FWA and the New Market Structure for NFTs | Adam (Rhynotic) and Eric Conner

David Hoffman:
[0:02] I'm here with Adam. He goes by Rynotic on Twitter. He's a creator of FWA. That's fake world assets on Ethereum. Adam, welcome to the show.

Adam (Rhynotic):
[0:12] Awesome. Thank you for having me. I'm excited to be on.

David Hoffman:
[0:15] And I'm bringing him out of retirement. We also got Eric Conner. Eric, it's been a while. Good to have you back, my man.

Eric Connor:
[0:19] Hey, David. Good to be back. It's been too long.

David Hoffman:
[0:21] Eric, I'm tapping you in on this conversation because I know that you are a FWA enthusiast, So I think it'd be pretty cool to have you on the show here. Also, energy is up in the crypto markets. And so we're doing more conversations. Adam, tell me about fake world assets.

Adam (Rhynotic):
[0:37] Yeah. So for anyone who's listening doesn't know, it is a NFT purchasing protocol where basically there is a pool of assets that are priced by the depositors, and they're backed by a certain amount of ETH. And then anyone can come in and purchase something randomly from the pool. And if they like it, they can keep it. If they don't like it, they can sell it back into, I think it's 90% of the depositors bid. And it's permissionless, decentralized, will go on forever. There's some parameters I can change, but the goal is to try to get as hands off as possible. The random numbers are pulled by Chainlink. It's kind of standard for anyone who's listening, but it's great. It's been going for about a month, month and a half. And I work at Tokenworks. Tokenworks is a on-chain financialized studio where we make a product a month. Although when a product takes off like this one, we kind of run with it and

Adam (Rhynotic):
[1:28] work on it as long as it feasibly makes sense. And so it's kind of where we are now.

David Hoffman:
[1:33] Talk to me just about the broad philosophy about like why you think FWA is cool, why it has legs, why it's captivated people's attention, why it's been successful. Like what's the overall idea?

Adam (Rhynotic):
[1:44] Yeah, I mean, I think people love NFTs. I know it's kind of a hot topic. Some people in ETH hate them, but I've been an NFT maxi for years. It's the main thing that keeps me interested. And so collectibles, we've seen Pokemon cards, especially in the last couple of years with, Libuboos and whatnot, like people like getting a random asset. Like you like getting something, but that just kind of makes sense. And digital assets make more sense than that. Like a lot of these sites, like Collector Crypt, BZ, Quartyard, they're great. Teams are awesome, huge inspiration. But at the end, you kind of end up with this physical asset that if you want to get it delivered, it takes two weeks and it's authenticated and kind of all of these things are sold by NFTs. And so like if there's digital assets that you want to keep, kind of makes sense to have it in this form. And some people are saying it's kind of the evolution of like an OpenSea type marketplace platform. We'll see. It's kind of still a little early to tell. Regardless, it's been really successful and fun, and people really enjoy it.

David Hoffman:
[2:46] So the consumer behavior that we're going for is like the whole gotcha thing. So you buy a Pokemon card pack, you get a handful of Pokemon cards. One of them is valuable. Sometimes one of them is very, very valuable, and that's kind of like the dopamine hit that people come back for. We're kind of replicating that consumer behavior with FWA. So you come to FWA and you like buy like a pack or is it you just buy one NFT you can buy multiple you can buy multiple sure but then like you don't really know what you get and that's kind of the fun that's the fun speculative gaming aspect to it correct?

Adam (Rhynotic):
[3:20] Yes and there are a lot of restrictions and you know because it's fully on chain so we use like it's called a Fenwick tree to like keep track of all of the positions and the odds of what you're going to get and so we are kind of restricted in that sense and that was kind of, part of the fun of building it is like what can how do we like work with these constraints to make something that people enjoy and,

Adam (Rhynotic):
[3:39] still works it's kind of resulting in what we have now but.

David Hoffman:
[3:43] Can we just like pop open the hood just to understand this a little bit better about like how does an nft come into the fwa system eth also needs to come into the fwa system not all of these nfts are valued equally some are valued more than others like some are incredibly valued how does the system, how does just like mechanically, how does all of that work?

Adam (Rhynotic):
[4:04] Yeah. So, I mean, part of my inspiration was like a Uniswap V2 pool. And so for people who don't know what that is, like when you add liquidity to a Uniswap V2 pool, you have to basically say, I have this amount of asset and I have this amount of ETH and we're going to deposit and get LP tokens. And so you're kind of setting the value there. And then obviously if, you know, if your asset rips, there's like a permanent loss. And if ETH goes up, you've made more and whatever. So kind of setting the price by backing just made a ton of sense for me. And it's also part of that constraint that I mentioned earlier. Like we don't really know the prices of these NFTs. So we don't know the price of a Bored Ape or a Punk or a 10,000 tokens NFT. And that's because a lot of these marketplaces aren't on chain. And so there's no way for to query OpenSea easily and be like, what's the price of this? There are some options. There's like NFTX that is like fractionalizing it. We could try to get a price. But for the most part, we don't know the price of these. And so it makes sense for someone to say, this is the price. And to prove that, I'm going to back it by that amount of money. And so that's kind of both a constraint and has turned into like a feature. And a big thing of these kind of Pokemon card sites like Collector Crypt is this buyback. And so they are willing to buy it back for a certain amount. And I think that also incentivizes people to participate because they know no matter what, they don't have to ship it. They don't have to get it delivered. They can just take back the money and they

Adam (Rhynotic):
[5:26] still kind of, even if they don't like the card. And so it's user behavior.

