layout: post

featured: false

title: "Introducing NFT Floor Price Protection 🖼️"

author: Team

categories: [ mainnet ]

image: assets/img/2023-01-30-stacktical-dsla-protocol-nft-floor-price-sla-blockchain-cryptocurrency-fintech-legaltech-insurtech-itsm-slm-sla-defi-nft.jpg

NFTs exploded into the mainstream consciousness in 2021 and the market continues to rapidly evolve and grow today. As one of the newer elements in the Web3 space though, NFTs lack some of the robust ecosystem tools that have been growing alongside the standard Web3 token economy for the past 6+ years.

NFT Floor Price Protection, powered by DSLA, fills a gap in the NFT ecosystem by providing decentralized risk management and downside protection for NFTs. Let's take a look. 👇

The Floor is Lava!

DSLA's NFT Floor Price Protection allows creators and projects to offer floor price protection using a decentralized Service Level Agreement (SLA) for their NFT collections; this help their project to stand out from the crowd and attract collectors. On the flip side, NFT collectors can buy a new NFT with confidence, hedging their risk of floor price drops (downside risk) and getting compensated if the target floor price is not maintained.

Consumer protection is the ethos of DSLA and NFT Floor Price Protection is making it a reality for the NFT market!

The basis of DSLA v2 is the issuance of Branded Service Credits to represent a user positions; these Service Credits behave essentially as liquid staking tokens.

In the case of NFT Floor Price Protection agreements, users who deposit a cryptocurrency premium to receive protection are issued xFLOOR Service Credits. Liquidity Providers who deposit cryptocurrency to underwrite the floor price agreement receive xFLOOR-LP Service Credits.

xFLOOR Service Credits will increase in value upon SLA verification if the target floor price is breached, whereas xFLOOR-LP Service Credits will increase in value if the floor price target is maintained.

User premiums are locked for at least one full period after their initial deposit, while LP deposits are locked through at least a validtion period *and* dependent upon the current balance of User deposits. As DSLA agreements are fully collateralized, there must always be enough liquidity in the LP side to cover all potential user compensations.

DSLA's technology is flexible and allows for novel integration by projects looking to stand out, provide protection and attract collectors. One such application would be for a project to create an NFT Floor Price Protection SLA and collateralize **both sides** of the agreement using a portion of minting proceeds.

Then, the project could airdrop xFLOOR Service Credits to buyers or holders, providing them downside risk protection at no additional cost to the holders.

Floor price protection is a game changer for projects, creators and collectors, but another feature of our decentralized SLAs gives the NFT Floor Price SLA even broader appeal. To understand the opportunity we need to look at how SLAs work. There are two sides to every SLA:

* One side joins to **Cover** a risk they are exposed to. In this case NFT Collectors join an Agreement to **Cover** the risk of the floor price dropping below a target price for the NFT that they own.

* The other side joins to **Clear** or underwrite that risk - aka *providing the cover*. NFT Creators and project backers join to **Clear** risk of price drops (they provide the protection to NFT Collectors). They earn a reward from the NFT collector stakes when the NFT floor stays above the target price.

With DSLA being permissionless and open, anyone can sign onto the SLA to either **Cover** risk or **Clear** risk. This opens new ways for people to interact with the NFT market.

* Collectors sign on to **Cover** the risk of floor price drops for an NFT they own.

* Creators sign on to **Clear** risk for collectors, backing their NFT collection floor price and making the project more attractive.

* Users who don't want to buy and hold a potentially illiquid JPEG can have exposure to the NFT market by backing a NFT Floor Price SLA according to whether they think the Floor Price will be maintained or not. They can **Cover** or **Clear** risk to benefit from predicting floor price moves without owning the NFT.

* Users who might not have funds to buy a certain NFT can still take part in the NFT market through the Floor Price Protection SLA

This is an entirely new market for NFTs where anyone can sign onto the SLA and be rewarded if the collection performs according to their prediction. Users can **Cover** risk and be compensated if the floor price drops below the target or users can **Clear** risk and be rewarded rewarded if the floor price stays above the target.

All kidding aside, the Pixelmon debacle was a great example of where NFT Floor Price Protection would have been beneficial. It serves as a case study on why NFT downside protection is all the more valuable going forward.

Looking at what happened with Pixelmon we can easily visualize where the market created by an NFT Floor Price SLA would have interested NFT investors on both sides - those who believed the floor price would be maintained and those who did not.

We're very excited to launch DSLA NFT Floor Price Protection and can see it becoming one of the fastest growing parts of the DSLA ecosystem!

DSLA is executing a staged roll-out of NFT Floor Price SLA's with select projects. If you would like to incorporate NFT Floor Price Protection for your project, please fill out this [Interest Form](https://forms.gle/NajZbMxaWzEQW6re6) and we will be in touch!

DSLA's approach to integrated risk management enables the downside-protected delivery of goods, services and digital assets without intermediaries.

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