Treasury as a fundamental value for NFT projects.
In this article, we will show how NFT projects can use treasuries to build fundamental value for their holders. Before we dig into that topic we need to go through how today’s NFT market works and how a treasury can build long-term value for the NFT holders in the future.
NFT projects today
The NFT market has skyrocketed and the technology is validated. Which caused some NFT projects to be one of the best investments in 2021 and most probably 2022 as well.
Most NFTs usually promise more value than just a JPEG, called utilities.
The most common utility in NFTs today is:
- Membership to holders community with exclusive content and network.
- The project developer buys digital real-estate in decentraland or sandbox and is going to build the “headquarter” in the metaverse
- Invites you to holders only parties.
- Free Merch
- Free airdrops
- Commercial rights to your NFT
So it’s clear that today’s NFT projects provide more value than just a JPEG, but they still lack fundamental long-term value.
The biggest problem today is how projects use the minting process.
It’s a lot of money flowing into NFTs and it’s not unlikely that you see a 10 000 unique NFT collection have a minting price of 0.5 ETH on average. I will use that as an example in this article.
10 000 NFTs sold for 0.5 ETH will result in:
- 5000 ETH Gross income to the developer
- OpenSea or other marketplaces takes a 2.5% cut,
- Developers get 4875 ETH net
- 125 ETH to OpenSea.
4875 ETH equals $17 062 500 is now transferred from the NFT buyers to the project developers.
* 1 ETH = $3500
It´s nothing directly wrong with that approach, we just think it can be done much better if we look at the minting process from another angle.
Royalties are what makes the project successful
Most NFT projects take around 10% on every sale of the NFT, so they are incentivized to get an as high average price as possible. This income is used for marketing, expenses to ensure that the project thrives, and salaries.
This is where we think most NFT collection developers should spend their time and ask themselves how they can build an NFT project that lasts and isn’t just short-term investment speculation. One of the most efficient ways to build fundamental value is to establish a metaverse-focused treasury owned by the NFT holders.
The alternative is to think of the minting process as a fundraising campaign
Instead of 97.5% of the minting value going to the developers, we suggest another solution that will benefit both developers and NFT holders in a better way.
Mining as fundraising based on this structure:
- 10% royalties to the developers
- 2.5% fee to OpenSea
- 87.5% will go to a metaverse focused treasury
After mint the numbers will look like this:
- 125 ETH to OpenSea
- 500 ETH / $1 750 000 to the developers
- 4375 ETH / $15 312 500 to the treasury
An NFT project with a fundamental value
As an NFT holder you will now own 1/10 000 of a $15 Million treasury that will actively invest in other NFT projects, DAOs, play to earn games and other tokens. On top of everything else, the NFT projects provide you with.
An opportunity to mint for a higher price
People are likely willing to pay more for the NFT when the buyer knows that 87.5% of what they pay for the NFT goes directly into something that gives the NFT a long-term value.
A well-managed treasury equals increased prices and more trading volume
When the treasury invests, people will speculate in price predictions and the interest for the NFT will increase. This will result in higher trading volume.
To sum up,
- With ownership in a treasury, the NFT represents a diversified asset group that gives the project long term value
- A treasury focused on the metaverse, will provide liquidity into the NFT market. More funding into quality decentralized projects will result in making the market more attractive. A more attractive market attracts more buyers and results in higher prices.
Zensible DAO has a professional team that manages the treasury together with the developers and the NFT holders. For the service, we charge a 0.2% monthly management fee and a performance fee based on the trading frequency and risk level.
Contact us if you are interested in setting up a treasury for your NFT project