David Hoffman:
[5:32] What is the incentive for somebody with an NFT to come and seed the asset base in the first place? like why I've got an NFT why would I take it to FWA

Adam (Rhynotic):
[5:42] And so and to be clear like a lot of this is based on odds like there's a chance you deposit and someone purchases your NFT first purchase and, you lose your money. That's kind of like the pitch. It happens. But on average, if you continually deposit NFTs, you are getting paid out what you list them at if you are pricing them fairly. It was kind of the initial pitch. And I think it's still playing out, but we're seeing people price NFTs a little differently than I'd expect. But if you put in, let's say, a board ape and.

Adam (Rhynotic):
[6:18] There's an 80th bid on OpenSea, so it's worth 80th. and you come in and you deposit it for eight ETH, you're going to, every time someone purchases from the pool, you're going to get a small amount of that. So if you're one one hundredth of the NFTs in the pool, you're going to get one one hundredth of every purchase. And that'll accrue over time. And on average, because the price to pull is the average of all of the NFTs in the pool, you will earn the amount of ETH that you paired it with. And then when someone happens to purchase your NFT, they will decide, do I want the NFT? Do I want the ETH backing? Do I want to sell it back to them? But if they do that, if it's priced perfectly, they'll take the NFT because there is a 10% haircut. And so that was kind of like how I planned it out as. But I think it's a pretty interesting way to sell your NFTs when there's very little liquidity that we're seeing.

Adam (Rhynotic):
[7:08] Also, there's no reason you have to keep your NFT in the pool the whole time. Let's say you want to deposit it. Some ETH has accrued. You're ready to pull it out. You can pull it out as long as the pool is not too hot, meaning that there's too many purchases, which was a big issue in the beginning. Not so much of an issue now as it's slowed down, but that's to keep the integrity of the pool and boring, on-chain stuff. And also, for the initial two-week period, there was emissions of the token, so people were incentivized to deposit because of that, and kind of built this network. One thing that interested a lot of people was how we launched the token, and so there was, you actually couldn't buy the token for the first two weeks. The only way was by participating, which I found super novel and interesting, and I think a lot of people did too.

Adam (Rhynotic):
[7:51] And so that kind of had a lot of volume as a result. Now we're in this more healthy period where like obviously purchases are down, it's less hyped, but we're still seeing activity. And as a depositor, I mean, the NFT yield is still quite good. But again, you can hit that, like the turkey meme where it's like day 1000. And so some people are making money, some people are losing money,

Adam (Rhynotic):
[8:16] but it's still kind of like an unsolved game. And so people are having fun doing it.

David Hoffman:
[8:20] I think that's the mechanics of the protocol that we have gotten pretty well thoroughly done. So let me turn to Eric here and just ask Eric. Eric, you are an FWA enthusiast. Why? What do you like about it? Why are you so thrilled about FWA?

Eric Connor:
[8:35] I think first and foremost, most fun I've had on chain in years, probably since the original NFT wave. I mean, I think everybody knows I've been an NFT maxi for a while, been supporting a punk for a while. Well, Adam made a good point. It was one I was going to make as well. There's a lot of inefficiencies in the NFT marketplaces. So I think that's one of the biggest things people don't realize why there's been such a long bear market in NFTs is like so many collections essentially went to zero because you can't even sell them, right? There's not even people looking for bids on the book of like OpenSea and stuff. So with FWA, at any point you can put any NFT, well, not any NFT, there's whitelisted collections, but most NFT collections that have any value you can put out there and potentially get a bid on it if someone lands on it and takes it at any point why did it capture me though at first just a novel idea is something to finally do on chain I mean DeFi is great and

Eric Connor:
[9:30] Is everywhere on Ethereum, but it's relatively boring at the end of the day. I think it kind of caught the Gasha trend at a perfect point. I'm sure a lot of people are aware, but on Ethereum and other chains, the Pokemon card thing's going crazy, right? You spend it for 100 bucks, you pull a random card, and that was going big at the time. And just bringing it to NFTs, that takes a trust layer out as well, right? There are some real world assets, I'm sure we'll get into at a point here, like Pokemon cards that are on FWA now.

Eric Connor:
[9:59] But just I had a bunch of just like I had considered dusted NFTs at this point even things that are pretty good like me bits and you know doodles that were once at a point of course up at you know multiple each that are hard to even get rid of these days and I was able to put them out there and farm and you know earn FWA and still have them out there now earning you know pack for being fees but and then I would also say the coolest thing is like to me FWA is like a protocol people can build on top of I've personally built something called Gasha Battles, which pits five people's pulls against each other. And then whoever gets the biggest pull takes all five NFTs. And there's been a ton of stuff built on top of this. There's been mega rip where people pull a bunch of eat together. And after seven days or whatever it is, they rip 100 packs and I'll split the pool. There's just a lot of cool things that can be built on top of the base FW layer itself. So I think it's bigger than just going on FWA.fun and ripping a pack. I think we're going to see a lot of cool innovation. Like to me, this is where NFTs are going to be bought and sold. This is where NFTs are going to be launched. I'm sure Adam wants to talk about Flair launch as well.

Eric Connor:
[11:05] And yeah, it's just like, it's the first exciting thing I've personally seen on mainnet in a while.

Eric Connor:
[11:09] That's not just DeFi, right? So I guess that's why it kind of just caught my attention.

David Hoffman:
[11:13] So FWA is both a, like a consumer, has a consumer relationship. I can go to FWA and do the thing. I can go buy the packs. But Eric, you're also positioning it as like, this is just like a liquidity infrastructure for NFTs as well. This is like a building block for something bigger.

Eric Connor:
[11:31] Yeah, for sure. I mean, because if you think about it, like say I'm sitting on a few Mibits, maybe one Mibit has sold in the last month on OpenSea or something. Like I can put five out there, I can back them with the full price, 0.3 ETH or whatever. If someone lands on it, they might decide just to take it. That person maybe was never going to buy a Mibit, right? This gets into the interesting thing and Adam hit on this a little bit, like how do you price these things? I think generally on FWA, we're seeing NFTs backed by less than what they're kind of going fair value on OpenSea because I think people would want to sell them. People would rather than take the NFT than take the ETH, at least a lot of people. Although that's not fully fair because the top NFT on FWA right now is a punk back with 300 ETH, which is a top-tier punk. It's a hoodie with a smile, very clean. It's probably around that value.

