Abstract
This document proposes a new $RARI rewards program that is designed to launch a network effect among community marketplaces and their users to build and trade on Rarible Protocol. The suggested mechanism of rewards distribution, lock-up period, and other specifications is based on the feedback provided by the community in the wake of the latest $RARI rewards program.
To enter into long-term partnerships with premier brands on the market and strengthen the rewards program as a whole, our goal is to choose active projects that are committed to marketing within their own communities to amplify the reach of the rewards program and community marketplaces.
Motivation
We believe in a future where individual creators and communities have their own marketplaces instead of big marketplaces dominating the space – a trend we are already seeing in traditional e-commerce as Shopify reaches half the size of Amazon marketplace in terms of GMV. On top of that, NFTs generally behave like luxury goods, all of which have their individual marketplaces. With that in mind, Rarible Protocol exists as a decentralized infrastructure to power these individual front-ends.
While there are more than 1500 marketplaces working on top of the protocol, market behavior still hasn’t changed towards individuals choosing these marketplaces as their go-to platforms to trade items.
To date, network effects have been the key factor in Rarible’s success, $RARI rewards program being one of the main tools to achieve it during Rarible’s first big breakthrough in 2020. In fall 2022, RARI Foundation voted to bring back the program. While being successful, the last program identified a number of areas for improvement that were extensively discussed within the community.
Our main goals for this round of the rewards program are to have a 50% market share traded on Rarible for the selected collections as well as trailing sales on the collections once the period of incentives has finished.
We suggest using $RARI incentives to promote community-specific marketplaces and establish this narrative.
We only need several big and successful marketplaces up and running to kickstart it.
Rationale
As NFT collections evolve into vibrant autonomous communities, they outgrow generic NFT marketplaces. Demand for community marketplaces as the next logical step for their development is growing, and Rarible is the leading provider of this infrastructure. The more projects choosing to build their community marketplace on Rarible, and the more users that adopt a habit of trading there, the faster it will reach wider adoption.
While extending rewards to community marketplaces, this proposal aims to incorporate the following changes to the program based on community feedback:
1. Distribute rewards across active community marketplaces
While collections with little to no activity did generate up to 50% of volume growth during the last $RARI rewards program, they did not create any sustainable growth and sales dropped back again as soon as the liquidity incentives ended. At the same time, collections that actively engaged their community, doing new drops and communicating with their users, were able to generate trailing sales with lasting change even after the incentives ended.
This is why we are proposing to distribute rewards through community marketplaces with vibrant communities. Active communication and promotion of community marketplaces by their creators will be a prerequisite for participation.
2. Increase the duration of the incentives program from 1-2 weeks to 90 days
A clear takeaway from the previous rewards program was that collections that received rewards over a longer period of time performed the best across the total time of their incentive period. To create observable behavioral change, we propose that all participating marketplaces will receive incentives over an extended period of time.
We believe spreading the total $RARI spent across a longer period of time will not only lighten the cost load but will also allow for community marketplaces to really take advantage of the entire rewards program period and push to their communities.
3. Lower the cost of $RARI rewards program
The $RARI rewards initial round was an expensive program to run. 420,000 $RARI were distributed across a period of four weeks. To make it more sustainable, we propose to lower the overall cost of the program to 400,000 $RARI while increasing the reward period to 90 days. The rewards are to be distributed among 5 collections. Each collection’s budget will be determined separately and derived from the total budge .
The proposed numbers were calculated based on the following considerations:
The team holds 30% of the token supply, another 25% has been distributed to the community during previous airdrop programs, And the Foundation currently holds 11.2m RARI which is about ~45% of the total RARI supply.
The previous program was designed after 420,00 RARI which is about 1.7% of total supply of the token, reducing the foundation budget from 46.7% to 45% of the total supply. It was designed to spend 10,000 RARI per 5 collections per day. Which is 2,000 RARI per collection per day.
4. Decreasing sell pressure on $RARI by extending the lock-up period to 9 months
$RARI token price dropped noticeably 2 months after the completion of the previous rewards program – exactly as the rewards lock-up period expired. To avoid the same scenario in the future and attract more long-term-oriented community members, we propose to extend the lock-up time frame to 9 months; a three-month hard lock followed by a six-month linear unlock. Ongoing conversations with the community confirmed that this idea is highly supported by participants.
5. Replacing royalties cash back with bid rewards
There are multiple considerations as to why we believe royalties cash back should be removed:
- Royalties cashback wasn’t popular among users.
- In combination with listing rewards, it was too high for cheaper collections, which resulted in negative impact to their floor price.
The previous program had two components: Listing rewards and Royalty cash back. While listing rewards was quite effective and popular, royalty cash-back was poorly used.
An issue experienced by the Nyolings community showed that with only listing rewards, it incentivized listing items lower and lower, resulting in the floor being driven down.
