[Investment / Partnership with NFT projects: Art, In-Game Assets, Access]

Farm or Buy approach to NFTs: (similar concept brought up by @Crypto_notte here: Proceeds from staking - #6 by Crypto_notte but applied to NFTs)

Trends:

  1. The number of global gamers just hit 3B, growing at 7-8% CAGR.
  2. NFT secondary sales amounted to $15B in 2021.
  3. The blockchain gaming ecosystem raised 35X more in the year 2021.
  • FTX went from launching a gaming fund to launching a gaming unit to power future game studios

Whether frothy markets lift the valuations in the blockchain gaming ecosystem, we can’t deny that the intersection of Gaming and NFTs are a chance for crypto mass adoption. With that, Meta Collective DAO would stand to gain by allocating a portion of its treasury to this nascent but exponentially-growing ecosystem.

The “How”

We “farm” it by deploying capital via Whitelist or discounted sales by partnering with projects with solid fundamentals. The DAO could assess projects based on team background, token design, game economy, demand sinks, idea, market size, opportunity, solution, utility, and competitive advantage.

How is it similar to farming tokens? Most NFTs are used to attract community members to participate in a project’s initiatives. By participating, we get rewarded and hold NFTs and buy more in the secondary market if we believe in it. Otherwise, we rebalance to stablecoins. We do it large scale with our DAO members or use the treasury funds.

Ex. Discounted NFT sales. Buy for 80, sell for Mint price of 100 (definitely and ideally above mint). We earned 25%. It’s like a bond, but raised money for projects is returned in-kind — in NFTs.

In addition, most NFT projects have their native tokens, meaning Whitelisted or discounted NFTs could earn from:

  1. Price appreciation
  2. Yields via NFT staking

The DAO can participate by:

  1. Partnering with up-and-coming NFT projects via whitelisting or discounted NFT sales
  2. Seed investment in early NFT projects (Blockchain gaming ecosystem)

Pros:

  1. Exposure to a growing market
  2. Huge funds can’t buy into illiquid NFTs, allowing well-capitalized DAOs to take advantage of the opportunity
  3. Added utility and benefit to token holders and DAO members
  • Access to exclusive deals & discounted sales

Cons:

  1. Illiquid
  • Capital and labor-intensive - We need to allocate a small amount to a considerable number of projects to dent treasury growth.
  1. Required due-diligence

Feel free to share your thoughts.

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I’m very supportive about the reasoning and approach.
Just governance / execution thoughts:

  1. Labor-intensity: do we have the resources to have someone allocated to surfing and interactive discord communities, get whitelisted etc.?
  2. If we get a lot of small whitelisting allocations, does it makes sense to put each of those to a vote? (e.g., deploying 5-10 sol to buy NFT in whitelist)
  3. Some of these projects require very fast sale (or buy more) after go live - again, voting on what to do might slow us down and make us not-competitive.

→ how about having a small treasury pot where more freedom is given to the founders / delegated person with deep expertise, connection etc in the NFT ecosys?

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thanks @solman for putting this together - very helpful

I think that for sure the “hard” side of this type of investments is the labor component, both in terms of 1) time, 2) specific expertise in NFT trading and 3) payoff in absolute terms of the strategy.

Just for my understanding before giving my POV and to educate myself on the topic (as i am not active in the NFT flipping space), what is the minimum/maximum size at which we can operate on average? (e.g are we talking about 100 SOL per collection, more, less, else?) Thx

Hi, thanks for all these receptive comments and important questions.

  1. There are other ways to get exposure other than “grinding” for whitelist like partnering with NFT projects as strategic partners and get deals in return. In line with that, there will be projects we will missed out on and that’s okay so long as we get to pick projects with good fundamentals.
  2. The last time we tested our first partnership with an NFT project, it took a couple of back and forth before the founding members agreed on the collaboration. During this first partnership, we were given enough lead time as the project is yet to launch a week after initial discussions. The DAO can vote on it within 24Hrs and still manage to participate as long as we have enough lead time.
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Since we will be participating in the “primary market” rather than the secondary market, we could treat NFT projects like we would any crypto project. We could based decisions on the quality of the team, aesthetics, culture, community, and NFT utility among others.

On the other hand, holding it requires a different set of metrics we need to track like: liquidity, top holder activity (are top holders “diamond hands” and not selling), and seniority distribution (how long are investors holding it for - the longer the better since it’s a sign that it’s not a quick money scheme).

Regarding how much should be invested per project, we could based it on conviction, deal terms, and or a fixed percent of treasury. As @Crypto_notte have said, we could remain fluid when an opportunity arises.

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Yes i totally agree with this approach. We can also move quickly when required, most of the time we are always able to turn around the discussion and vote within 48 hours max so that should be enough

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In my view I am a little skeptical, but that might be coming from my general apprehension of NFTs.
As I see it you run two major risks:

  • NFT market is heavily correlated and if the market dries up/drops all the positions will likely drop.
  • We will probably be led to buy lemons, and since it will be a primary, you will have no visibility on potential liquidity.

Although you won’t be able to diversify, I suggest only a small allocation to test the theory/gain trust of who would be selecting the NFTs.

Great Stuff, thanks for sharing