Eric Connor:
[12:19] But if that gets pulled, someone has to pick, do they keep the punk or do they keep the E? If they keep the E, that person who put the punk out there has to rebuy their punk essentially at 300 E. So you have to be very smart about your pricing. Now, since that's the rarest ones, the lowest odds of being pulled, it probably should be a long time so that's pulled. And how the protocol works, they should earn that back in fees by the time it's pulled. But we have seen someone put a punk out there and it got pulled well before, like early on, right? So it's just, it truly is just kind of, you know, like, like Adam said it over time, it all kind of evens out there's winners and losers, but you are taking a risk by putting stuff out there. And at any point you could spend for point, I think it's 0.08 ETH or something right now to spend, you could spend and, and you could pull a PONC. So, um, it's cool. There's, there's Pokemon, there's a Pokemon card out there that's backed by like 20 ETH or something like that. And I think...

Eric Connor:
[13:12] This is a topic we should just have at some point in this podcast, but these protocols like Collector Crip who are custodian and insuring these Pokemon cards and wrapping them and putting them on chain, I think we're going to see a proliferation of ironically real world assets on fake world assets. On fake assets. Right, which introduces a trust layer, of course. I'm curious about Adam's thoughts on this. If at some point FWA would even think about custodian or anything like that and insuring, But, you know, I think we're going to see like Rolex watches on this thing. I think potentially someone could put a house deed out there, like anything that's tokenized to go on here.

Eric Connor:
[13:46] So that's why I think long term is super cool.

David Hoffman:
[13:49] Yeah, Adam, how do you see like the growth vectors of FWA ahead for it? Or are you kind of just like hands off? Like this is a mechanism. We've built it. Maybe there's some, you know, tweaking and perfecting to do. But other than that, like you're going to just like kind of set it and let us see what happens.

Adam (Rhynotic):
[14:06] And I mean, obviously, long-term goal is to be more hands-off, but right now is like the time to really be working on it. And we're going to keep adding new features, keep tweaking it. I think Eric touched on the Flair launch mechanism. Basically, all the NFTs we're seeing in the pool currently are NFTs that have existed already, that have been around for years. Maybe they launched in the last year, if you're lucky.

Adam (Rhynotic):
[14:27] Having new launches deployed into the pool, I think is really interesting and incentivizes people to participate. And there's a chance where, you know, a lot of these mint kind of phases for previous NFTs, it's like a one day thing. It's a one week thing, max. Like there's a chance that someone launches a new collection through Fware and it's there for a while. And like, you know, also I think Quit mentioned on this and he did a podcast, but, when you're minting a, let's say there's a Azuki, you know, and this is the Azuki launch day and you purchase if you get a common azuki that's like not, it's not a fun experience for you you're shooting for that rare the rare golden azuki whereas here if you get an azuki at all, you're very happy you know if you pull an azuki like that's an awesome experience and you've gotten what you wanted and so that kind of skews the perception as well like you're now excited to get the common of the collection and we'll see how it actually plays out when like collections are launching it maybe i'm completely wrong.

Adam (Rhynotic):
[15:24] I think that will be pretty interesting. I'm building it so anything can be put in the pool. That's kind of why the backing can be, as people call it, like long, you know, having like 50 ETH on a 10,000 tokens NFT is because I don't really, we don't know the price of these assets. Like if someone is willing to back it by that and that's what they say it is, like it's hellish to try to figure out the price of a punk. And if you want to say, you know, if we made it so you could only, let's say punks were 30 ETH and we're like, you can only back punks by 30 ETH. No one's going to put in a hoodie. No one's going to put in an ape. No one's going to put in an alien. And I think that's a bad decision. And so it's kind of the trade-off in that sense. We're still trying to think about how to price things more fairly. Maybe there's a V2 where we do that. But for now, it's kind of just fair game. But I think it'd be really cool to have more reward assets. We've already added these Pokemon cards.

Adam (Rhynotic):
[16:18] There's no reason we couldn't add anything else that's tokenized that's a reward asset. It i will not be the one trusting them i will never do that i hate that idea i'll leave that to the professionals like collector crypt is extremely talented and been doing it for so long hellish that's why i'm sticking with, fake assets like i want to nft they're so easy you can prove you own it but if there's demand and there's a better custodian than me like there's no reason we shouldn't add it and so, we'll kind of see that'd be really cool anything that's token i mean there's so many things that are coming on chain now that kind of makes sense i know, it's probably stopped a little bit in the last like I remember four years ago everything was coming on chain and so I think we're kind of more mature now and we have more the infrastructure is there and so, There still is like the risk. Like what happens if, you know, I go back to like my shoe flipping days at like StockX. And what happens if someone lets a fake through? And what happens if, you know, StockX goes bust and then like they don't actually have the shoe anymore? That is a risk you're taking as well. But that's kind of why I would not be the one custodian things. And so, but let's say that happens. Let's say there's like that 20th Charizard that's in there. I think it's a Charizard. Let's say everyone, it comes out and it's like, oh, well, the Charizard is bust. It's a fake Charizard. The purchaser would hopefully still take the ETH backing and that still exists. And so the risk is kind of on the person that deposited the asset rather than the person purchasing it from the protocol in the future. And again, maybe it doesn't play out like that, but that's kind of like worst case doomsday scenario is how I could see it going.

David Hoffman:
[17:46] But so the way I'm looking at it is like, it is just one single global AMM for NFTs. Like you have NFTs, a splattering of NFTs on one side and you have ETH on the other.

