LST NFTs? - Lilypad's Solution for Insured NFTs: What You Need to Know
pathSOL, Yield Royalties, & More
Some people might be complaining about a lack of innovation this cycle, but incremental innovations shouldn’t be ignored. Restaking could be cast into this bucket, though things like native yield on Blast are better examples. Pac-Man also recently just announced prediction markets with native yield. This is a pretty basic solution that didn’t require a whole lot of technical capacity, but saw a much higher ROI when it comes to users and funds bridged to the chain. Of course, the vast incentives and points on Blast also helped. We’ve seen onchain perps via platforms like Hyperliquid become much more viable, bridging the gap between DEX and CEX. Pre-TGE markets and points markets also have helped to provide more certainty come TGE for highly-anticipated token launches. While these improvements haven’t made millions more crypto natives, these are just a few examples of interesting changes we’ve seen.
We’ve also seen a lot of mindshare shifts within crypto, even if this hasn’t yet necessarily culminated in the massive user adoption to validate it. This includes recent debates highlighting a lack of pragmatism from ETH leaders, and the rise of Solana with its sharp UX and focus on BD. Agree or disagree, if a certain route is potentially more likely to result in innovation, then the industry turning toward this path more as opposed to the tried-and-true is a step in the right direction for those who hold these sentiments. Put simply, those who like Solana should be happy that people are even entertaining conversations around Solana being the dominant chain this time around, something that would’ve been considered ludicrous not too long ago. If you need to have conversations defending the incumbent chain in the first place, perhaps its moat is not as strong as it seems…
On this note, Solana has been home to all sorts of incremental innovations. From simple NFT options to P2P lending protocols, Solana Blinks, and more, the chain has hosted various lightweight improvements that aren’t necessarily game-changing but valuable in their own right. In today’s edition, we’ll focus on Lilypad, a protocol that fits this description.
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Background on Lilypad
Lilypad is an NFT launchpad whose premise is pretty simple; the protocol introduces the concept of LST NFTs. This is not some ve-tokenomics LST scheme; NFTs can simply be purchased with LSTs, as opposed to the norm of just buying them with native SOL.
Rather than pay out minting proceeds as the means of funding for the NFT collection team, the yield from the LST is instead used to pay out a royalty. That’s right, the collection owner doesn’t actually get paid the principal SOL, they only receive the yield over time as a means of payment. In addition, minters can choose to effectively burn their NFT in exchange for their LST back, thus canceling any future yield that would be directed toward the team. Overall this concept swings the pendulum of risk in NFT mints much more toward the team as opposed to the minter.
This obviously may not be preferred by all teams to launch an NFT, and going this route might express more long-term thinking which could be valued by a community and boost popularity and potential sales. This mechanism forces teams to take a more long-term approach, hence why Lilypad uses the term ‘unruggable’ to describe their protocol. OK, this might be a bit of an overstatement; but the mechanism definitely mitigates the rug risk substantially when the price paid by minters is spread out over time. There’s obviously less initial funding for the team to allocate, but forced pacing of operational expenses might be a good thing. Users can weigh the pros and cons, as can teams.
All too often, users and developers alike settle for simply using the native gas token on a given chain to denominate in. This definitely does not have to be the norm, but it is. Stablecoins be used, and using LSTs is a no-brainer. After all, foregoing the use of LSTs just forces buyers and sellers both to hold a shrinking share of the network, as PoS chain users must stake to maintain their percent of network supply owned. This alone is an incremental innovation that could be tacked on existing NFT protocols. At a minimum, it would add more utility to these LSTs and LRTs, which have grown to become more and more important to their respective ecosystems. Lilypad takes this a step further with its lock-to-mint model.
Overall, Lilypad provides an interesting take on the traditional NFT minting process, at a time when there might be more increasing demand for DeFi, Web3 gaming, NFTs, etc. Some have floated the idea that these things finally might see more attention as opposed to just explicit memecoins and speculation as rate cuts generally promote the investment in more forward-looking ideas rather than forcing capital deployers to focus on cash flows in the present. Lilypad is easy to understand, no ponzinomics hidden under layers of obfuscation. The platform just held its first mint, of its own native NFT, selling 70% of the supply.
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