This content originally appeared on HackerNoon and was authored by Olayimika Oyebanji
Rewarding NFT owners even after they have pressed the panic button might seem counterintuitive, but it's actually what ERC-5173 (NFT Future Rewards Contract) is all about. This ERC standard was developed in 2022 by Untrading co-founders Yale ReiSoleil, dRadiant, and D. Wang to tackle what they describe as a “zero-sum trading paradigm” and create a fairer and more rewarding NFT and crypto ecosystems.
\ It is easy to agree that addressing the unequal value distribution in a system that is fraught with irregularities like wash trading and spoofing shouldn't fall short of a technology that reorients trading toward a standardized profit-sharing model. But can ERC-5173--an NFT future rewards (nFR) contract designed to enable previous owners of an asset receive a fixed amount of its future price increases–change the status quo?
\ Untrading CTO and Cofounder Yale ReiSoleil, Jr., told Olayimika Oyebanji in this interview that “trading is the greatest myth ever sold to the public” and provided valuable insights into the specific functionality of ERC-5173. Read on!
You recently described trading as the greatest myth sold to the public. Can you elaborate on that?
I call trading the greatest myth sold to the public—that it's really misconceived in people's minds as an easy way to riches. This myth was fostered by shiny marketing, get-rich-quick schemes, and stories of overnight millionaires.
\ In reality, most of the time it is a zero-sum game; the vast majority of retail traders are losing money. The system was really designed to favor large institutions and high-frequency traders who have enormous advantages in terms of information, technology, and capital.
Moreover, the idea that anyone can consistently predict market movements and profit from short-term price fluctuations is largely a fallacy. Markets are inherently unpredictable, influenced by countless factors beyond any individual's control.
\ Our ERC-5173 implements the most successful high-stakes game theory strategy—cooperative strategy—as greatly validated by perhaps the greatest research in this area performed by Professor Robert Axelrod. This approach allows us to create a system in which participants can benefit from asset appreciation without the need for constant market predictions. That is quite opposite to the traditional trading myth, where many of whom buy into the dream end up with immense stress and financial losses, coupled with disillusionment.
Can you take us through ERC-5173 as a model for future nFR rewards?
Sure! ERC-5173: this is our proposed Ethereum Improvement Proposal, which brings to light the whole concept of NFT Future Rewards, or simply nFR. This standard is designed to revolutionize how we think about asset ownership and value distribution in a digital capacity.
\ At the core, ERC-5173 enables the creation of tokens that continue rewarding past owners even after the sale of an asset. Here is a fast run-down: using what is called provenance tracking to keep a record of all previous owners of an asset so that when it appreciates in value—well, a portion is shared among historical owners.
\ This is, therefore, managed by smart contact to ensure transparency, and there is no need for intermediaries. The most impressive feature of our ERC-5173 is the interoperability that enables it to interact with other Ethereum standards, therefore making them versatile and easy to integrate into already existing ecosystems.
\ By implementing ERC-5173, we're not just minting another kind of token; we're really fostering a new paradigm for ownership and value creation within the digital economy. This is a model of cooperative strategy that has been proven to work under game theory but applied in digital assets and decentralized finance.
How does this model align with your philosophy?
ERC-5173 aligns perfectly with our philosophy of untrading and engendering a fair, collaborative, and sustainable financial ecosystem.
First, our model transcends our belief in win-win situations. Unlike traditional trading, where one party's gain is often another's loss, our model allows multiple parties to benefit from the success of an asset. This is in line with our core belief that finance should be cooperative, not adversarial.
\ It rewards long-term thinking and value creation. By giving a continuing reward to past owners, we incentivize people to contribute positively to an asset growing in price at some time in the future—if not immediately—rather than engaging in short-term speculation. This aligns with our goal of fostering a more stable and sustainable financial environment.
\ Thirdly, it democratizes access to financial goods. Traditional systems are historically biased for giving the lion's share of rewards to the largest players or the most recent owners. Our model tries to equalize or democratize access to rewards across all contributors to the history of an asset, in alignment with our mission for finance to become more inclusive.
\ Furthermore, the transparency and automatic nature of smart contract-based systems is well suited for our vision—building trustless but efficient financial mechanisms that are not dependent on the effectiveness of such a centralized intermediary. Last, and arguably most important, this model reinforces the cooperative strategy empirically shown to be the most effective in high-stakes game theory; this validation has come through the work of Professor Robert Axelrod.
\ This scientific basis strengthens our belief that cooperation will yield a better result than competition in creating a much stronger and more effective financial system for its participants. In essence, ERC-5173 is more than a technical standard; it represents our philosophy: that finance should and can really be a tool for collective growth, not just a zero-sum game.
How does it determine the future rewards for unNFT And unCrypto owners?