David Hoffman:
[17:57] And so this is actually just like Ether being used as money for a splattering of nfts and the way that the nfts come in is that the individual prices it according to what they think is correct can we talk about that mechanism that like organic mechanism what are the penalties for an individual and i don't mean like protocol ascribed penalties but like why does the pricing mechanism work so let's say i'm say i'm the punk hoodie owner and I fairly value my punk at 300. Say that is fair. You know, God comes and says, yes, correct, that's fair. What are the penalties if I were to actually value it at $350? Or what if I were to actually value it at $250? Like, why does the market guide things correctly towards the actual fair value? How does that actually work?

Adam (Rhynotic):
[18:48] Yeah, so you're incentivized to not underprice it because then it is more likely to be purchased. And so there's no reason for you to put it at $250 when it's $300. Let's say even instead of God, there's a 300 standing ETH bid on CryptoPunks.app.

Adam (Rhynotic):
[19:05] And so if you list it at 250, like there's a 99%, any rational actor will decide to, if they purchase it, will take the NFT because they can sell it higher elsewhere. So that's kind of already like solved in that sense. And if you overprice it, too much, let's say you overprice it 350 or it's a double, you price it at 600 ETH, it's harder to get purchased from the protocol. But if it does get purchased, then the purchaser will most likely take the ETH because they're getting more money. Now, when it gets really close, let's say it's within 10%. And so if you back it by 300 ETH and it's worth 300 ETH and I purchase it and I'm a rational actor, I have to decide, do I want this NFT or do I want 300 ETH times 0.9 because it's a 10% haircut? And that haircut currently all 100% goes to the protocol and buys the token, but you would get 270 ETH as a result. And so as long as the standing bid is within that 10%, like you will take the NFT. And so that's kind of the incentive to price it fairly. And we haven't seen that play out exactly, but I think over time and with the correct incentives, it will.

Eric Connor:
[20:21] But one other thing too, pricing it correctly, so pricing as close as possible, you earn, the higher you back, the more protocol fees you earn essentially. So like you are somewhat incentivized to price higher because you would get a higher cut of the protocol fees.

Adam (Rhynotic):
[20:36] Well, the, the, um, on the east side you get, so let's say even if there's, you know, say there's a hundred things in and it's a hundred dollars, each item gets $1 regardless of the backing. But there are FWA incentives that go and are given to higher backed assets and it's like the square root of the.

Eric Connor:
[20:55] Price and so.

Adam (Rhynotic):
[20:58] But the reason you also back it accurately is because it lasts longer in the pool because the odds are higher or they're less likely to get it pulled. And so overall, you don't have to micromanage it as much. And all of the incentives were there to try to get it to price perfectly. And so there is still a world where maybe there's, again, a V2 pool that solves all of these issues that if they're even considered issues. But pretty happy with how V1 is kind of still working after a month and like people are still playing with it a big thing was like oh what happens after, you know we stop emitting tokens and all the supplies out there and the fact that there's any activity at all like it's it's working and it's it's still a pretty early for a, hopefully multi-year protocol that will like if i get hit by a bus god forbid that doesn't happen but it will still run and there's no there's no failure the only i mean, the single point of failure is probably Chainlink, you know, and that's, was it a $10 billion company right now? And so, yeah. And that failure will just be you can't purchase and you can withdraw all your assets. And so, also God forbid.

David Hoffman:
[22:02] So it's a wind down, not a crash.

Adam (Rhynotic):
[22:05] But, knock on wood, if I get hit by a bus and Chainlink fails, it will wind down. And so that's pretty good. Obviously, God forbid, there is some sort of exploit, things are on chain. There already was an exploit in the first version that we had to pay back out because I didn't get it audited and then prove the concept, got it audited. We're now here. Things are wonderful. And so I can almost thank the exploiter because we found it day one instead of day 30. And so, yeah. And it's been cooking since.

David Hoffman:
[22:37] What stops me from like going and looking at the whitelisted NFTs, finding the cheapest one, buying a cheap one, putting it into the FWA pool, and valuing it astronomically high, like 10,000 Ether. Like, why wouldn't I do that?

Adam (Rhynotic):
[22:51] I mean, there's no reason you wouldn't. It's like, we've seen that now. There's been, there's a Amacamego at like 50. There's a Punk at 300. The risk you're taking, though, is if someone manages to purchase it from the protocol, you're buying it back from them at whatever you backed it with.

David Hoffman:
[23:06] Oh, because you have to back it also with the actual real ETH.

Adam (Rhynotic):
[23:09] Yes, exactly.

David Hoffman:
[23:10] And so if I put in a stupid NFT at $1,000 backing and then they sell it back to me,

Adam (Rhynotic):
[23:15] I pay for that? You're basically buying it from them for $1,000. Yeah. And so, or $1,000.

David Hoffman:
[23:23] ETH. And then that ETH doesn't go to me. It goes into the protocol.

Adam (Rhynotic):
[23:27] That ETH goes to them.

Eric Connor:
[23:29] Don't wonder.

David Hoffman:
[23:30] Oh, it goes to them because they're against the money. Oh, I see. And then the 10% haircut,

Adam (Rhynotic):
[23:34] Because they don't get all of it, but it's still worth it for them to take 90% of it. That other 10% will buy the FWA token and go to the protocol.

David Hoffman:
[23:43] Right, so if I put in a stupid NFT at 1,000 ETH, they see like, oh, I just got this stupid NFT, but the protocol is offering to buy it back from me at like 900 ETH. Obviously, I'm going to take that. Protocol collects 100 ETH, and then me who deposited 1,000 ETH in a stupid NFT, I don't get my 1,000 ETH back. But I've been printing ETH fees along the way, and so in theory, that should have paid me out anyways.

Adam (Rhynotic):
[24:09] And I do like to think of it more like the protocol not buying it from you, but the depositor buying it back, I think it makes more sense.