This brings us to the idea of creating a new mechanism that would drive the floor up and bring liquidity to community marketplaces – bid incentives. We propose the same structure of rewards for Bids as for listings from program #1:
- Sorting bids by price and assigning them position numbers
- Reward each bid with exponentially more points the higher their bid is
Example: There is a Bored Apes collection. The current best floor bid is 10 ETH, which is way below bored apes floor. Imagine there is a floor bid of 60 ETH on any ape in the collection. That means that any bored ape holder has the ability to instantly sell their ape for 60 ETH. This creates great utility in the marketplace for sellers. Therefore sellers build behavior by going to the marketplace where liquidity lives.
To be eligible for the rewards, bids should be within 25% of the floor.
Community marketplace selection mechanism
As outlined in the rationale above, the goal of the new rewards program is to incentivize community marketplace adoption and sticky behavior among the leading projects in the industry and their users. To meet that goal, we propose that 5 collections will be picked out by a team made up of Foundation & Rarible.com marketing.
Regardless of the age and stage of the project we wish to partner with, it must align with the values and tenants of the Foundation. Additionally, each project must meet a set of criteria which are as follows:
- Product that aligns with the Foundation and that the Foundation believes in.
- A provable track record of active communication, transparency, and accountability.
- Long-term mindset with goals, activations, and developments planned for established times in the future using community marketplace as main secondary market; option for primary market for drops as well.
- Commitment to strengthen the marketing efforts done by Rarible & The Foundation
a.) Must be willing to push the narrative surrounding Community Marketplaces in a way that satisfies the Foundation, Rarible, and the project in question. - Direct community across all socials to the community marketplace created for them. Establish the narrative that the CM is the main marketplace for the project. Encourage buying, selling, and trading to be done with the CM.
The metrics of success used to evaluate and track community marketplace partnerships are as follows:
1. Total market share for the collection during and after the duration of the program
2. Social metrics for Discord, Twitter, Mirror, and other applicable sites
3. Total number of connected wallets to the community marketplace(s)
4. New leads generated from the overall narrative during the program. i.e. new marketplaces created and other collections reaching out to build a community marketplace.
Key Terms
$RARI - the official token ticker of the ERC-20 token that governs Rarible Protocol ecosystem
Community Marketplace - trading platform specific to individuals, projects, or collections that has the main functionality of a generic NFT marketplace
Points - listing rewards accumulated by a user every 10 minutes according to the predefined formula. Points are converted into $RARI tokens at the end of every day.
List & Bid Rewards - token incentives received by users who make listings or place bids on collections
Lock Period - the time during which claimed rewards remain unavailable for transacting or trading
Linear Unlock - release schedule when tokens are unlocked in small increments over an extended period of time
Claim - the action of requesting $RARI rewards from the claims contract. Rewards are not distributed automatically to a user’s wallet and need to be claimed.
Specifications
Total budget
A total budget of 400,000 $RARI is allocated to 5 collections with community marketplaces built on Rarible infrastructure. The total budget is distributed among 5 collections (chosen by the team of RARI Foundation and Rarible.com members according to the proposed criteria) over the course of 90 days.
Each collection’s budget will be determined and derived from the total budget of 400,000 $RARI. Everyone who lists items or places bids on collections on participating community marketplaces will receive a share of $RARI via points system.
Listing and bid rewards algorithm
- Take a list of listings with their respective positions sorted by price ascending
Ex. Listings
a. 1 - 1ETH,
b. 2 - 1.1 ETH
c. 3 - 1.3 ETH
- Take a list of bids with their respective positions sorted by price descending
Ex Bids
a. 1 - 0.99 ETH
b. 2 - 0.95 ETH
c. 3 - 0.8 ETH
- Every 10 minutes each listing and bid accrue Points according to the formula
a. Formula for listings: 100+90/sqrt(number of items with same or cheaper price)
b. Formula for bids: 100+90/sqrt(number of items with same or greater bid)
c. If there are two bids of the same price, they receive the same amount of points.
d. During the last program, points were accrued according to the formula 100+900/N. 1. This time SQRT parameter is added to the formula to make the slope of distribution more even. Also made the points number smaller by factor of 10 to prevent huge numbers.
- Only bids and listings with created/updated 5 minutes+ of age are counted. Updating an item price / item bid constantly would result in not getting any rewards.
