Venture capital Paradigm: An article to understand the NFT constant speed issuance sales agreement

introduce



This paper introduces the Constant Velocity Issuance and Sales Protocol (CRISP), a pricing mechanism designed to sell NFTs at a target velocity over time.

If we wanted to sell 100 NFTs per day, but could only actually sell 10, then CRISP would slowly lower the “buy now” price. If we wanted to sell 100 NFTs per day, but were actually able to sell 200, then CRISP would rapidly increase the "Buy Now" price with every new sale.

We provide a Python notebook to simulate the behavior of this mechanism, as well as a reference Solidity implementation.



motivation



Imagine you have an infinite set of NFTs that you want to sell at a fixed rate - say 100 per day.

You can design an auction system to achieve this goal. You could sell all 100 in one auction, or maybe hold 100 different auctions, one NFT each time.

However, the user experience of auctions can be very unwieldy - auctions cost gas, and we want users to be able to buy one of these NFTs at any time without waiting for the auction to terminate.



mechanism



Overview

CRISP tracks the sales velocity of NFTs and compares it to the target velocity.

When NFTs sell too fast relative to the target price, we want to be able to adjust the price quickly. The higher the sales velocity compared to the target velocity, the faster we want to increase the price.

On the other hand, we don’t want to be too hasty in lowering the price when the NFT’s sales rate is too slow relative to the target rate. After all, at some point in the past, there was enough demand to support the current price. Therefore, we will slowly lower the price over time.

sales speed

We use exponential movement and or EMS to measure sales velocity.

EMS is an adjustment to an exponential moving average, often used in quantitative trading, to measure the accumulation of a quantity over a recent weighted time window. It is computationally inexpensive and requires very little storage space.

CRISP EMS is specifically used to track the number of NFTs sold over a recent period defined by the average half-life of sales. A sale with an average half-life of 100 means that a sale 100 blocks ago would only add 1/2 the current EMS.

The EMS in block b is recursively defined as:

velocity where S_b is a variable representing the number of sales that took place in block b.

Given two blocks b_1 and b_2, assuming that no sales occurred between the blocks, we have

Velocity We can use the above formula to convert target sales velocity into a target EMS. Assuming our target is 1 sale every n blocks, the target EMS should be

Speed raises price

If the current EMS is above the target, by definition, the sales velocity is too high. Therefore, we would like to charge more for the next NFT sale, as this will (probably) reduce demand, or at least increase revenue.

The faster we sell NFTs relative to the desired price, the faster we can update the price. So, we define a variable