Proposal: $ANIMAL Creator Token

Core Idea

$ANIMAL (https://info.uniswap.org/pair/0xc787dad394ae566dee96575a676afdf3c0c7a88f) is an experimental creator token for visual artist Oleg Kolbasov, aka Animal Money. (https://animal.money)

The idea here is that an artist can issue their own ERC20 token, seed a liquidity pool, and accept their own token as payment for unique NFTs.

This makes the token price a reflection of market demand for the artists’ NFTs and speculation on the future demand for their NFTs. It’s a minimum viable system for creating an independent fan economy. All you need is an ERC20 token, an ERC721 contract, an AMM pool, and artistic talent.

Learnings From #NFTHack

The original concept was that we would issue an $ANIMAL token on Uniswap, and whoever accumulated 50% of the supply would be able to win an NFT and physical painting that was being painted live on Twitch.

This would be an interesting real-time auction of a painting while it is being created, with the addition of a secondary market for the $ANIMAL token that could create interesting trading behavior and a lot of fan interaction.

What we learned is that Uniswap v2 price slippage makes it impractical to accumulate 50% of the token supply. Gas fees were also prohibitive, especially given the low initial token price (~$1 per $ANIMAL), which made token purchases feel slightly ridiculous, since the gas cost was much higher than the token cost.

The price of $ANIMAL ultimately quadrupled, but there would need to be many more trades against the pool to bring it up to a reasonable price, and lots of gas burned on the way.

However, setting up the ERC20 token and Uniswap pool was very simple. We began to think about different ways to create an ongoing revenue stream for creators through the same mechanism, and decided that this flow should be repeatable:

  1. A creator deploys an ERC20 token and AMM pool, setting a reasonable initial price.
  2. They deploy an ERC721 (or possibly ERC1155) contract for minting NFTs.
  3. They list items for sale, priced in their ERC20 creator token, which can be minted as NFTs (or sold directly as physical items or experiences, if there’s no relevant NFT angle.)
  4. Fans buy the creator token in order to redeem it for NFTs or other buyable things from the creator, and speculators buy the creator token anticipating future demand.
  5. The artist sells the creator tokens they received as payment back into the pool whenever they want, benefiting from the increased price.

We’re pretty sure this would work, and would give the creator full control over their internal fan economy without any protocol or marketplace dependencies.

Next Steps

We want to deploy an ERC721 contract for minting NFTs of Animal Money’s artwork, which will be listed for sale priced in $ANIMAL tokens.

We also want to migrate most of $ANIMAL’s liquidity from Uniswap v2 to Uniswap v3 when possible. Being able to specify a price range as an LP instead of supplying liquidity from 0 to ∞ should fix the price slippage issue we ran into during the hackathon, and we can set a more realistic base price.

We also want to make NFT token minting and ERC20 token trading possible on Layer 2, to reduce gas fees.

Finally, we want to explore NFT marketplaces that allow payment for NFTs with any ERC20 token, which would allow us to price our NFTs in $ANIMAL.

Until we find a suitable venue, the $ANIMAL-to-NFT redemption will be a manual process where you have to contact the artist directly. That’s cool if there’s also a physical piece of art tied to the NFT, since you need to work out shipping, but if it’s a pure NFT minting action, it would be better if you could do it automatically.

How MetaCartel Can Help

We were excited to get the message encouraging us to apply for a grant, since we have all of these ideas that are ready to go!

What we really need is money for gas, paint, and canvas. The implementation itself is fairly straightforward. Any tips on marketing or emerging marketplaces that would let us price NFTs in our creator token would also be great, or if there are any holes in our proposed implementation above that we haven’t considered.

Pretty sure 3 ETH would get us to where we need to be. This would be mostly spent on gas and providing liquidity, with a bit cashed out to offset material costs for painting. (Canvas is expensive!)

The immediate step would be to deploy the ERC721 contract and complete our first direct NFT sale for $ANIMAL, and the other steps will need to wait a little bit for Uniswap v3 deployment.

Update (5/4/2021)

We’ve launched the Animal Money NFT contract and minted the first two NFTs. Keeping with our goal of a minimum viable creator economy, this is a straightforward ERC721 contract based on the OpenZeppelin preset library, with an auto-incrementing ID and a base URL of https://animal.money. The link between the NFT and the piece of art is therefore entirely up to the artist, assuming they own their own domain name.

Oleg and I have also gone over how to make minting and transferring as simple as possible for artists without taking any control away from them. Our current theory is that it would be best to deploy two contracts that the artist owns: ERC20 for the artists’ currency and ERC721 for their NFTs. The NFT contract uses the artists’ URL as the base URL. Minting and transferring of NFTs can be managed through Etherscan, the NFTs can be tied to the relevant piece of art on the artists’ website, and they can also connect the tokens to metadata using a third-party service of their choosing (OpenSea being one example, but the space is growing). Cashing out payments is easy in the Uniswap pool for their cryptocurrency.

Speaking of which, we’re preparing to move $ANIMAL liquidity from Uniswap v2 to Uniswap v3 as soon as it launches, which will allow for much greater capital efficiency. Since we no longer need as much grant money for liquidity reasons, the money will stretch further to cover gas costs and initial liquidity for many more artists.

We’re now pivoting our request to $10K - $15K of ETH in order to pay the gas fees to deploy an ERC20, ERC721, and Uniswap pool for as many artists as we can bring on board! We will also guide them through using MetaMask and Uniswap to control their own fan economy and introduce them to other marketplaces.

Covering the set-up costs for the artists will clear the biggest hurdle for less prominent artists to enter the space, and making sure they own their own contracts will keep them from getting locked into any particular service. Oleg has a great community of artists he plans to reach out to once we’ve worked out the kinks with $ANIMAL.

The outcome of the grant will be:

  • As many artists as possible set up with their own ERC20 and ERC721 contracts, and Uniswap v3 pools, as well as the knowledge to manage their economy through MetaMask, Etherscan, and Uniswap.
  • A consolidated document of feedback from all of these artists after three months of running their own fan economies with this system.
  • Analysis of the economic aspects of the Uniswap pools and NFT sales.
  • More refined scripts for launching token contracts and pools, and better integrations (hopefully) with third-party tools and marketplaces, which will make it easier for artists to sell their NFTs using their own creator token.

Update 5/5/2021

We’re live on Uniswap v3!

https://info.uniswap.org/#/tokens/0x2ab228e7ab5cb890e8e930629c91a2d42210581b