Adam (Rhynotic):
[24:15] But still, yeah, exactly. And so, very cool.

David Hoffman:
[24:18] The thing I like about this is that, to Eric's point, liquidity really dried up in the NFT world. And this is kind of like a universal buyer or just like a universal liquidity engine so that if there's literally not an offer for you on OpenSea, you can go to FWA and you can do something there. And it feels like if we had many more mechanisms like this, the NFT flywheel would have been a little bit more sticky and sustainable. And like owners would have had just more assurances that there would be liquidity or a way for them to get ETH in some way or another. And so I do think that under the success conditions of FWA, like this is really good for the NFT industry.

Adam (Rhynotic):
[25:02] I like to think so. I mean, some people don't like it because obviously it's a little gamified. I think we've seen gamified NFTs for years.

Eric Connor:
[25:08] They can just not play.

Adam (Rhynotic):
[25:09] They can just not play. I know. I think it's a net positive. I think it's bringing fun back to NFTs. And that's what I've been trying for the last couple years. People love punk strategy. Punk strategy had a moment for punks. Some people felt like it was still a net negative for crypto punks in general. Some people felt like it was, I don't know, a lot of opinions. I disagree. But I see their points, especially a lot of the more art-focused people. You know but I think if you're against the financialization of art maybe ETH is not for you I don't know that's my personal opinion I think like you're kind of financializing at the second you mint it and the second you sell it on OpenSea,

Adam (Rhynotic):
[25:45] But I see everyone's kind of point, but I think it's a net good.

Eric Connor:
[25:49] I think where this gets really interesting too is the eventual idea of custom pools. So I'm in the FWA team and I've been talking about this, but instead of just this one global pool, people could potentially launch their own pool. Say I want a single punk whale and I want to start to get rid of my 30 punks, right? I could just have my own Eric punk pool, right? 30 punks out there backing with what I think the value is. Now the spinning price obviously goes up. And I don't know, Adam can probably speak to the customization here, but the odds would vary on your punks. But people could have a chance every spin to just win a punk, right? And as a punk holder who has a bunch that are just sitting there and doing nothing, you could be earning fees on them. Of course, you could be selling them. You could be buying back their punks. But I even saw somebody tweet about how Yuga Labs is sitting all these punks like 10% that they could potentially, they really could never sell because it would just look bad on the market, but they could potentially be farming through FWA, through maybe a custom pool, something like that on those punks. So it starts to get really interesting when you talk about that. Flair launch, which I think is going to be a superior NFT launching mechanism as well versus just putting it out there, cash grab and first person to sweep the collection gets the most value out of it. So there's a lot of stuff beyond I'm just, you know, the current generalized pool that I think is going to be really interesting for the NFT space too.

Adam (Rhynotic):
[27:14] And I'm trying to keep the general pool as simple as possible as well. Like there's a, and obviously I consider like, oh, like maybe we have separate main pools that have price bands. So you can only put something in in this price range or maybe it's only Yuga Labs kind of assets. But I think having the main pool as simple as possible benefits everyone building on top of it. And so we're seeing like a gotcha battles or the mega rip one or flop. They, it's simple. It's easy to build on this main pool. Everything kind of, there's 6,000 assets. It's a bunch of collections. It's perfect. And then having these custom pools kind of solves the problem of like, if I want to only pull and purchase like a punk again.

Adam (Rhynotic):
[27:55] That purchaser can go in, look for pools that are only punks and kind of go from there. And the pricing mechanism would work in the main pool too. Like the way it's set up, if there's only punks in the pool, like it will be an average of everything in there. And so the code was already audited. It's really simple to just kind of make it a little more granular just with one depositor. And we're still working. We'll probably be past the first Square launch. We'll probably be not past the user pool, custom user pools out yet. But we'll see. And I'm still tweaking it. maybe it makes sense. We've had some people say they don't want actually the buyback option for custom pools. And so maybe there's a world where you want to deposit all their punks. They don't want to back them by ETH, but they're still incentivized because all the money goes to that because they're the only depositor. And so kind of still workshopping that. I have a couple iterations done that I'm getting audited, but they still IP tweaked. And we'll kind of see. We'll see what happens. I'm really excited about the custom pools because I think it kind of solves a lot of the issues for the main one, especially if all the fees from the user pools flow back to the main pool

Adam (Rhynotic):
[28:58] and flow back to the token. I think it's still kind of always like a nice little ecosystem.

David Hoffman:
[29:02] Yeah, talk about the actual token. So FWA token, it was created at Genesys, but you could not buy it. You could only get it by actually participating in FWA. Talk about the way that the token came into the world and its role that it plays in the app.

Adam (Rhynotic):
[29:17] Yeah, and so some of the reasons of why you could only get it by participating. I've launched probably 16 projects over the last two years and there's so many external factors that go into like why a project failed and a lot of them aren't my fault, I mean you could say it's my fault as like a mechanism designer but not my fault and like I remember I launched one of my first token works projects was top blaster and it was 6.9 percent of token fees on selling the fees would accrue whoever top blasted and paid the most on average for the tokens would get them all, really cool idea I liked it the site looked great one hour after launch Trump launched and just nuked it to zero it might have even been dead before but like there was no chance of it coming back, One of the tokens got sniped and it was called Cabal. It was on mainnet. You had to convince an AI agent to let you sell. So you had to basically like beg, publicly beg, and it would tweet and it would show. And it would take into account like, oh, like what's the market? Is the token trending upwards? Are you in profit? How long have you held? And it's like, how compelling is your argument? Really cool. And like, I think like we launched that in a certain market and it could go crazy. Instead, it went to like $2 million market cap, which was still great. But someone sniped 25% managed to sell after like 40 attempts which is still really cool it took 40 attempts to sell as a sniper it took projects dead and so like as a result of someone who didn't really care and.