The determination of future rewards for unNFT and unCrypto owners is a key feature of our ERC-5173 standard, and it's designed to be both fair and flexible. Let me break down the process:
\ For unNFTs, we use Provenance Value Amplification (PVA) to distribute a percentage of the sale price to all previous owners, and the exact percentage is set when the unNFT is minted. In the same vein, there is time-weighted ownership, which takes into account the duration each owner has held the assert so that the longer the period, the larger the percentage distributed.
\ There is also room for contribution factors, which enables some unNFTs to earn from their interaction with an asset or contributions to its ecosystem. For unCrypto, we have created a yield distribution system that allows previous owners to earn rewards from yields that are generated. Similar to unNFTs, price appreciation sharing allows previous owners of an unCrypto token to earn rewards when it is sold at a higher price. Lastly, we have created volume-based rewards for some uncryptos to distribute rewards based on trading volume in order to incentivize liquidity provision.
How does it galvanize all participants toward the price appreciation of an unCrypto asset?
The ERC-5173 standard and our unCrypto model are designed to galvanize all participants toward the price appreciation of an asset through several means. Some of these include aligned incentives, kingdoms, reduced selling pressure, network effect, etc.
Through aligned incentives, we ensure that both current and previous owners have a stake in the asset's success, thus creating a larger, more engaged community of supporters invested in the asset's long-term growth.
\ Kingdoms are our gamification strategy. It is aligned with our nFR framework and introduces several new elements to unCryptos. For instance, members of each kingdom manage their assets in such a way where everyone benefits and all interests are aligned.
We aim to reduce selling pressure. To a great degree, this eliminates out the tendency to sell based on short-term price movements, as previous owners will continue to benefit from future price increases. This might be one factor contributing to much less volatility and a more stable upward track in price.
\ Network Effect: The more it can make people aware about the chances of continuous rewards, the greater would be the base of participants. This interest and participation would generate demand and, hence, price appreciation. By building an ecosystem in which every player—past and present—is vested in the success of that asset, we are creating a more harmonious and growth-oriented atmosphere. It's a step away from the often adversarial nature crypto trading took toward collective success translating into individual rewards.
With regards to the current state of the NFT market, what's the adoption rate of this model within the NFT ecosystem?
The current adoption rate of our ERC-5173 model within the existing NFT ecosystem is at an early stage, but promising signs of interest and growth are already visible. This needs to be put within the context of the broader NFT market. Several times I have said that we have seen quite a big market correction in the NFT space, mainly including those really speculative and low-effort projects which essentially nose-dived in value. Now, this correction, while pretty hard on so many, has opened up and created much more fertile ground for new innovative models like ours.
\ Currently, our model is being adopted primarily by the more forward-thinking creators and projects that recognize the long-term value proposition of the ERC-5173 standard. We see especially high interest from digital artists looking to retain a connection with their work and to benefit from its appreciation in the future, gaming projects looking to create more death highlight, exciting, and rewarding ecosystems for their players, and metaverse platforms that realize the potential for creating more dynamic and interlinked virtual economies.
\ While I cannot disclose the exact numbers due to confidentiality obligations, we have seen quite a steep climb in inquiries and implementations in the last couple of months. We are in discussions with some of the biggest marketplaces in NFTs to integrate support for the ERC-5173 tokens; this would be the next quantum step in adoption. Worth noticing, such diffusion of new standards in the blockchain space is very often fit to an S-curve.
\ We believe that we are still on the ascending branch of this curve. When more success stories start appearing, though, and all the benefits become relevantly realized, we can foresee rapid acceleration in adoption. Furthermore, the current market conditions are such that many are seeking in the NFT space more sustainable and value-driven models—a realm in which what ERC-5173 has to offer perfectly places. Over time, as we mature along with the market, our model will eventually shift towards a speculative-less, utility-oriented, and long-term value-creation atmosphere.
\ While we are thrilled by this progress, we also understand that broad market adoption will take time. It doesn't involve any technological implementation but changing people's mindset in terms of digital ownership and value. We drive this change through education, strategic partnerships, and continuous tweaking of our model on the availability of pertinent feedback and data from the real world.
What are the challenges facing the implementation of the ERC-5173 protocol?
While the implementation of the ERC-5173 protocol is highly promising, let me highlight that it does come with its set of challenges. Allow me to outline some key obstacles we are working on.
\ Technical Complexity: Under the ERC-5173 standard, some concepts are introduced that might need changes in the architecture of existing smart contracts. This could prove difficult in certain cases for developers accustomed to traditional token standards.
\ Gas Costs: This is due to the potential increase in transaction costs on the Ethereum network from tracking historical ownership and rewarding decentralization. We look hard inside our coding structure to reduce these costs, but it's an ongoing challenge.
\ Regulatory Uncertainty: The innovativeness of our model—where previous owners are still rewarded —begs questions around how these assets may be classified from a regulatory point of view. We work very closely with lawyers to help us navigate this.
