A neutral fungibility layer for NFTs

Creating sustainable liquid markets for NFTs remains an unsolved problem. While a handful of NFT collections have solved floor liquidity through secondary-market bids, aggregators, and fungible-vault liquidity, the scale of that liquidity is limited, and non-floors are ubiquitously illiquid.

NFTX pioneered fungible NFT liquidity in 2020, first on Uniswap V2 and later V3, helping establish floor markets worth tens of millions. But volatile price movements can quickly widen spreads and make those markets unusable without incentives for new liquidity providers to step in. Other venues have created bid liquidity for NFTs, however much of that liquidity relies on unsustainable token incentives.

This relaunch rebuilds NFTX on Uniswap V4. It keeps the original DNA, fungible floor liquidity, and goes further by serving the whole collection. We improve on prior designs through a few notable features:

Liquid Listings

When a Liquid Listing is created, the seller, regardless of listing price, immediately receives a freshly minted ERC20 floor token, which can be instantly sold at floor value. The remaining value above the floor is realized when the listing is subsequently filled.

Dutch Listings

A seller can send an item straight to a declining-price auction and immediately receive a freshly minted floor token. The remaining value is then sold via a Dutch auction.

Trade-Ups

Listings are priced in floor-token multiples. For instance, a user pricing their rare Milady at 2 MILADY tokens lets someone holding 2 floor NFTs trade up to the listed rare.

Re-Listing

Arbitrageurs can permissionlessly curate listings by re-listing assets without having to take on the risk of buying the asset from the pool. This enables efficient repricing of assets and provides a revenue source for appraisers.

NFTX leverages Uniswap V4 to provide unique features for LPs and users:

Liquidity Providers

LPs farm yield by providing floor liquidity to Uniswap V4. There is no concept of "staking" LP tokens. Instead, protocol revenue (listing fees and swap fees) is sent directly to the V4 pool through the donate() method, inheriting the same claim logic applied to swap fees. This provides a differentiated source of yield that goes beyond the impermanent loss that comes with swap fees.

V4 Hooks

New trading strategies such as TWAMM and onchain limit orders are unlocked in V4, alongside open-source hook development that will likely create new tools for the NFT market through NFTX's liquidity.

V4's Singleton Contract

Creates reductions in gas fees for swappers, letting users hop between floors of different collections without the additional gas costs of V3 or the transfer of individual ERC721 tokens.

NFTX LST

While outside the scope of this whitepaper, a combination of liquid-staking infrastructure and Uniswap V4 allows NFTX to generate additional yield from circulating ETH in the system.

NFTX also removes the cost of entry and exit. A user who wants to enter and exit the fungible state of their NFT pays no fee to deposit or redeem. Instead, fees are collected through the listing system described in this paper, allowing LPs to reduce swap fees and create tighter spreads while remaining competitive.

Users and creators can also permissionlessly bribe LPs through V4's donate() feature. Bribes can act as a route to bootstrap liquidity for a collection, enabling NFTX's feature set as well as V4 strategies and the NFT-Fi products that integrate NFTX pool tokens.

One limitation of existing fungible NFT protocols is that liquidity is restricted to floor items. Other protocols have made steps toward solving this by allowing higher-tier deposits, but the process requires manual or centralized effort and may not adapt quickly to a changing meta.

NFTX allows any non-floor item within a collection to be deposited into a collection's pool as a Liquid Listing, and in return the user receives a floor token (for example, MILADY). All listings are quoted in multiples of the floor, and the price is set by the user creating the listing.

2.1Listing Fees

Liquid Listings only work if there is an incentive to ensure the seller sets a fair price. Without one, users could list items at extortionate prices with no intention of being filled while still accessing a freshly minted floor token. This would depeg the floor token from the market, as it could no longer be used to claim a fairly priced item.

To resolve this, NFTX charges a listing fee that scales with how aggressively an item is priced and how long it is listed for. Because the listing is published at the seller's self-assessed price and anyone can fill or re-list it at that price (a Harberger-style dynamic), there is a strong incentive to price at a fair market rate. Users can still set their price far above fair value, but the fee will be high and the item will not sell, incurring losses that eventually force the listing to close.

When a user lists an NFT, they pre-pay the fee to cover their listing up to the chosen expiry. All fees are paid in floor tokens and are deducted from the liquidity released at the point of listing. The fee scales with the square of the floor multiple, so doubling your asking price costs roughly four times as much to maintain. For floor multiples above 2x, the curve is deliberately softened to keep high-value (grail) listings viable. If a listing is closed early, the unused portion of the pre-paid fee is refunded. The exact formula is given in Appendix A.

2.2Fees

A configurable protocol fee share can be carved out of collected fees before the remainder is donated to the pool. When the protocol fee is set to zero, 100% of fees flow to LPs. LPs claim their share using the same logic as swap-fee collection, without any additional staking or gas.

2.3Dutch Auction (expired Liquid Listings)

Users pre-pay the listing fee for a chosen duration and are free to update the price or duration at any time. Listings can be closed at any time by the holder, returning any remaining pre-paid balance.

If a holder's pre-paid balance runs out (and the listing is neither filled nor closed), the item is immediately moved into a Dutch auction where the price falls linearly from its current floor multiple down to the floor (1x) over a fixed window. Because the expiry time is known up front at listing, no keeper is required to trigger the auction.