Adam (Rhynotic):
[30:42] People will disagree with this but there is a fine line and like it's kind of blurry what a sniper is and what an early participant is you know it's like if I see a project early and I buy it and I'm a believer like am I a sniper am I like.

Eric Connor:
[30:56] Or am I just

Adam (Rhynotic):
[30:57] A savvy crypto trader. Like, I don't really know. And so I usually don't, like, I'm not upset at snipers. Like, I think, like, if I didn't know what this project was and I can make money, like, I would probably try to buy it early too. And so... In that sense, I think it makes sense to try to distribute your token to people that actually know what it is and actually are participating. And so the best way to do that is to not let them buy. Don't let people buying that aren't buying. And there's different ways we could have done it. We could, I've seen some other products pop up that are like giving purchase allocation to people that participate in a project. But I think for us, it just made sense of like, oh, you can cash out as ETH or you can cash out as FWA. And that's like a way to buy it. We also want to do incentivized activity and try to like, they call it like the cold start problem of like how do you get bootstrap protocol to start like getting deposits and start getting people to play, and the token kind of just like plugged all those little holes and so, also it's really fun to have a token like I think if you're making a crypto project like why not try to make it as decentralized and work on its own like that's the whole reason we're here and so we could have not had a token and there's a lot of, platforms that don't but I think having a token and accruing value to it is like, crypto forward kind of way and so yeah.

David Hoffman:
[32:13] How does it actually accrue value

Adam (Rhynotic):
[32:14] And so again a lot of this is on chain this has been like from day one and the docs and it's all dependent on usage like it's the token probably worthless like who knows but again the fees from the platform all go to buy fwa and distribute it to various parties and so initially all the fees were going to token works, and now the fees 100 of the protocol fees so you know the 10 haircut there's a one percent fee on purchases and I think there might be a 1% fee when you take the NFT portion, but all of those fees kind of go to buying FWA publicly and all it's one ETH per block so it does it automatically again if I get by a bus it'll still work and, distributes back into the system and so right now we have it set so I think 40% goes to purchasers that day and 30% goes to depositors that day, and 30% is burned. And I could be wrong on this number, but something like that.

David Hoffman:
[33:11] Okay, so there's a perpetual incentive to do the thing because there's always flows to buy FWA and that goes to flowing to people depositing NFTs or doing purchases. But then 30% is also burned. So that's put into the pocket of the value of the token.

Adam (Rhynotic):
[33:27] And again, this is fully dependent on people participating in any way. People deciding that they want one of these NFTs and they're playing, it all goes away if people stop purchasing. And we're trying to kind of align with that. But there's obviously no buybacks at the token if there's no volume. And so just to drive that home. But yeah, I think it's like the people that are holding the token kind of believe in the platform and believe that this protocol is working and can work even better. And it's the fact that 100% fees go to buybacks. They don't go to buyback and burn all of them. But what initially was kind of emissions tokens getting almost minted, they were fully like in the claim contract, but I'd call it emissions, was now replaced by tokens getting emitted from buybacks, like demand of the platform. It kind of all just like works. And so, well, I'm still tweaking all of these numbers too. Like, that's kind of where I want to be hands off, but it's too early. It's a month in and it's hard to say how everything kind of plays out. And we're not really we're in like a little mini kind of bowl hopefully it's this is the start of a bowl if i had to, praying my my my each long that i made in may right at 23 30 finally i've been a whole underwater for so long has finally i made three thousand dollars, on this trade after three months and i closed it immediately and i was down so much.

David Hoffman:
[34:56] But i was like i

Adam (Rhynotic):
[34:57] Actually like i held it long enough and i knew it would come back and so again hopefully this is the start of like a little the big one yeah the big one but, if that's the case like i think like having a decentralized kind of protocol like this that's user owned through the token and um, it's um and it's been nice that like we've been able to experiment for the last two years we've been launching tokens we we run with the ones that make sense we kill the ones that don't some people like that some people don't we're very transparent with how it works but, it's nice that like right before a bowl hopefully we have a big winner and like we you know we we've been, we've already made a bunch of revenue in the first two weeks and we're now just kind of like heads down working on it and we do make money off the, the token trade that's kind of the where token works still has revenue is there's

Adam (Rhynotic):
[35:43] a one percent buy sell tax that goes to us but that's configurable and like can go down as well but.

David Hoffman:
[35:49] Erica brought up flair what is this component of fwa what is flair

Adam (Rhynotic):
[35:54] Yeah so it's it's actually it's flair like think of fair but with a w because it's like okay gonna meme it forever all the memes are running great and it's funny people call it i didn't call it, like I didn't intend for that people pronounce it as that which is funny I think it's great so I kind of run with it but anyway Flair launches our net new NFTs that are launched through the platform and so, we saw it first with Jack Butcher launched a collection called Rappers and so it was 80 NFTs we backed them with 0.01 it was super low and basically launching NFT collections through the protocol, And the reason I think this is interesting is kind of what I said with the, I think it was the Azuki example. Like if you get a common rapper, you're still happy. You're like, oh my God, I finally got the collection that I wanted.

Adam (Rhynotic):
[36:41] And so we're hoping that this helps distribution as well. And there's a lot of problems, there's problems with artists launching in the pool that I think Flair solves. And so first you have to back it. You have to back it by ETH. And a lot of artists can't do that. Or they're like, ah, I kind of want to just release art. I don't want to have to put up ETH as well. And then also just distribution in general i think is like we saw in 2021 a lot of these gas wars a lot of these like how do i get these nfts not only in collectors hands but also in like a fair public distribution.

