Please describe your proposed solution.
Our protocol is designed to automatically provide market-making demand liquidity for NFTs and NVAs on Cardano (i.e. Our dApp enables users to instantly sell whitelisted NFTs for the current market floor price).
The Opportunity / Problem: The future of tokenized non-fungible assets is a multi-trillion dollar market. We are seeking to solve the very large, very simple problem of a lack of buy-side liquidity in non-fungible asset markets, to make those markets efficient when NFTs mature into Non-fungible Virtual Assets (“NVA”s) and crypto supports the exchange of real-world NVAs on-chain.
The Status Quo: Non-fungible asset markets are naturally illiquid (not-liquid) and inefficient, due to the unique nature of each asset. In traditional finance there are centralized players that make an on-demand market for sellers. (e.g. Fannie Mae, the public/private institution that was set up to automatically purchase any mortgage which “conforms” to certain standards in the USA; acts as a market maker for mortgages, which are non-fungible assets). To support the widespread adoption and tokenization of NVAs, we need a decentralized automated protocol to serve this function.
Immediate Solution: Our initial use case will be improving efficiency of NFT markets on Cardano, ensuring that sellers have a simple way to sell NFTs at floor market prices.
Future Solution: The data we collect will be valuable to analyze and then utilize to train AI systems capable of optimizing the pricing of Non-fungible Virtual Assets (“NVAs”) on our platform. This data will help to develop later iterations of the protocol that will allow for fair market purchasing of assets based on their meta-data and other information, not just the floor price of the asset collection.
Mission: Our mission is a dual mandate to deliver automated liquidity to non-fungible virtual asset markets and maximize value to L4VA token holders over time.
Values: We plan to achieve our mission by designing and building our protocol to be flexible, intuitive, simple, and scalable.
What are NVAs? In an effort to broaden the view of what constitutes an NFT, we have coined the term Non-fungible Virtual Assets (“NVA”s) to include NFTs, Digital Collectibles, Traditional Non-fungible Assets (mortgages, insurance, real estate, etc.), and other New / Synthetic / Exotic Non-fungible Assets yet to be tokenized on the blockchain. We believe that NVAs and the innovation of NVA Applications (“NVAP”s) will be required to ultimately deliver mass utility and wide-scale adoption of blockchain technology into the future.
How it Works: We are building a decentralized automated protocol to solve the inherent liquidity problem in non-fungible asset markets by (1) providing buy-side liquidity for non-fungible assets at the floor price of the asset, (2) automatically emitting those assets back to the market via flash auctions at a profit, and (3) then sharing profits with the community of L4VA token holders who govern the protocol.
Who We Engage: The project will initially engage all of the participants in NFT markets on Cardano for a portion of their trading (e.g. when an owner wants to sell an asset quickly), then will evolve to support market participants across all forms of NVAs traded on the blockchain.
Scaling Opportunities: We are building this protocol to scale and support all types of non-fungible assets over time (e.g. real estate, bonds, mortgages, insurance policies, annuities, precious materials, etc).
Validating the Utility: We will prove our impact based on usage of the system in terms of % of sales on L4VA compared to other NFT marketplaces on Cardano. For every “Sacrifice” transaction on our dApp (defined as when a user sells an NFT in exchange for L4VA on our protocol) our value is validated. Our business model seeks to capture 5% of all NVA market volume at maturity.
Market Impact: Economic theory predicts that our protocol will help to equalize supply and demand for particular asset policy IDs, which will demonstrate itself by increasing floor prices of projects with high correlation to the percentage of transactions for a particular policy ID happening on L4VA. We also expect that our protocol will help to reduce volatility of floor prices due to short term supply and demand shocks, especially during times of lower transaction volume.
How does your proposed solution address the challenge and what benefits will this bring to the Cardano ecosystem?
L4VA is the first decentralized automated market-maker for non-fungible assets to exist anywhere.
<u>Right away, our application is solving a major problem in NFT markets and laying the foundation for widespread adoption of Cardano as the blockchain of choice for Non-fungible Virtual Assets (“NVAs”) and NVA Protocols (“NVAPs”).</u> Our solution is designed to be fully open source, with open APIs for integration into other marketplaces and applications, helping to solve market inefficiencies across the Cardano ecosystem.
Immediate Benefits: L4VA will immediately deliver value to Cardano NFT market participants by providing (1) instant automated buy-side liquidity for sellers of NFTs at the floor price and will (2) raise floor prices on p2p markets as sellers no longer need to undercut the natural floor price to seek fast liquidity.
Intermediate Benefits: L4VA will attract projects seeking to utilize blockchain to build digital non-fungible asset protocols (NVAPs) to solve real world problems (e.g. mortgages in developing countries, tokenizing real estate, insurance, etc.), because Cardano will have L4VA as an open source application and open API integrations to support the proper functioning of these markets during periods of low volume and/or volatility.
Future Benefits: L4VA has the potential to serve as the automated market maker for all NVAPs across all non-fungible assets, which will drive adoption of Cardano by large enterprise players who seek to integrate their assets as NVAs on the blockchain with the most advanced automated market maker for NVAPs. We are building this protocol to scale to support all types of non-fungible assets over time (e.g. real estate, bonds, mortgages, insurance policies, annuities, precious materials, etc).
