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NFTX: The first NFT Index fund has arrived

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DappRadar

1-click investments in NFTs just became possible

NFTX is a platform for making ERC20 tokens backed by NFT collectibles. These tokens are called funds, and (like all ERC20s) they are fungible and composable. 

With NFTX, it is possible to create and trade funds based on your favorite collectibles such as CryptoPunks, Axies, CryptoKitties, and Avastars, right from a DEX such as Uniswap.

Source: NFTX

There are two types of funds on NFTX:

  • D1 funds (input) have a 1:1 backing between a single NFT contract and an ERC20 contract. For example, if Joe owns 2 PUNK-ZOMBIE, that means he can redeem exactly two random zombie CryptoPunks at any moment. Another example would be Joe owning 1 AXIE-MYSTIC-2, giving him the ability to redeem one random Axie with two Mystic parts.
  • D2 funds (top-level) are Balancer pools that combine D1 funds. For example, AVASTR will be a D2 fund that combines three different D1 Avastar input funds (AVASTR-BASIC, AVASTR-RANK-30 & AVASTR-RANK-60). The point of this is to offer more diverse exposure without requiring users to hold multiple tokens.

When a new fund is created, the account which sends the transaction is designated as the fund manager. This allows the creator to change fund parameters like fees, supplier incentives, and NFT eligibility. 

When the creator is done modifying the fund they can then “finalize” it which gives up their control to increase trustlessness.

These funds can eventually be redeemed or traded against the primary token NFTX which has potential market demand. Effectively turning traditionally illiquid NFTs into liquid ones, tradable on decentralized exchanges such as Uniswap. 

It has the potential of bringing NFTs into the DeFi mainstream, by granting them liquidity, and composability. Two things that form the cornerstones of Decentralized Finance. 

NFTX Token 

The NFTX token was released on the 5th of January 2021 at a price of $18.00. Initial tracking indicated a quick drop off followed by a steady rise to around $35.00 and now back down to around $25.00 at the time of writing.

Source: CoinGecko

NFTX tokens that were received during the community raise were unlocked at 12:00 PST (20:00 GMT) on the 5th of January. An NFTX/ETH pool was created on Uniswap (in the minutes following the unlock) at a starting price of 40 NFTX per 1 ETH. This pool will begin with 30,000 NFTX and 750 ETH.

Who is NFTX for?

A common misconception is that NFTX is a project for NFT collectors, but most NFT collectors enjoy browsing and trading individual NFTs, so there is no reason for them to wrap their collections into fungible tokens.

However, many people out there that don’t have the time or knowledge to trade individual NFTs would like exposure to NFT markets. 

These are the NFTX target users—the people trading top-level funds of NFT blue-chips such as AXIE, PUNK & KITTY on Uniswap, not the people minting/redeeming their NFT on the NFTX website. 

Most of the time the only people minting/redeeming fund tokens will be arbitrageurs. This is similar to the dynamic with WBTC. Most people that trade WBTC do not mint and burn it themselves.

NFTX will start out with just D1 funds, so at first, the homepage will have quite specific funds listed, however, once the top-level D2 funds are created then the homepage can shift focus to those funds instead. The idea is for NFTX to be like CoinMarketCap, but for the NFT space. 

Users will arrive at the homepage and be greeted with metrics for top-level funds backed by NFT blue-chips such as CryptoPunks, Axies, CryptoKitties, and Avastars. Eventually, the hope is for NFTX to become home to over a hundred top-level NFT funds, each of which will feature real-time price, volume, and TVL data.

NFT Valuations

A new product on the DappRadar Hub in 2021 is the NFT Value Estimator. Currently, still in Beta mode, the purpose of the tool is to give NFT holders an indication of the value of their NFTs. Currently, only CryptoPunks are covered but soon more NFTs will be added for estimation. 

Today,  the NFT Value Estimator tool has an important role to play in understanding how the introduction of the NFTX platform has affected the value of CryptoPunks. The question is, has the introduction by NFTX as a way of bringing tangible liquidity to NFTs increased the value of CryptoPunk NFTs?

Inside scoop 

We spoke to the owner of CryptoPunk #5855 about whether they have seen an increase in the value of their CryptoPunk since NFTX launched. 

They told us that using the DappRadar NFT Value Estimator in December 2020 the value was estimated at around $6k. Moreover, that punk was purchased one year prior, in December 2019, for a cost of $132.00. So the value of the punk had already increased significantly over the last 12 months. 

Source: Etherscan

On the 7th January 2021, just 2-days after the launch of NFTX the DappRadar NFT Estimator is showing an estimated value of $9,850.56. Which, according to the owner is about $4,000 higher than before the release of NFTX. 

Aside from the obvious opportunities presented for those that are either new or long term holders of these specific NFTs. NFTX has opened up a completely new way to look at NFTs and their value. 

Traditionally, moving NFTs on would be a tricky process. The NFT can be valued, but importantly it needs to be bought by another party to realize that value. NFTs were once an illiquid asset class. But NFTX has just flipped that on its head. 

What happens next will be truly fascinating to observe as we see the emerging NFT space really start to grow into itself in 2021. As traders pivot and look for new opportunities, 2021 could be the year of NFTs.

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