\ User Understanding: This idea of perpetual rewards for previous owners is a bit strange and may be hard—fully undertake or realize at first by some users. Education and, thus, communication will have to go a long way in solving this issue.
\ Some of the integration difficulties concern inheritances from traditional token standards many NFT marketplaces and wallets were built around. On the other hand, integrating support for ERC-5173 tokens will mandate major updates to their systems.
\ Interoperability: Our standard is designed to be fully compatible with the existing Ethereum ecosystems; however, how smoothly it would be able to interact with the vast majority of other DeFi protocols and services is still an ongoing process.
\ It is against the backdrop of these challenges that we forge ahead to provide a solution for each. We are only fueled by the belief in the potential benefits that ERC-5173 has to offer, far outweighing the obstacles, and surmount those barriers towards an all-inclusive and sustainable digital asset ecosystem. To this effect, our approach will be one of continuous iteration, enlisting the closest collaboration with our early adopters and having an open dialogue with the broader blockchain community. We perceive these applied challenges not as roadblocks but as chances to refine and further strengthen our protocol and thus give a more strongly coupled and valuable solution to the market.
\ However, the biggest challenge is the paradigm shift that ERC-5173 has brought into the financial market system. It goes beyond traditional Time & Sales reporting, whose staples in transactions are mainly a record of 'when' and 'what'; driven by simple parameters of price and volume in trading decisions.
\ Our protocol adds into the equation several new and key matrices, among them the Total Reward Ratios, Number of Generations, and identities of buyers and sellers. It is not only recording transactions on a 'when' and 'what,' but also on a 'who' in every transaction. That is exactly how these levels of details and complex variables interplaying bring about a far richer but more complex trading environment.
Can you share your experience as CTO of Untrading with us?
My time at untrading as a CTO has been exciting and full of challenges. Being a young executive in a fast-moving industry, one is learning every day, facing new challenges, and surmounting them. One of the most rewarding aspects of my role has been leading the development of our ERC-5173 standard. It's just so fascinating, being in a position to see from a conceptual idea to all the way down a real blockchain-based solution that will actually revolutionize asset ownership and trading.
\ Management of a team of developers and liaison with other departments to align our technology with our business goals is very valuable in terms of experience. It has taught me a lot about leadership, communication, and the importance of a collaborative atmosphere.
\ It has been one of the biggest challenges to be at the forefront of an industry moving very fast. Staying ahead of the arc with regards to blockchain technology, ever-changing and fluid, requires continuous learning and adaptation to ensure that our solutions remain relevant and razor-edged.
\ Our interactions with the larger blockchain community have also been very critical. We have had the opportunity to give speeches regarding our idea at conferences, discuss it from a technical point of view by reaching out to other developers, and get feedback on our proposals. Overall, being a CTO at untrading has given me the chance to work on technology that I sincerely believe can make a change in how we do finance and asset ownership.
Any parting words?
We are currently at a pivotal moment in the evolution of finance and digital asset ownership. The problems we are facing within the present system are not impossible to overcome; rather, they represent an opportunity. We don't just build a different protocol with ERC-5173 and the principles behind Untrading; we set the mere conditions for a much more level, transparent, and collaborative financial playing field.
\ I would like to encourage each and every one of you, regardless of your age or background, to engage with these new technologies. That is the beauty of blockchain and decentralized systems: they are within reach for every individual. Maybe just your unique view will open the way for the next big innovation in this space.
\ As we move further, let us not lose sight of the big picture. Technology should serve to improve anthropic life and create opportunities for all, not just a few. At untrading, this serves as our North Star: using blockchain to democratize finance and create win-win scenarios for all participants.
\ I would like to thank our team, our partners, and the broader blockchain community. The journey has just been incredible so far, and I'm truly excited about what the future holds. We are only scratching the surface on what's possible with this technology. Mind you, the future of finance does not happen to us; it's something we're doing.
\ Together, let's create it with innovation, integrity, and positive change at heart. We're not simply innovating for innovation's sake. We're working to construct a financial ecosystem that is both fair and engaging, one that truly aligns with the values of the next generation of users. Thank you for the opportunity to share our vision. Never stop discovering, never stop learning, and let's keep on pushing the frontiers of what is possible in the decentralized finance world.
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This content originally appeared on HackerNoon and was authored by Olayimika Oyebanji
Olayimika Oyebanji | Sciencx (2024-08-16T16:30:16+00:00) Exploring ERC-5173 (nFR Future Rewards Contract) With Untrading CTO And Co-Founder Yale ReiSoleil Jr. Retrieved from https://www.scien.cx/2024/08/16/exploring-erc-5173-nfr-future-rewards-contract-with-untrading-cto-and-co-founder-yale-reisoleil-jr/
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