The TradeStars platform
The TradeStars platform can be considered to be a Decentralized Exchange (DEX) for Fractional NFTs, where economic incentives for users to stake in the game are connected to real life statistical data.
Leveraging our team past experience in the Fantasy Sports and Gaming industries, we created a crypto-economic game based on the trading of virtual assets that would represent real-life statistical performance.
- Real life statistics are tokenized with our Fractional NFT implementation where users can trade shares from. We call this shares “Smart Tokens”
- The tokens supply for each Fractional NFT Market is managed by a bonding curve that sets the share price seamlessly as per market supply and demand.
- When Smart Tokens are purchased, the payment gets added to the reserve balance and new Smart Tokens are issued to the buyer. Since both the reserve balance and the supply are increasing, the purchase of a smart token will cause its price to increase. Similarly, when Smart Tokens are liquidated, they are removed from the supply, reserve tokens are transferred to the seller, and the token price decreases.
- To ensure that the price fluctuation of the reserve does not affect the market price of the smart tokens, stable coin is used as the common reserve token.
Tracking real-time and historic statistics for these NFTs added another component to the formula that would be a factor of influence while determining it shares' final price. Much like in the real-world stock exchange, hard data would influence the perceived dividends for the stockholders (more on this later) helping determine the new price for the trading shares and setting the incentive on the opportunity to spot and buy early those assets that promises the most upside to your investment.
As new prices gets validated there will be users willing to buy or sell to make profit out of their holdings, and these actions would then result on setting new prices for the traded assets.
Also, if for each purchase transaction a small fee is accrued for the NFT owner, users would be encouraged in holding the ownership of the Fractional NFTs and try to increase the transaction volume of its shares.
All this would result in the creation of a hyper liquid market around the real-life, tokenized asset, represented by the Fractional NFT.
TradeStars' core focus is to enable sports fans around the globe to be able to use the platform in a friendly and natural way. Here’s how the simplest use case for a user interacting with the platform works:
- 1.Once registered on the platform, the user can fund their account with any of the supported payment methods, or use an external web3 compatible wallet to fund it using any supported ERC20 token.
- 2.Users can now purchase or liquidate Smart Tokens of any of the unlocked Fractional NFT markets .
- 3.While holding Smart Tokens in their portfolio, and according to the scoring rules, users will receive dividends in the platform main token (TSX).
- 4.Users can stake TSX to unlock new Fractional NFT markets, participate voting in platform Governance decisions, and entitle a percentage of the generated platform transaction fees.
Fractional NFT markets are the main items on the TradeStars platform and can be compared to the liquidity pools seen on conventional decentralized exchanges.
A Fractional NFT market is composed by the real-life performance of a sport player tokenized through the Fractionable NFT and its circulating supply of shares or "Smart Tokens". It provides automated liquidity managing its shares' supply and price validation using a parameterized bonding curve.
Users can purchase and liquidate Smart Tokens at these markets and, by using a common reserve as medium of exchange (TSX), all of these tokens are interchangeable inside the TradeStars platform.
As we defined earlier, these tokens are transferable ERC-20 compatible tokens that are created and destroyed by the holding Fractionable NFT, providing automated liquidity.
Each of these tokens represents a fraction, or a share, of the emitting Fractionable NFT, and users can trade, hold, purchase or liquidate these tokens at anytime against the TradeStars smart contracts in exchange for the reserve token. (more on this later)
Much like the Bancor's implementation, we use a method based on a “Constant Reserve Ratio” (CRR) for setting the relation between price and supply for these tokens. The CRR is set by TradeStars and can be later changed by TSX holders' voting decisions.
The CRR is used in price calculation, along with the Smart Token’s current supply and reserve balance, in the following way:
A constant ratio is kept between the reserve token balance and the smart token’s market capitalization (supply * price). Dividing the market cap by the supply produces the price according to which the smart token can be purchased and liquidated through the smart contract.
The smart token’s price is denominated in the reserve token and readjusted by the smart contract per each creation or destroy operation, which increases or decreases the reserve balance and the smart token supply (and thus the price).
When smart tokens are purchased, the payment for the purchase is added to the reserve balance, and based on the calculated price, new smart tokens are issued to the buyer.
Due to the calculation above, a purchase of a smart token will cause its price to increase, since both the reserve balance and the supply are increasing, while the latter is multiplied by a fraction. Similarly, when smart tokens are liquidated, they are removed from the supply (destroyed), and based on the current price, reserve tokens are transferred to the liquidator. In this case, any liquidation will trigger a price decrease.
The following image shows a simplified scenario of how this mechanism works:
The actual price of a smart token is calculated as a function of the transaction amount.
- R - Reserve Token Balance
- S - Smart Token Supply
- F - Constant Reserve Ratio (CRR)
T = Smart tokens received in exchange for E (reserve tokens), given R, S.
E = Reserve tokens received in exchange for T (smart tokens), given R, S.
Smart Tokens are first created by depositing an initial reserve and issuing the initial token supply.
As all the Performance Smart Tokens use the same reserve token, they form a network of tokens. The common reserve token can be described as a network token which captures the combined value of the network of smart tokens which hold it in reserve.
The network token also functions as a “token for tokens”, rendering all the smart tokens in the network interchangeable.
Since increased demand for any of the smart tokens in the network would increase demand for the network token (because it is required for purchasing these tokens and held in their reserves), and the price of network token is directly related (to maintain the CRR) to the value of the Smart Tokens. We will use the TradeStars TSX token as the common reserve token.