The Fungify NFT Mint

The first ve404 mint

At the conclusion of The Great Fill (TGF), the first ve404 NFTs will be made available for minting. These NFTs will have the ability to receive staking revenue from the protocol, multiply point mining rewards, and participate in governance, giving it protocol-backed utility. The earlier an NFT is minted, the more revenue share and the larger the points multiplier it will have. And, unlike traditional NFT mints, the process is reversible, allowing you to recover your currency at any time. However, the NFT is permanently burned, reducing the supply.

This article covers how to participate in the mint, the details of the mint, and the thinking behind the design.

How to Participate

Purchase FUNG tokens. Deposit 210,000 FUNG into the Fungify NFT Minter contract.  Upon doing so, you will have minted an NFT from the ██████████ collection. At any time after the mint, burn the NFT to receive back 210,000 FUNG.

The contract address and mint interface will be announced on Feb 28th.

Mint Details

There will be a total of 75 NFTs available for the initial mint. Once these have been minted, Season 1 of the mint will have concluded. No additional minting will be possible until Season 2 is announced. Each Season will feature collaboration with a different existing NFT collection, executing on our vision of combining the best protocols with the best culture and communities. 

There is a hard cap of 3500 NFTs, beyond which none will ever be minted. Each Season will coincide with the natural rise in the circulating token supply, with a target of ~50% of the FUNG circulating supply locked up within the NFT collection. 

During the initial minting process, which is expected to last only a brief period of time, there will be a 20% fee on any burns. Once the mint has concluded, the fee will be removed completely. This is a temporary measure to discourage individuals from looping through to destroy the NFT supply at minimal cost. Once the collection has achieved a distribution and reached the cap of 75, there is no longer any necessity for a fee, and retrieving the underlying becomes completely reversible at no cost.

The Utility

When converted into an NFT, the underlying FUNG gains a multiplier on liquidity mining, revenue share, and governance. The earliest 25 NFTs minted start with a multiplier of 3.5x. Each subsequent 25 will have the multiplier reduced by 0.1x. The following table shows the correspondence between how early an NFT is minted and the FUNG power it acquires.

Liquidity mining multipliers remain active for up to 10mm of capital deployed. 

We intend to make the NFTs available as asset markets on Pools.

Rarity

Rare traits are purely aesthetic, but will be concentrated near the earlier token IDs, with some still appearing further into the collection.

Motivation

We have been observers of the Curve Wars and the powerful incentives to accumulate protocol tokens that have been downstream of demand to access enhanced liquidity mining rewards, revenue share, and governance, respectively, in terms of importance. Moreover, having incentives for tokens to be taken out of circulating supply enhances the ability for that token to drive usage through liquidity mining rewards. 

There are some limitations to the model of removing tokens from supply by having them locked in NFTs, since the NFTs themselves can be sold. However, there is a significant gap in liquidity between ERC-20s and NFTs because of the capital commitments required to purchase an NFT. This gap in liquidity represents the true extent to which the locked tokens are taken off the market. As the NFTs appreciate in price, the liquidity gap between the underlying ERC-20s and the NFT further widens, entrenching the extent to which the tokens have effectively been removed from circulation. 

On the other hand, a major limitation of the veCRV system is the irreversible lockup. Imposing such conditions acts as a barrier to widespread participation. Instead of individuals widely aligning themselves with the protocol, protocols like Convex, acting similarly to a liquid wrapper around the locked tokens, captured the value of the liquidity for its own token.

We wanted to improve on the incentives of Curve, while also fostering the sense of community and value that comes with being instantly recognizable as tribally aligned. By merging the Curve token model with the general concept behind ERC-404s, we are able to not only create similar or even better incentives as veCRV, but also create an NFT collection that has some of the key qualities widely demanded by the community: utility, reversibility, and progressive scarcity.

ERC-404: The Concept and the Standard

At the heart of ERC-404 is a powerful idea: that ERC-721s should have ERC-20 counterparts. This idea, pioneered by Pandora, has allowed NFT collections to break through capital barriers in unprecedented ways, with collections seeing the majority of their volume start to take place on the ERC-20 side. 

Our idea, inspired by ERC-404, but coming from the opposite direction, is the inverse: that ERC-20s should have ERC-721 counterparts. Ultimately it is about joining the fungible and non-fungible worlds together to derive the benefits of both. We view this as the inevitable path for the ecosystem, as the best protocols join with the best NFT projects, fusing these parallel bubbles of technology and culture together. 

For simplicity from a development perspective, our implementation will use a standard ERC-721 contract that accepts deposits and withdrawals of our ERC-20. As the standard matures, we foresee the benefits of making this transition seamless and employing the actual ERC-404 standard itself. We intend to participate in and promote the ERC-404 ecosystem to build mindshare around this vision of the path forward for protocols and NFT projects alike.  

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