Introduction

A Supercharged Onchain Marketplace for Digital Assets

Creating sustainable liquid markets for NFTs remains an unsolved problem. While a handful of NFT collections have solved floor liquidity thanks to secondary market bids, aggregators and NFTX liquidity, the scale of this liquidity is limited, and non-floors are ubiquitously illiquid.

NFTX’s use of Uniswap V2 and, more recently, Uniswap V3, has helped establish liquidity in the tens of millions, but volatile movements in the price can quickly widen spreads and make markets unusable without incentives for other liquidity providers to step in. Blur has also had some success in creating bid liquidity for NFTs, however much of this liquidity relies on gameable BLUR token incentives.We improve on this through a few notable features:

• Liquid Listings: When a Liquid Listing is created, the seller, regardless of listing price, immediately receives a freshly minted ERC20 token, which can be instantly sold at floor value. The remaining value above the floor is realized when the listing is subsequently filled.
• Liquid Auctions: When a Liquid Auction is created the seller immediately receives a freshly minted ERC20 token, which can be instantly sold at floor value. The remaining value above the floor is then sold via dutch auction.
• Trade-Ups: Liquid Listings and Liquid Auctions are priced in floor ƒ token multiples. For instance, a user pricing their rare Milady at 2 ƒMILADY tokens would allow for someone with 2 floor NFTs to trade-up to the listed rare.
• Lockbox: When depositing an item into the user’s Lockbox, the user immediately receives a freshly minted ERC20 token. This is similar to Liquid Listings however deposited items are not available for purchase but instead have a variable interest rate based on pool utilisation.
• Re-Listing: Arbitrageurs can permissionlessly curate listings by re-listing assets without having to take on the risk of buying the asset from the pool. This feature enables efficient repricing of all assets in the pool and provides a revenue source for appraisers.
• Reservations: Users can reserve items in the pool by putting up collateral and paying an interest rate. Reserved items can then be redeemed at a later date–useful for users with short-term liquidity issues or anticipating upcoming events such as airdrops.

ƒlayer leverages UV4 to provide unique features for LPs and users:

• Liquidity Providers: LPs farm yield by providing floor liquidity to Uniswap V4. There is no concept of “staking” LP tokens, instead any additional protocol revenue (e.g. Liquid Listing, Liquid Auction and Lockbox fees) are sent directly to the UV4 pool through the donate() method, inheriting the same claim logic as applied to swap fees. This provides a differentiated source of yield that goes beyond the impermanent loss that comes with swap fees.
• UV4 Hooks: new trading strategies such as TWAMM and onchain limit orders are unlocked in UV4 as well as open source hook development that will likely create new tools for the NFT market through ƒlayer’s liquidity.
• UV4’s Singleton Contract: creates reductions in gas fees for swappers, allowing users to hop between floors of different collections without the additional gas costs of UV3 or the transfer of individual ERC721 tokens.
• ƒlayer LST: While outside of the scope of this white paper, a combination of Geode’s LST infrastructure and Uniswap V4 will allow ƒlayer to generate additional yield from circulating ETH in the system.

ƒlayer also removes the cost of entry/exit. A user who wants to enter and exit the fungible state of their NFT will pay no fee. Instead, fees are collected via the fee systems described in this paper, allowing LPs to reduce swap fees to create tighter spreads while remaining competitive.Users and creators will also be able to permissionlessly bribe LPs through UV4’s donate() feature. Bribes can act as a route to bootstrap liquidity for a collection to enable Flayer’s unique set of features as well as UV4 strategies and associated NFT-Fi products that integrate ƒlayer pool tokens.