What does it mean when you can programmatically split fees with multiple parties forever?
|Brian Flynn||Aug 4|
NFTY tracks the ever-evolving narrative of how mainstream will enter crypto through user-facing applications. In each edition I explore dApps, games, and the ecosystem affecting consumer crypto applications.
Many crypto-native projects have added or are considering adding affiliate fees baked into their own smart contracts over the past six months. While on-chain affiliate links have the potential to increase liquidity in a more transparent way, many individuals believe it won’t help drive mass adoption for on-chain markets.
To date, composability and the incentives to use existing contracts are drastically outweighed by creating new markets & tokens. There has been a handful of attempts by exchange products like OpenSea and 0x Instant to enable referral/affiliate based rewards inside of exchange contracts. Some have pointed out that the introduction of affiliate rewards in these platforms have not seen a dramatic increase in the amount of total transaction volume and liquidity in these markets because of the baseline liquidity not being there.
Say we were to reach a point where liquidity on decentralized exchanges hits a point where volumes are rivaling centralized exchanges. What would separate the investment of new money into on-chain markets vs. tokens? On-chain affiliates may be the answer. Here are a few ways this can potentially shake out.
Social capital to flow from tokens to markets — while many content creators have been notoriously known for increasing demand for new tokens, NFTs on OpenSea and soon markets on Augur will possess an opportunity. As user experience and education improves, it would make it easier for the average consumer to invest in markets on-chain as opposed to exchanges. With Augur V1, it used to be that only creatives benefitted with coming up with the “perfect market”. Now investors can add long-term Augur V2 “markets” to their portfolio.
On-chain bounties are transparent — on-chain affiliate means on-chain, transparent data for everyone to see. Instead of donations and Patreon being the preferred method of monetization for creators, perhaps they would point to markets which offer affiliate rewards.
Composability encouraged — While Veil was primarily focused on creating their own markets, there was no upside to let users permissionlessly create their own markets (Veil created new markets based upon requests, creating too many markets would spread liquidity thin). Now, new overlays would be encouraged to highlight and funnel users into existing markets in order to generate affiliate fees.
I’ve noticed this trend starting to develop in Q4 of 2018. I wrote about the concept of “on-chain curation”. Instead of news sources following price movements, content would be incentivized to drive liquidity to specific markets.
Future curators will be reporting on markets rather than news. Affiliate fees will be taken at every inch in the market. This creates an entirely new effective way to convert attention to liquidity, something that a lot of native-crypto markets currently lack — NFTY #29
Disclaimer: I work on helping create a world of infinite possibility at Dapper Labs. All opinions are my own and don’t represent the opinions of Dapper Labs.