Thread by @fwd_protocol

Today, we're excited to introduce Forward, a permissionless protocol for improving NFT liquidity WITHOUT abandoning creator royalties.

The key to preserving royalties is finding a middle ground between the different actors in the NFT market. Here's how:

forward-protocol.readme.io/docs

NFT royalties make sense for *collectors*, who buy NFTs for their utility, status and community.

Collectors are typically long term holders, so it’s understandable for them to pay royalties on secondary sales, as a way for creators to share in the financial upside of their work.

But the NFT market also consists of liquidity providers (market makers, traders, AMMs, etc), who trade more frequently, and have little interest in “owning” or “using” the NFT.

For these actors, royalties act like a tax, making it hard to provide liquidity at competitive prices.

One reaction might be to say “screw those profit-seeking liquidity providers!”. However, our position is that they offer a valuable service, which improves the UX for regular collectors by reducing volatility and enabling instant liquidity.

If NFTs are going to be adopted more broadly, the UX of selling needs to drastically improve. Regular users want a vending-machine UX. Roll up, get quoted a fair price, & instantly sell. Liquidity providers can enable this, but royalties limit their ability to do it efficiently.

When two users trade P2P, it’s a single transaction, with a single royalty. However, if a market maker facilitates the trade, buying from User A and selling to User B, it’s two transactions, with two royalties. This ends up hurting the users, who get worse prices.

In an attempt to solve this problem, many marketplaces have made the controversial move to optional royalties. But this doesn’t address the core problem. It optimizes for liquidity providers, at the expense of creators. Why not optimize for both?

This is why we built Forward.

Forward is the first “actor-aware” NFT liquidity protocol. It unlocks instant liquidity for collectors, efficiency for market makers, and preserved royalties for creators.

Here’s how it works:

1. Market makers create off-chain bids (token, trait or collection wide), which any owner can accept.

2. When the bid is accepted, the NFT is locked in the Forward protocol and the use of the token is restricted (no auth, airdrops, etc.)

3. While locked in the protocol, the token can be relisted on major NFT markets (e.g. OpenSea) using Seaport and EIP-1271.

4. When the token is bought or withdrawn, the protocol verifies that a full royalty was paid (via royalty registry), before allowing it to be released.

So how does this help?

1. Since market makers *forward* the royalty onto the buyer, they can efficiently provide liquidity to the market, improving instant sell prices for collectors and reducing the risks of entering the market.

2. Because the NFT never goes into the market maker's wallet, it reduces the incentive for regular users to skip royalties (no utility, status or airdrops).

Short-term liquidity providers are automatically segmented, allowing creators to easily identify their true community.

3. Because a royalty is guaranteed to be paid when the NFT is resold, aggregators and portfolio interfaces who want to honor creator royalties can safely surface Forward bids to their users, giving them competitive prices and a vending-machine instant-sell UX.

Finally, despite our best efforts to design a middle-ground, we appreciate that not all creators will agree. And that should be their decision.

To that end, we’ve made it possible to opt-out of Forward at the protocol level, and will be providing a simple interface for doing so.

The Forward Protocol is code-complete, and will be launching soon after an audit. If you’re a market maker or creator, check out our docs to learn more, or join our Discord for support.

Let’s grow NFT liquidity and adoption together 🤝

forward-protocol.readme.io/docs