5. Only listings up to 1.4x of floor price are counted. - Only the first 100 bids and first 100 listings are counted
7. Only bids greater than 75% of floor price are counted. - Bid must be placed for a collection, not an individual item
Bids example: (floor price 1 ETH):
Collection #1 has 5 bids: [0.9] [0.8] [0.8] [0.77] [0.74] ETH
Let’s calculate the Points that will be given to each bid every 10 minutes:
The formula is POINTS = 100+90/SQRT(N), where N is the position of the bid
0.9 ETH = 10 + 90 / sqrt(1) = 100 points
0.8 ETH = 10 + 90 / sqrt(3) = 61 points // this bids have same amount of points because there are a total of 2 bids at that price, and 1 bid with better price
0.8 ETH = 10 + 90 / sqrt(3) = 61 points //
0.77 ETH = 10 + 90 / sqrt(4) = 55 points
0.74 ETH = 0 points // this item has a bid lower than 75% of floor price.
Listings example (floor price 1 ETH):
Collection #1 has 6 listings [1] [1] [1.1] [1.1] [1.3] [1.41] ETH
Rewards:
- 1 ETH = 10 + 90 / sqrt(2) = 73 points // this doesn’t receive max amount of points, because there is another item at the floor price
- 1 ETH = 10 + 90 / sqrt(2) = 73 points // they both receive 73 points
- 1.1 ETH = 10 + 90 / sqrt(4) = 55 points // they both receive points because there are 2 items with better price
- 1.1 ETH = 10 + 90 / sqrt(4) = 55 points // and 2 items at the same price
- 1.3 ETH = 10 + 90 / sqrt(5) = 50 points
- 1.41 ETH = 0 points // because item price is greater than 1.4 x floor price
Point system and conversion
It is important to understand that the total Points accumulated by each user depend on all other participants’ activity – how many users bid and do listings, at what price etc. – so it’s different from day to day. Even if you repeated all the same actions with the same amounts, the number of points you get on different days won’t be the same.
Your personal rewards are relative to cumulative activity on a collection for the last 24h. Total points earned by program participants get converted to $RARI every 24 hours proportionally out of the daily budget. The entire daily budget gets distributed to all daily points earned equally.
Example:
The total budget of 400,000 $RARI is distributed among 5 collections over the course of 90 days, which means the daily budget per collection is 888 $RARI.
As an example, let’s imagine a day of the program when 100 listings and 50 bids were made. According to the formula POINTS = 10+90/sqrt(number of items with same or cheaper price), in this scenario listings from 1 to 10 generate 2670 POINTS every 10 minutes, which gives us 380,000m POINTS per day.
Bids are going to generate 1650 POINTS every 10 minutes, amounting to 230,000 million points per day. Together with listings, this brings the total number of generated points to 610,000 in total. All 888 RARI would be equally divided between 610,000 points.
In this scenario, listing #1 would get 100 Points every 10 minutes, which means 14,000 points a day. To calculate the number of $RARI this listing would receive that day, we multiply it by 888 (daily $RARI budget per collection) and divide by 610,000M (total number of points received by both listings and bids that day). 888 * 14400/610000 = 20.9 RARI.
At this pace, the earnings for this participant would be 628 $RARI/month and 1,888 $RARI per program duration.
Note: points earned on different collections are the same. So in case of several collections receiving rewards at the same time. Total budget for all collections are what is then dispersed equally among all point earners
Rewards lock-up algorithm
After a participant clicks “Claim”, a lock is automatically created with a 9 month linear unlock, to protect $RARI from sell pressure: 3 month (13 weeks) Lock and 6 month linear unlock (26 weeks)
Example: If a user claimed 1000 $RARI on March 1, 2023, the tokens won’t be unlocked until July 1, 2023. After that, every week a 1/26th part of $RARI is unlocked.
Due to tech reasons, the same lock-up mechanism will be applied to all unclaimed rewards. It won’t affect existing locks that a user has, but if a user has unclaimed RARI from the previous program, then the new lock will be created on all tokens with 9 month lock-up – even if unclaimed RARI is for the previous program.
Steps to implement
- Change locking parameters. New locks after claiming to be created with lock-up of 3 months + 6 months of linear unlock.
- Transfer 400,000 RARI to the Claiming Wallet 0xcD9f82Fe3B60a5C8482A69279AB5C8d0Be19cA24 and
- Approve Spending of 400,000 by Claiming Contract 0xc633F65A1BEBD433DF12D9F3ac7aCF31b26Ca1E6
Note: This is a little ambiguous, claiming wallet and claiming contract are two different things, where Claiming Wallet is where tokens are stored, while claiming contract is a tech tool that spends them. This is done so that tokens for example might be moved back from Claiming Wallet to the main treasury.
Steps for tally submission:
Call Data is prepared with a tool https://abi.hashex.org/
- Action #1
- Transfer Tokens
- Target Wallet Address: 0xcD9f82Fe3B60a5C8482A69279AB5C8d0Be19cA24
- Value:
- choose RARI from dropdown
- Value 400,000
- Click “Add Action”
- Action #2
- Custom Action
- Target Contract address: 0xcD9f82Fe3B60a5C8482A69279AB5C8d0Be19cA24
- Contract Method: “invoke”
- Calldatas:
- _to: 0xFca59Cd816aB1eaD66534D82bc21E7515cE441CF
- _value: 0
- _data: 0x39509351000000000000000000000000c633f65a1bebd433df12d9f3ac7acf31b26ca1e60000000000000000000000000000000000000000000054b40b1f852bda000000
- Click “Continue”