The value of the item falls every second until it reaches 1 floor token, at which point it can be redeemed in the same way as any other floor NFT in the pool.

This lets users "set and forget" their listings, accepting that they will pay a predetermined listing fee and will either sell at the price they set or, if they have mispriced the asset, during the auction.

2.4Dutch Listings (immediate auction)

When creating a listing, a user can instead send the item straight to a Dutch auction by choosing a short duration. This allows very fast liquidation of non-floor items, with the auction creator receiving immediate liquidity of 1 floor token and the remainder decaying from the chosen multiple toward the floor over the listing's duration.

This is particularly helpful for NFT-Fi applications that need to liquidate their users' non-floor items as quickly as possible, without appraising assets or holding a long-dated listing. As with all items that enter auction, there is no refund on the fee.

NFTX allows users not only to list their own NFTs, but to re-list any item that is already available in the pool and that they do not already own, whether it is sitting at the floor or already carries a listing. The re-lister pays the item's current price above the floor (if any) to its existing owner and pre-pays the new listing fee, capturing the upside if it sells. This lets those with specialized knowledge profit by repricing mispriced assets in the pool.

This also works for items that already carry a listing: a listing at 1.1x can be re-listed at 1.3x by paying the 0.1 premium to the current owner plus the new accrued fee, without committing the full floor value.

Swapping NFTs has typically been an OTC affair, where users create specific conditions for a trade. These deals are highly illiquid and rarely filled. Fungible NFT vaults solved floor-to-floor swaps natively for collections. NFTX takes this a step further by opening floors up to mid and rare swaps.

With enough liquidity across collections, cross-collection trade-ups and trade-downs become possible not just on NFTX but also across secondary-market listings priced in floor tokens.

Collections enter NFTX through a launch gate that controls who can create and initialize a pool. The gate is a swappable contract, so launches can be fully permissionless (a public gate) or curated (a white-glove gate) depending on the collection and the moment.

A collection can also be launched single-sided, initializing a pool with only collection tokens and no paired ETH. This creates a one-sided range position and lowers the capital required to stand up a new market, which is useful for bootstrapping liquidity ahead of broader participation.

6.1NFTX LST

While outside the scope of this whitepaper, NFTX collection-token liquidity is paired with flETH, an ETH-equivalent wrapper whose underlying ETH earns staking yield through a swappable strategy. Yield is directed to a separate, protocol-owned receiver. flETH behaves like WETH for the purposes of trading and LPing, while putting otherwise idle ETH to work.

6.2Collection Shutdown

For collections whose circulating supply falls to a small number of tokens, NFTX provides a permissionless wind-down path. Token holders vote by locking their tokens; once quorum is reached, the remaining NFTs are sent to an external liquidation venue and the ETH proceeds are distributed pro rata to token holders. This ensures the last holders of an illiquid collection can always exit cleanly, and the collection is permanently sunset to prevent resurrection.

6.3Integrations

NFTX exposes an onchain price oracle derived from pool observations, giving NFT-Fi protocols a manipulation-resistant reference price for collection tokens. A zap contract bundles common flows, such as buying an NFT directly with ETH, into a single transaction. Together with the V4 hook, these make NFTX straightforward to build on top of.

6.4Offchain Inventory

With the rise of offchain inventory as a profitable market-making strategy, NFTX is well positioned to capitalize by using its own treasury of collection tokens to execute on these strategies. As an aside, while offchain market making reduces fees for passive onchain LPs, NFTX's listing system is set up to subsidize their revenue.

In summary, NFTX is a non-custodial and neutral implementation of a fungibility layer for NFTs that aims to tighten spreads by extending LP fees beyond swaps.

At the pool layer, the protocol is neutral and non-upgradeable: the deployed contract logic cannot be replaced, and users are free to enter and exit the fungible state of an NFT without fees. A protocol owner retains a limited set of administrative controls, such as registering manager contracts, configuring collection launch gates and fee parameters, and a safety pause. Neutrality helps expand the network effects of NFTX's pool tokens through product and gaming integrations.

NFTX also unlocks features not yet seen in the NFT market: Liquid Listings, Dutch Listings, Trade-Ups, and Re-Listing, creating additional value for users and LPs.

As liquidity for NFTX pool tokens expands, more product opportunities become available to further increase revenue.

NFTX charges a single, fixed-rate listing fee, pre-paid in floor tokens. There is no separate variable-rate model. The fee scales with the square of the self-assessed floor multiple and linearly with duration, normalized to a 7-day reference period.

The floor multiple is expressed to two decimal places, where 100 = 1.00x floor, 150 = 1.50x, 200 = 2.00x, and so on. The minimum listable multiple is above 100 (an item priced at floor is simply a redeemable floor item). A kink at 200 (2.00x) softens the curve for higher-value listings.

fee = (floorMultiple² × 1e12 × duration) / 7 days

fee = ((floorMultiple + 200)² × 1e12 × duration) / (4 × 7 days)

Equivalently, above the kink the effective multiple is (floorMultiple + 200) / 2 before squaring, so the marginal cost of pricing higher is halved past 2x to keep grail listings viable.

Example fees (per item, 7-day listing), denominated in floor tokens:

Fees scale linearly with duration: a 14-day listing costs twice the 7-day figure. Unused fee is refunded if a listing is closed before it expires; items that enter a Dutch auction are not refunded.