In the future, more and more manual labor might be done by machines. This is bad news for all the crypto bros hoping to get employed by Mc Donalds as a burger flipper in bear markets. Machines don’t complain about overtime and can’t strike. The perfect employee. Unlike humans.
But there are some things that machines aren’t great at—being creative, for example. The team behind DEIP believes that we will see a shift to an economy where most of the value is created through creative industries. That’s why they decided to build a protocol for the creator economy.
What is DEIP?
DEIP is a set of protocols for the creator economy. It’s an application-specific chain on top of the Octopus network that combines fractionalized NFTs with tools for creators to enhance the liquidity of their NFTs. It also includes an NFT-backed stablecoin and yield farming program.
The protocols include:
- creator economy protocol
- dynamic liquidity protocol
- intangible assets yield farming protocol
- collective intelligence protocol
Why any of that matters?
By now, most of us will agree that NFTs and digital creative works are a great fit. So the question isn’t if NFTs will still be around but how creatives will be able to leverage them best.
A major challenge, however, for creatives remains liquidity. Creating an NFT is pretty straightforward. You create the art and then attach it to a token. But money only starts flowing in when someone purchases the artwork.
Fractionalized NFTs
DEIP provides creators with a way to enhance liquidity for their works by fractionalizing their NFTs. Instead of selling them as a whole, they can turn their NFT into multiple tokens for which they can define a set of operations. For example, anyone with a fractionalized NFT token could be enabled to vote.
Creating fractionalized NFTs, or as they’re called in the context of DEIP, F-NFTs brings the following benefits:
- enhanced price discovery via transactions on the secondary market
- liquidity
- governance
- automated distribution of royalties to holders.
The dynamic liquidity protocol is the second protocol that directly provides liquidity for NFTs in the DEIP ecosystem.
To break it down to its fundamentals, it is a stablecoin backed by NFTs. It allows creators and nft holders to mint/loan the stablecoin dX in exchange for locking assets as collateral.
The price of the fiat currencies in this setup is provided through the chainlink oracles. And to ensure that the stablecoin doesn’t lose its peg, the collateralization ratio is set to 200%. That means that for every $100 you take out as a loan, you need to lock up at least $200 worth of NFTs as collateral.
To withdraw an NFT, the borrower has to pay back the amount of stablecoin taken out, and pay a so-called stability fee which is distributed 50/50 to yield farmers and the ecosystem fund.
Collective intelligence protocol
The collective intelligence protocol implements a proof-of-reputation, combining a reputation system with a crowdsourcing mechaism. It’s based on decentralized assessment systems and still under development. The main idea behind it is to incentivize quality control, and curation of NFTs on the platform.
Constructor
Another item still under development is the Constructor, or as they like to call it the Web3.0 wordpress. If you ever created a blog on Web 2, you’re probably familiar with Wordpress. It remains one of the most popular blogging platforms, making it easy for anyone to get started (just don’t fall for using wordpress.com -they rip you off).
The constructor will provide no-code and low-code tools for creators to build their own intangible asset-centric web3 platforms. A fully web3 blog if you want. It will natively let creators integrate modules such as the FNFTs, DeFi, funding mechanisms, licensing, third-party modules by other polkadot ecosystem teams, and DAOs.
Consensus and Token
As an appchain, the DEIP protocol is relying on a hybrid Proof-of-Stake consensus algorithm to validate and build the chain. They use the default for substrate-based chains which is called BABE/GRANDPA as suggested by Polkadot. Being octopus network based allows for a deep integration with the NEAR ecosystem.
An interesting aspect is the differentiation between non-financial transfers such as adding the hash of an IP asset to an asset bucket or inviting members into a DAO, and financial transfers, such as selling an NFT. The first are free, while the latter costs a small fee. The team added this to enhance the UX, because imagine if you had to pay every time you want to update a hash and had to pay.
The native platform token DEIP is used for payments, governance, staking, and yield farming. People can also use their holdings to bet on certain segments of IP assets in the network. Depending on how they place their bets, the ecosystem fund will increase the capital allocated to popular segments, and users can earn profits from it via yields.
DEIP is an interesting way to build for the creator economy and seems to be one of the bigger NEAR ecosystem participants. Nevertheless, I would like to see liquidity actually increase through fractionalization, and do have some doubts regarding an NFT-backed stablecoin. It sounds great for creators to be able to borrow against their own NFTs. I just wonder how such a system would cope with a massive market downturn or with — what we, unfortunately, see quite a lot in NFTs — wash trading & price manipulation. 🧼
So if anyone has an answer or something to say about those concerns, hit me up, please 🙏
This is, of course, subjective and my opinion, but I am not very fond of the entire fractionalization and financialization efforts in the world of NFTs. Instead of fractionalizing, why not create 100 copies of the digital artwork created and sell it to 100 people? I’d rather have an entire piece of art than just a pixel of a Doge. Why not give fans a way to subscribe to their favorite artists and receive copies at every new drop?
I’m pretty sure that as NFTs are becoming more invisibly integrated into platforms, we’ll see a shift to higher volumes with low-price NFTs (in 2021, already 50% of sales were below $200). I might have a bit of an idealistic touch as a child of two musicians, but sometimes art is just that. We don’t need to make it all about finance.
