NFT pools for game asset swaps

Detailed Plan

NFT = non-fungible token, FT = fungible token

Overview

Fungify is a Plutus-native NFT-FT pooling protocol, a key component required to expand NFT capabilities. NFT-FT pools enable people to do the following:

Have access to immediate liquidity for your NFTs
Earn yield on NFTs
Use NFTs as collateral for loans
Invest in indexes of NFT projects
Swap NFTs of the same type effortlessly
Become fractional holders of NFT projects

NFT-FT pools allow efficient and fast NFT swaps, so you can easily convert your gaming assets to whatever you need in the current moment. This means you don't have to make deals and trades, often losing value when looking for a quick swap. This could prove especially useful for simple NFT trading card games, some of the more feasible early-stage games that have already started, and will continue to pop up in the next few months. Gamers can also earn yield on their inventory by providing liquidity to these pools.

Play-to-earn games on other platforms have begun engineering advanced and intricate economies, enough so to prompt Axie Infinity to make their own internal DEX for in-game assets. Fungify's NFT-FT pools provide a generalized solution for Cardano game creators to use when exploring this frontier. Given how prevalent NFTs are in gaming, we believe there is great opportunity for creative applications of these pools.

How do NFT-FT pools work?

A NFT-FT pool works by locking a NFT into a pool, specific to that NFT's project, in exchange for fungible pTokens. pTokens represent a claim to one of the NFTs in the pool, and can be redeemed for a NFT contained in the same pool.

pTokens can be traded on any open market, such as SundaeSwap, where the price will be discovered through arbitrageurs. The price reflects the "floor" of the project. NFT holders can convert their NFTs to pTokens through the pool and sell them at this price for immediate liquidity. The liquid market allows NFTs to be used as collateral for loans. Liquidity providers for market making pairs can earn yield on their pTokens. People can buy fractions of NFTs represented by pTokens to track a project like an index fund. Assets of the same type can be easily swapped for another, a common use case in the metaverse, where certain quests require certain items.

Fungify V1

Fungify V1, with core functionality for swapping NFTs/FTs from a pool and a farming script for LPs to earn yield, is currently going through intensive internal testing and final touches are being made. We plan to release Fungify V1 this January. Liquid markets will be set up for several projects in order to showcase Fungify's potential.

To follow our progress on V1, hop into our Discord: <https://discord.com/invite/4f36hKZBBd>

To learn more, check out our docs: <https://sicks0sicks.gitbook.io/fungify/>

Roadmap

This proposal is for building upon the Fungify V1 foundation to improve pool customizability and UTXO parallelization. These will be important in accommodating a large audience and a wide range of gaming use cases. This proposal covers the next 0-3 months of the roadmap. Further funding for the implementation of UTXO parallelization will be applied for in fund8.

In the next 0-3 Months

Code audit
Fungify V1 launch
Improve pool customizability to support specific metadata delimited pools
Research & design UTXO parallelization methods that will enable high frequency gaming swaps

In the next 3-6 Months

Implement UTXO parallelization methods to enable high frequency gaming swaps

In the next 6-12 Months

Integrate with Hydra
Code audit
V2 release

Auditability

Fungify major releases V1 and V2 will go through an official code audit. Progress can be tracked through the number of projects using customized Fungify NFT-FT pools. Success can be measured through the number of games built utilizing and the number of game assets swapped using Fungify NFT-FT pool infrastructure. Success after 6 months will look like 5+ games using Fungify NFT-FT pools.

Risks/Open Questions

How will blockchain games and their in-game economies evolve over the next few months/years?
Will impermanent loss be sufficiently offset by yield farming/airdrops?
How do we prevent incentive models from failing in the event of sudden drops in liquidity?

How would this help Cardano become the go to blockchain to develop gaming applications?

Fungify lays down the base infrastructure for the Cardano gaming ecosystem to be built upon. NFT-FT pools enable games with more complex NFT based mechanisms and for players to earn yield on their gaming assets. This proposal would ensure this tooling is available to all game creators and is optimized for the high frequency swapping expected from gaming application use-cases.

Funding breakdown

2 Haskell/Plutus devs for 150 hours at $50/hr = $15000

Total $15000

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