Wait, Can We Short NFTs Now? Study on nftperp | TKX Research

6 min readSep 24, 2022

by @Guaaronnnn
editor @FriedWagyuu

Part I. NFT + Perp: How?


The NFT market has been up and down. Many protocols are trying to solve the liquidity issue, for example, lending, fractionalization, AMM, etc. But we could never short an NFT to hedge the downside risk. So, how did nftperp achieve this?

In one sentence, nftperp is a DeFi protocol built on Arbitrum: nftperp’s core function is a perpetual exchange, where you can long or short blue chip NFT projects such as BAYC, CryptoPunk, and more. Traders can go long or short on the floor price with any amount in ETH. nftperp forked the vAMM originally designed by Perpetual Protocol, which ensures no liquidity and order book are needed.

For the floor price feeds, nftperp partnered with Upshot.xyz and integrated with chainlink to bring real-time NFT price feeds on-chain for its smart contracts. Of course, there is a funding rate to make sure the perpetual’s price is close to the real floor price in the spot market.


nftperp is based on vAMM which uses x * y = k as most AMMs. vAMM does not require a liquidity pool and users deposit ETH into a smart contract vault as collateral. The price is discovered through the vAMM bonding curve where the vAMM acts as an independent settlement market. All the gains and losses are directly settled in the contract.

Dynamic Virtual Liquidity Model

vAMM can easily solve liquidity issues, but there are still some critical problems to be solved:

  • The long and short imbalance will put the protocol at systemic risk due to high slippage if the virtual liquidity (x & y) value cannot be adjusted dynamically.
  • The further the market price diverges from the vAMM initiation price, the larger slippages become.

nftperp introduce a Dynamic Virtual Liquidity model to solve the long/short skew issue. The Dynamic Virtual Liquidity model will adjust x and y values based on two scenarios:

  • Convergence Event: convergence event occurs when the price of perp deviates from the oracle price for more than 5% longer than 8 hours, the system will adjust the y value with a multiplier to match the oracle price. With each convergence event that occurs, the virtual liquidity resets. This allows trades to be executed back in the centre of the bonding curve where slippage is at its lowest.
  • Dynamic k Expansion & Contraction: k implies the depth of virtual liquidity. The larger k is the less slippage when trades are executed. As long as the process of k expansion and k contraction does not affect the ratio between x and y, the protocol can withstand any market conditions (high vs. low open interest).

The Dynamic Virtual Liquidity model can protect the critical shortcoming of vAMM as large slippage might bring unforeseen risks to the protocol.

True Floor Price

The marketplace floor price is commonly used by NFT-Fi protocols as an oracle. However, there are a few issues with that:

  • Price manipulation: a very common concern to NFT-Fi protocols.
  • Single NFT listing (that establishes the floor) does not represent the broader market’s consensus.
  • The minimum asking price represents the sell side rather than the fair price (a value that bids and asks meet).

nftperp introduce True Floor Price as a tamper-proof NFT price oracle. It is a computation method that:

  • Collecting and parsing on-chain/off-chain NFT transaction events on top NFT marketplaces like OpenSea, LooksRare, and X2Y2.
  • Determine data eligibility: eligibility is based on transaction event type, token IDs, and wash trade detection. For example, the same token ID wasn’t traded/transferred within the last X hours meets one of the conditions.
  • Filtering extreme outliers: filters out sales that are less than 0.1x of rolling average value, because these sales with a low price are easy to manipulate. It also filters sales that are 9x of the rolling average as these transactions have little to do with floor value.
  • Probable outliers filtering with Acceptable Price Range (APR): APR is a dynamic value used to determine whether the new sales are or aren’t included in True Floor Price calculations. APR is calculated by the Truncated Mean, the Standard Deviation, and a Sensitivity Multiplier.
  • True Floor Price TWAP: The True Floor Price value is updated whenever a new sale within APR gets added to the database. It is taken every hour — sampled 24 times and TWAP’d daily to update the oracle.

For risk management, nftperp has two ways to further control the risk:

  • Oracle index prices are for funding rate calculations, not for liquidations. This can significantly protect traders and nftperp itself as price manipulation might still happen with True Floor Price.
  • nftperp will focus on blue-chip NFTs such as BAYC, where the market cap and network effect are much larger and more challenging for manipulation.

Final Thoughts

NFT financialization is a direction that will bring the NFT market to a higher level. nftperp has a Dynamic Virtual Liquidity model and True Floor Price model to solve its vAMM shortcoming and NFT-Fi commonly faces issues. nftperp is still on the testnet, if its solution proves to be working, we can expect more different kinds of NFT derivatives protocol across the market.

Part II. Market Updates

Nasdaq is preparing to launch an institutional crypto custody service
Equity exchange operator Nasdaq has been plotting a move into institutional crypto custody service, according to several people briefed by the company. Nasdaq is also establishing a new crypto-focused division in tandem with its exploration into crypto custody, Nasdaq Digital Assets.

Crypto market maker Wintermute hacked for $160 million
Crypto market making firm Wintermute has been hacked for $160 million but the firm remains solvent. CEO Evgeny Gaevoy said that 90 assets were stolen. Two amounts of tokens were worth between $1 million and $2.5 million, with the remaining below $1 million.

Draft stablecoin bill in Congress to require Fed, state regulator approval
Draft legislation to create a U.S. federal framework around stablecoins would temporarily ban the types of payment coins that are not backed by outside assets — similar to TerraUSD, an algorithmic stablecoin that collapsed earlier this year.

Stablecoin Issuer Tether Ordered to Produce Documents Showing Backing of USDT
Tether has been ordered by a U.S. judge in New York to produce financial records relating to the backing of USDT. The order requires Tether to produce “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements” as well as records of any trades or transfers of cryptocurrency or other stablecoins by Tether including information about the timing of the trades.

Crypto Exchanges Binance and FTX Have Both Bid Roughly $50M for Voyager’s Assets
Binance and FTX have made the top bids of roughly $50 million for the assets of insolvent crypto lender Voyager Digital. Neither offer has been accepted yet, according to the report. Binance’s current bid is slightly higher than FTX’s, according to the people. Final results of the auction are expected to be announced on Sept. 29, although an announcement could come earlier.

Part III. Fundraising News

Immortal Game — Chess game
Raised $15.5M in a funding round led by TCG Crypto. Other investors include Kima Ventures, Alven, Moonfire Ventures, Spice Capital, Kraken Ventures, Blockwall, 35 Ventures, Sparkle Ventures and others.

Portofino Technologies — Crypto market maker
Raised $50M in a funding round. Investors include Valar Ventures, Global Founders Capital and Coatue.

Integral — Web3 finance platform
Raised $8.5M in funding round led by Electric Capital. Other investors include former Coinbase chief technology officer Balaji Srinivasan, Anchorage Digital co-founder Diogo Mónica and Roham Gharegozlou, CEO of Dapper Labs.

Messari — Crypto Analytics Firm
Raises $35M in a series B funding round led by Brevan Howard Digital. Other investors include Morgan Creek Digital, Samsung Next, FTX Ventures, Point72 Ventures, Kraken Ventures, Uncork Capital, Underscore VC, Galaxy, and Coinbase Ventures.

Sardine — a real-time fraud prevention product
Raised $51.5M in series B funding round led by a16z crypto. Other investors include XYZ, Nyca Partners, Sound Ventures, Activant Capital, Visa, Google Ventures, Uniswap Labs Ventures and others.



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