Adam (Rhynotic):
[37:14] And so i think by launching through for what it does is it lets people come in and say i want to back these nfts let's say there's a thousand of them and they want to sell them at 0.05. They say, all right, I want these to launch through 0.05. Is there anyone interested? And then collectors can come in and say, I will back 1, 5, 10, whatever the limit is. And they put up 0.05 ETH. When it gets fully backed, the collection is launched and all of those 1,000 NFTs get added to the pool with the backing. And then let's say someone purchases one of these NFTs from the pool, they can say, I want the ETH or I want the NFT. If they take the ETH, the NFT goes back to the launch contract and goes to the person that backed it. And so they said, I want it for 0.05. They got it for 0.05. They're happy. Or let's say, hey, I'm the purchaser. I like this new NFT. I am going to keep it. They keep it. Then the ETH that it was paired with goes back to the backer minus the 1% pool fee because you can't really avoid that. If we ever launch a new pool, will make it so it doesn't have that, but 99% of the money goes back to them.

Adam (Rhynotic):
[38:21] How does the artist make money? The artist makes money by the fees that it accrues while it was in the pool. And so, like I mentioned earlier, you could deposit an NFT. It gets purchased the first purchase and you are out of luck. But with a large enough amount, the variance kind of evens out. And so on average, let's say for 1,000 NFTs at 0.05, when mint out at 50 ETH, the artist should get around 50 ETH in fees, all things considered. And so the artist gets the full amount. that they were hoping for the backers that backed it get a chance, hopefully a higher chance of getting it if the purchaser doesn't take it with a minimal risk. And then hopefully the distribution is really good because it goes to people who purchase from FWA. And so there's kind of a bit of chance of like what I actually get. And there's a chance that someone purchases from there and decides to keep it is probably higher than the average thing in the pool. And so it kind of helps the ecosystem as well. We'll see how it plays out. again the first one we'll probably launch by this podcast this could be hugely dunked on as a result but i think it's going to be pretty good so the first one we're launching as well which should be this weekend.

Adam (Rhynotic):
[39:31] Is a test collection it'll be 111 nfts backed by 0.25 eth, and they'll act as almost like beta nfts you can activate them and get first access to deploy these custom user pools and so we'll kind of like let people play that way they're little cute fuzzy things that we made and And so, we'll price it at 0.25. I think the interest is there. After that, the first artist launch will be Sterling Crispin who has made this awesome Save Ethereum collection where the goal is to, back up the block, the early blocks of Ethereum onto Ethereum and kind of save all the data that exists. And it's kind of like a recursive thing. And there are these on-chain little cards that have people's faces that are in the space and are pretty cool. And they can trade a card game too. I don't know. We'll see. I'm excited for both. but we'll kind of see what happens. I think the goal is to get.

Adam (Rhynotic):
[40:23] Activity and get people purchasing. That's kind of the key. Like if no one, again, if no one's buying NFTs and there's no one bidding on NFTs and no one's purchasing from FWA, it's bad. It's bad for the ecosystem. And so incentivizing as much as we can for people to collect and to purchase NFTs from the protocol, like that's the goal. And so by doing these Square launches, We're hopefully adding NFTs to the pool that people really like at prices that we've seen people are willing to back it at. And so it should be a net positive for the whole ecosystem.

Eric Connor:
[40:55] Yeah, I think it eliminates a lot of the issues we saw in like 2021, 2022 with NFT mints. I mean, what you saw was, I mean, a lot of cash grabs, first of all, like instant sellouts and artists just walking away, right? This takes that away because the artists isn't getting paid to ETH right away, right? They're getting fees off the backing of the collection, essentially in the FWA pool. And it might take a long time for like all these NFTs to sell, right? They're in the larger pool. People have to spend and land on them and all this stuff. So, and it also, it's a better distribution like for the artists. They're getting put in this larger pool. There's a lot of users using FWA that maybe didn't know about the artists that has a smaller like Discord community. There's less of like just rush to trying to site mints and get a whitelist and all these things. So, you know, So it still requires the NFT market to be hot for any launch to do well or for NFTs in general to sell out. But I think it takes away a lot of the issues we saw with Ments in 2021, 2022, which led to, I mean, it was like an IPO-like craze. It led to too many scammers, too many cash grabs, and eventually just drying up liquidity, right? And in the end, that led to the downfall of NFTs for the last four years until hopefully now seem to be bouncing back a little bit. But I like the mechanisms. I'm interested to see how it'll play out.

Eric Connor:
[42:14] And NFTs, at least Robinhood NFTs right now seem pretty high. With FWA on Ethereum mainnet, things seem to be bouncing back. So getting a new launch mechanism could be a nice catalyst as well. So definitely excited. Yeah, launch mechanism.

David Hoffman:
[42:27] I think these are definitely the right words. It feels like one of the things that Pump did is it really homogenized and standardized the token launch process. And there was somewhat of that in the NFT space, but it was all like opt-in, like the 10,000 NFT PSP, but really that was it. And so what I like about this is like there's one central place to have a standardized launch for an NFT. And that like just orderly market structure makes things more scalable, more easy to reason about, more easy to think about. And I think that has like potential just for just palatability and like understanding in the market. And so like having an NFT launchpad where like liquidity is there,

David Hoffman:
[43:12] no matter what that NFT is or what it does, I think it's actually pretty bullish. Adam, what's next for FWA? When we shut down this podcast here in a bit, where are you going to go work on? What's the short-term roadmap?

Adam (Rhynotic):
[43:23] I just got the contract back for the FWARE launch stuff. So I kind of got to come to the auditor, go through, make the changes that need to. Seemed pretty good, but they had some recommendations. Try to get that out. And then FWARE launch zero, and then hopefully FWARE launch one, hopefully Sterling. And then another thing I want to kind of work on and kind of take my hands off as much as possible is that the NFTs that are added to the main pool, I don't really love that I can pick and choose. And just like if FWA holders think 10,000 tokens are bad for the ecosystem, like maybe they should be able to kind of take them out. And so brainstorming that, a lot of it is just like sitting on the changes more than actually doing them. It's like what feels right, what, you know, the mechanisms itself, like how do we tweak these? And that's kind of a hard, like if I sit down and really try to think about mechanisms, like I can't but they'll kind of just like come to you and so, Kind of keep chugging along on that. It's a nice setup. You know, we have a pretty like solid short-term roadmap. And so it's just always something to work on. But, you know, got to throw a podcast in here and there.