L4VA is a true DeFi solution AND <u>has broad utility applications across many of the focus areas of this challenge</u>:
Physical products - Tokenised housing as a Cardano native asset, Fractionalised physical asset ownership, others…
In order for physical products to have a functioning market the owners must have the ability to sell assets efficiently at a fair value; without L4VA these projects innovating in this area will struggle if there isn’t consistent fairly priced demand for their NVAs.
DeFi - Stable coins, DEXs, borrow & lending, synthetic assets, others…
By definition our protocol is a true DeFi protocol in every way. We are a decentralized financial protocol delivering value and utility to the NFT market today and the NVAs and NVAPs of tomorrow.
Gaming - Open world games, card games, RPG, others…
For every unique NVA across gaming, there needs to be fast and reliable markets functioning to support the purchasing of these in-game tokens from sellers in real time; L4VA solves this.
Climate Change - Solutions that help to solve environmental issues
Carbon credits have not made a major impact on blockchain yet, largely due to the complex nature of these assets. L4VA could be the protocol that makes Cardano the right place for carbon credit owners to trade carbon credits as NVAs, since L4VA can help make an efficient market for these assets.
Marketplaces
Marketplaces are inefficient for trading NFTs and NDAs. L4VA is a different type of marketplace, providing an enhanced solution for markets to generally operate more efficiently.
Insurance
Insurance policies are all non-fungible. Decentralized insurance underwriting financed by a diversified pool of investors requires that there is a protocol to purchase policies from applicants initially in order to collateralize these policies into portfolios which can be fractionalized and sold. L4VA will play a critical role in helping to augment NVAPs operating in this space, by providing buy-side liquidity for sellers of policies quickly.
Artificial intelligence
We plan to utilize all of the data captured through usage of our protocol as a training set for AI models to help drive more specific pricing intelligence that will allow us and other applications to better understand market pricing of NFTs and NVAs so that we can provide automated buy-side liquidity to sellers at the floor price, and potentially provide instant liquidity quotes for sellers at higher prices based on p2p market pricing correlated to metadata and auction performance on L4VA.
How do you intend to measure the success of your project?
Our project fulfills all three major metrics for success (as defined by the Catalyst Challenge):
Increasing the number of products available for the community to use that help to enrich the ecosystem with new use case
Our product is completely new and innovative, while also helping to support adoption of other new use cases by making markets more efficient for NVAPs in (real estate, mortgages, insurance, climate, physical assets, etc)
Increase the number of integrations that bring existing solutions together for a more seamless and connected experience between different products.
Our protocol is fully open source and we will provide open api’s to ensure that we can continue to support the ecosystem by way of integrations.
Increased quality of existing products & integrations through improvements and new functionality
Our protocol will increase the quality of NFTs, NVAs and NVAPs by providing liquidity to those projects and improving the user experience by ensuring that owners can freely enter and exit ownership.
Our project will attract other projects seeking to tokenize real assets as NVAs by providing stable well functioning markets in early stages of adoption and lower volume; this will boost the number of projects who will build on Cardano.
Success Metrics: The success of L4VA will be directly measured based on usage of the protocol itself, specifically in the following areas:
- TVL: Total value of floor prices of NFTs locked on the protocol (“in Purgatory”). TVL growth will show adoption and trust in the L4VA Protocol over time.
- Transactions: Total NFTs Sacrificed (sold) to L4VA. Transaction growth will demonstrate adoption of the protocol and value to market participants.
- Market share: Percentage (%) of NFT Sacrifice transactions divided into all NFT transactions on other exchanges over time. This will demonstrate how valuable the L4VA protocol is compared to existing person-to-person exchanges.
- Market Impact: Floor price increase % over period of time, divided into % increase in sacrifice Trxns over the same period. A value >= 1 shows correlation between floor price increases and adoption of L4VA.
- Active Users: Growth in number of daily, weekly, monthly active users on the platform, (1) gross and (2) as percentage of total number of active wallets on Cardano.
Existing products and integrations:
There are p2p marketplaces for NFTs but there so far does not exist any product or solution like L4VA. We are open to integrating with all existing marketplaces for NFTs and Non-fungible Virtual Assets (“NVAs”).
Technical Requirements: As far as we are aware there are no technical constraints currently to accomplish the development and release of our protocol and dApp as designed.
Ecosystem Maturity: Our protocol solves a problem for NFT markets today and NVAs tomorrow!
Why it’s Important: Our protocol utility is crucial to support decentralized NVAs and NVAPs and to make the vision of crypto (democratizing ownership and free exchange of assets without the need for a central 3rd party) truly realistic and competitive in the face of strong entrenched traditional financial players. Without a decentralized market maker for Non-fungible Virtual Assets (NVAs) on the blockchain the hope and vision for mass blockchain may never be achieved.
Please describe your plans to share the outputs and results of your project?
We plan to openly and honestly report on the outputs of our project through multiple public forums, including:
Github: We will share code commits on Github as we complete them.
Success Metric Analytics: Upon main-net launch, we will track and visually display the success metrics above (TVL, Transactions, Users, etc.) in the user interface.
User-facing Analytics: Upon main-net launch, we will share data analytics in the user interface related to price performance, transaction volume, and auction KPIs of specific asset types and/or collections (by policy ID). This will improve the user experience and increase usage per user.
Internal Analytics for Future Development: We will track and analyze the protocol transaction data to support the development of advanced functionality (e.g. providing variable pricing across NFTs and other types of asset NVAs based on metadata beyond the floor price). This will allow us to develop functionality that will create markets for more types of assets (real estate, bonds, mortgages, insurance, etc.) into the future.