Mentor:

Carter Turnbull

Challenge:

Every blockchain, protocol, token and even NFTs are searching for one common thing in Web 3. Liquidity. Not just temporary liquidity, but long term, reliable, sticky liquidity.

This has led to a ton of innovative ways to reward liquidity providers and encourage them to leave their capital parked in a specific protocol for as long as possible, but the underlying theme in all of these solutions is that the ‘stickiness’ is derived from profit.

Solution:

Rather than encouraging people to stay in an LP with profit alone, protocols need to create other incentives to maintain that liquidity.

Enter generative LP NFTs. One of the reasons NFTs gained so much popularity is because of the non monetary, emotional value that a unique, cute or nostalgic photo creates for a person.

This connection with the art is undoubtedly part of the reason why people hold onto their NFTs, even when prices (and potential for profit) take a back seat.

Adding a generative art piece to the NFTs that represent ownership of an LP will be a low friction way to create an extra reason for investors to NOT unwind their LPs. This will lead to an increase in overall ‘stickiness’ of the liquidity for any protocol that implements the solution.

Why it is important:

Attracting and maintaining liquidity is one of the main things that can make or break a protocol. Without sufficient liquidity, potential investors could be spooked by high slippage or an unclear future exit. If a protocol has deep liquidity, then more volume will flow through its product, and the underlying business will generate more revenue.