/NFT-Guild/NFT-Swap-Infrastructure-Templates>] is the MVP of this solution. It allows NFT projects and collectors to set up their own Swap Pools easily. To our knowledge this hasn't been achieved before.
Partially on-chain offers (Phase 2) :
Similar to the first model the Proposer creates a listing, locks an NFT in a smart contract and defines a series of unlock conditions representing the offers they would consider for exchange. Unlike the fully on-chain method, though, the Proposer indicates openness to receiving counter-offers.
This allows a Fulfiller to send an off-chain counter-offer, which the Proposer can accept or decline. If accepted, the conditions of the initial offer are updated to include the counter-offer, and the Fulfiller is notified that they can now complete the on-chain swap via the smart contract.
This method would work best in situations where the Proposer has a set of swaps he knows he would accept in exchange for his NFT, but is also willing to accept other offers.
To combat spam, the Proposer can predefine a list of counter-offer requirements, for which data aggregation about prices and traits from marketplaces and statistics services would be needed.
Off-chain offers (Phase 2) :
In this model, the Proposer wishes to exchange an NFT but doesn’t have a specific exchange in mind. As a result, they cannot set up the smart contract with the initial offer and unlock conditions. Instead, they list their NFT as available for swap and open to counter-offers. After reviewing multiple counter-offers, the Proposer can accept one and initiate a transaction to a simple escrow smart contract, which only involves the counter-offer, without any additional conditions.
To minimise the potential for spam and scam attempts, the same options for setting up counter-offer filters as described above apply.
Business Model:
Our business model is simple and straightforward: we plan to charge a small fixed fee for each facilitated exchange transaction. This structure will allow us to scale the service organically. Additionally, we're exploring the possibility of launching a governance and utility token, if we determine it will be a good fit for the project once we launch. Although this is a potential future implementation, such a token could enable users to influence the platform's development, unlock premium features, or earn rewards, enhancing our platform's value and community engagement.
How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?
Our proposed solution addresses the challenge directly by providing a product that adds a unique and valuable use case to the Cardano ecosystem - a comprehensive platform for the swapping of non-fungible Cardano native assets. There are currently no known services that offer this kind of functionality, making Collectibles Exchange a pioneering initiative, not only within the Cardano ecosystem but across the entire blockchain industry.
The impact of our project on Cardano will be multifaceted:
- Increased Utility of NFTs: Our platform will significantly increase the utility and liquidity of Cardano-based NFTs by providing an efficient, trustless way to swap them. Currently, many NFT owners on Cardano hold onto their NFTs due to a lack of appropriate avenues to exchange them. Collectibles Exchange will solve this issue, giving NFT holders more options to utilize their assets.
- Attracting New Users to Cardano: By offering a unique and compelling service, we expect to attract a significant number of new users to the Cardano network. The lack of existing platforms to facilitate NFT swaps, presents a compelling opportunity to attract a new user base.
- Driving More Adoption: The introduction of a service that allows for NFT swapping will further strengthen Cardano's position as an innovative blockchain platform for NFTs, potentially driving more widespread adoption of the network.
- Enhancing the Ecosystem: The implementation of our proposal will encourage more artists and collectors to mint and trade NFTs on Cardano, thereby enriching the ecosystem and contributing to its growth and diversity.
Our proposal aligns with the technical requirements, ecosystem maturity requirements, and general considerations of the challenge. As our prototype NFT Swap Pools has already demonstrated, the necessary technical infrastructure exists within Cardano for our solution to be implemented. Furthermore, the maturity of the Cardano NFT ecosystem, along with the lack of existing solutions for NFT swaps, makes this an opportune time to introduce our service.
How do you intend to measure the success of your project?
Once the project is completed and deployed, to measure the success of our project, we will use a combination of both quantitative and qualitative metrics that are indicative of the platform's effectiveness, user engagement, and impact on the Cardano ecosystem.
Platform Usage Metrics: These are straightforward numerical measures that provide insight into how many people are using our platform and how often.
- Number of Registered Users: A higher number of registered users will indicate a greater interest in our platform and by extension, the Cardano ecosystem.
- Number of Successful Swaps: This metric will indicate how much our platform is being utilized. An increasing trend in successful swaps is a strong indicator of success.
User Experience Metrics: To measure the quality of the user experience, we will collect qualitative feedback from our users.
- User Surveys and Feedback: Regularly soliciting feedback from our users will provide insights into the user experience and identify areas for improvement.
- Usability Testing: By conducting usability testing, we will gain a deeper understanding of how users interact with our platform and where potential pain points might be.
Community Growth Metrics: This will measure our project's impact on the Cardano community.
- Community Engagement: The level of engagement in our online community spaces (e.g., social media, forums) can give us a sense of how our project is fostering a community.
- New Users to Cardano: By tracking the number of users who have joined Cardano because of our platform, we can gauge the growth we're driving to the Cardano ecosystem.
Ecosystem Impact Metrics: To gauge our platform's impact on the wider Cardano ecosystem.
- NFT Market Activity: We will monitor the level of activity in the NFT marketplace. An increase in transactions and overall market activity would indicate our platform's success in driving more utility and liquidity for Cardano NFTs.
These metrics are realistic because they are based on data that we can directly collect from our platform or observe from the broader Cardano ecosystem. They will allow us to regularly evaluate our progress, identify areas for improvement, and demonstrate the value our platform brings to Cardano.
Please describe your plans to share the outputs and results of your project?
As described earlier, all smart contracts developed for this project will be open-sourced and made available on the project's Github page. This will allow other developers and projects in the Cardano ecosystem to leverage our work, thereby fostering collaboration and innovation within the community.
In addition to this, we commit to sharing all the outputs of the project with the Catalyst team and the community milestone reviewers. This will be achieved through comprehensive monthly reports and milestone proof-of-achievements that demonstrate our progress and deliverables.
Furthermore, we will actively seek collaboration with other relevant projects within the Cardano ecosystem. Our intention is to not only share insights and learnings but also to establish potential partnerships that could enrich the utility and user experience provided by our platform.