David Hoffman:
[44:28] Yeah. Oh, we appreciate it. The podcasters appreciate you throwing a podcast in here and there.

Eric Connor:
[44:34] What's interesting here is just all the building on top and the composability of Ethereum just showing being very beneficial. Like we're seeing a lot of, I don't know if David, you've seen Emblem Vault, but essentially this is a thing that you can wrap NFTs from other chains and bring over. So like that's how the Pokemon cards are coming over, right? Most of these are on Solana or other chains. You can now wrap them, bring them over to Ethereum, put them in FWA. So I think this is driving a lot of innovation around composability across chains and real world assets. I mean, I have a hot take that in like two years, most of the most valuable assets on fake world assets are going to be real world assets. I just think like if you can, if you can pitch to like quote unquote normies, I hate the term, but if you can pitch to them, hey, instead of, oh, you can get this NFT, which maybe they don't like NFTs, they've heard bad things about NFTs. Everyone wants a punk, I guess. But other NFTs, who knows where that's going. If you can pitch, hey, you can spend for 50 bucks and win a $100,000 Pokemon card, or you can win a Rolex, or you can win a title, whatever. Things could get weird, right? I don't know. I think luxury good sellers, like, I don't know, a Louis Vuitton or a Prada or something could tokenize authenticity. and we could see those going to insured vaults on Crypt Collect.

Eric Connor:
[45:50] And you could spin and you could win a Louis Vuitton bag. I don't know. There's just so many things that could happen with this real-world asset layer that are being tokenized. And of course, there's an element of trust there. But as someone like Collector Crypt gets bigger and more trustworthy, at the time, hardens that stuff, right? But...

Eric Connor:
[46:09] Yeah, all these new things that are popping up, like MVault, and just you can bring them over to Ethereum. And then, Adam, I'm sure you guys have, I've talked to you a little bit about going to Robinhood. I'm sure you guys have plans for other chains too. But just being able to bring these assets from chain to chain. Because I think, like I love mainnet Ethereum, right? Like in my heart, that's where I started. And I still got a soft spot for it. But there's no denying like the UX of layer two chains is way better, right? Fees are cheaper. But like FWA had to launch on mainnet Ethereum because that's where punks live. That's where high-value NFTs live. But if we slowly start talking about composability layers and wrapping vaults to bring over to other chains, that opens a whole other aspect here. Because now, all of a sudden, NFTs don't have to live on one chain. I could bring my punk over to Robinhood. There's an FWA on Robinhood. It's cheaper. It's quicker. All these things. So to me, there's unlimited potential here that go well beyond just spending for NFTs that are on the Ethereum mainnet.

Adam (Rhynotic):
[47:05] And I'm not against moving it to a different chain. Like, I mean, we're obviously, like I said, mainnet makes sense for the home of the token and the protocol because that's where the NFTs are. But also, I mean, just like people are building on top of us, like we built on top of on Chainlink and on Uniswap V4. And so anywhere there's like a Uniswap V4, actually, I don't even think we need Uniswap V4 on the chains that we deployed, but we'll need Chainlink because we can bridge the token over with like layer zero. We've seen many people do that. like Adam from very surf code repeat is his Twitter but he launched friend pet like years ago and he's since brinsed it over to mainnet and has renamed the token on mainnet and it's like a different project there but it's the same token which is pretty cool, There's no reason we couldn't bridge FWA token to all these chains, have a deployment there, and benefit from the speed. Because that's probably the biggest thing, too, is it takes about a minute to purchase because we're waiting for some chain link callbacks and some other stuff behind the scenes. And so not the end of the world, but it could be way more fun to do it instantly. And it's definitely there. Although I'm pretty firm on it won't leave the EVM. I'm not a big... I mean, Solana's fine. I trade on Solana, I participate in Solana. I like building on Ethereum. I think it just makes sense. And so we'll probably die on that hill.

Eric Connor:
[48:24] But yeah, I mean, think about the crazy stuff. I mean, you could, if it's a Robinhood, say, you know, there's tokenized stocks there. I saw today someone's like making an NVIDIA 3X long token on Robinhood chain. You can move along wallets. Like you could have, you know, stocks inside of this theoretically, right? You could have a custom pool where you spend for, you know, top prizes, a thousand shares of Tesla and the bottom prize is one share of GME, right? and you're doing gosh-a-spins for stocks, right? Or like there's leverage stock tokens in there. Like when you start thinking about what could actually go in here, it gets really interesting.

David Hoffman:
[48:57] Adam, thank you for building cool stuff on-chain. I think there's definitely a missing need for that these days. And hopefully this is the first of many apps like this bringing fun back to on-chain stuff. And thank you for being the first.

Adam (Rhynotic):
[49:11] Awesome. Thank you for participating, everyone, and you guys for being interested. And we'll see what happens. So it's pretty exciting so far.

David Hoffman:
[49:19] Eric, it's good to talk to you, my man. I think we'll probably talk a lot more now that energy's back into the cryptosphere. So this is perhaps also the first of many.

Eric Connor:
[49:26] Definitely. Good to be back. Thanks, David.

David Hoffman:
[49:27] Bankless Nation, y'all know the deal crypto is risky, but not risky enough. The institutions are here, so we're going even further west. This is the frontier. It's not for everyone, but we are glad you're with us on the Bankless journey. Thanks a lot.