The next NFT primitive: tradeable delegation rights
by foobar
Delegation is crypto power-of-attorney. You store valuable tokens in cold wallets, link it to a hot wallet, then do everyday token-gated actions like claiming airdrops, playing games, and joining discord channels from your hot wallet. You never put your vaulted tokens at risk.
We launched delegate.cash as a free immutable public good four months ago, and it’s grown to secure $380 million worth of NFTs across eleven EVM chains at time of writing, including three hundred cryptopunks, a thousand bored apes, and ten thousand art blocks pieces! It’s been used in airdrop claims for practically every top NFT project out there, including Yuga’s Sewerpass, ArtBlocks’ Friendship Bracelets, Forgotten Runes, and Invisible Friends. Not to mention event-based ticketing like Tokenproof and creator-focused platforms like Manifold.
But this is just the beginning. It’s time to announce Liquid Delegates…
What are Liquid Delegates?
Liquid delegates (LDs) wrap delegation rights into a tradeable NFT. This gives you a trustless way to trade airdrop claims and more. It grants no-liquidation, no-risk NFT rentals automatically compatible with all standard ERC721s.
How does it work? The Liquid Delegate creator chooses two parameters: an NFT they own and the timeframe to delegate it for. For example, I might delegate Azuki #578 for one month. I would then deposit the Azuki into an escrow contract that will manage the delegation, and I receive a Liquid Delegate NFT in return.
Liquid Delegate NFTs have the following properties:
- they are tradeable on NFT marketplaces
- holder will automatically receive delegation rights
- holder has exclusive rights to atomically flashloan the escrowed token
- holder can burn it to return the escrowed NFT to the depositor
Why are these features important? Tradeability opens up an entirely new liquid market for NFT utility, whereas beforehand they were mostly done in handshake deals behind closed doors. Automatic delegation rights makes it simple to use that utility. Exclusive flashloan rights provide backstop functionality to ensure compatibility with projects that don’t support delegation yet. The burn function opens up an avenue to retrieve the escrowed token before expiration if the depositor changes their mind.
Once a Liquid Delegate expiration timestamp hits, anyone may burn the Liquid Delegate and return the escrowed NFT to the depositor. Eager depositors may wish to call this trigger themselves, or automated bots could burn expired NFTs on demand.
What are the Use Cases?
1. Airdrop Claim Rights
Some people don’t have the free time to be glued to their screens 24/7/365 with notifications on across Discord/Twitter/Telegram to claim free stuff. Of course they’d like to maximize profits, but not at the expense of other important priorities. Or maybe there’s a DAO which finds it difficult to run proper governance across all the onchain activites necessary. Liquid Delegate lets you put those airdrop rights up for sale and let someone else do the dirty work. And LD buyers can batch up their work to make it worth the time.
2. Alpha Pass Rentals, Event Ticketing, IP Rights
Want to give somebody a taste of a token-gated discord? You could rent your NFT to them for a week (for a small fee, of course) taking advantage of the fact that delegatecash has native support in both Vulcan and CollabLand. Or maybe you have an ApeFest ticket but can’t go in-person yourself? Previously you might give it to a friend, or negotiate some sketchy OTC deal with a Twitter anon. Now you can just rent out your token utility for a week or two, and get paid in an upfront way for it. It would also be fascinating to structure IP rights agreements around Liquid Delegates.
3. Lockup Incentives
NFT projects want to reward their most loyal diamond-handed believers. But what does that even mean – discord activity, twitter pfps, follower count, something else? Now projects can directly incentivize long-term alignment by purchasing Liquid Delegates from holders who lock up for extended time periods. Could veToken-esque incentive programs be built on top of this? We’ll see!
Are there other protocols tackling each of these usecases? Of course. But none of them roll up so many different possibilities into a unified interface with simple time expirations and comprehensive asset protection. Standardization attracts liquidity.
Native Marketplace
Most NFT marketplaces can’t handle the interactivity we need. For example, it can take a half-hour to view metadata after minting a new Liquid Delegate! Burned tokens keep showing up after being burned, there’s no easy way to filter or group by expiration time, and updating images to show a state change (such as expiry, or a scam) requires manual intervention. We need better for dynamic protocols.
So we’ve built our own native marketplace for buying and selling Liquid Delegates that provides the safest, cleanest, fastest user experience. We’ll provide filtering mechanisms to help buyers and sellers find exactly what they’re looking for, and we will not blacklist competitors. Protocols are meant to be open and composable.
I wrote an article about the sustainability of royalty mechanisms last year, and I’m putting my product where my mouth is. Liquid Delegate will monetize in three ways: (1) a creation fee where half is shared with referral codes or alternate frontends; (2) integrating the ERC-2981 royalty standard that third-party marketplaces such as Blur and LooksRare partially support; (3) following ERC-2981 on the native marketplace. We’ll adjust these parameters after observing market feedback, to start they will be 0.01 eth per creation and a 10% creator fee on secondary trading. Liquid Delegates will always be decentralized bearer assets, free of whitelists and blacklists. This will never change.
How to Use It
Go to delegate.cash/liquid to browse the marketplace of existing Liquid Delegates. If you connect your wallet, you can then use ETH to bid on them. Or you can create new LDs of your own! Go to the “Manage” tab, which will show you the NFTs your connected wallet owns. Select one, then you’ll have three steps:
(1) Approve the LD contract to move your NFT into escrow
(2) Select an expiration time on the datepicker; the longer the LD, the more valuable
(3) Deposit the NFT and receive your Liquid Delegation
Now that you have your Liquid Delegate, you’re free to list it on the native marketplace, list it elsewhere, or burn it to retrieve the deposited NFT. If somebody buys it from you, then they have delegation rights. You will wait until the LD expires, then it will be burned and your deposited NFT returned to you.
Now let’s dive into some technical details. Keep reading if you’re curious about fun features under the hood, otherwise you can go experiment with creating your own Liquid Delegate right now!
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Immutable Attributes, Mutable Images
A great internal battle rages – decentralized bearer assets are critical, yet the user experience for new primitives requires so much handholding and experimentation. Liquid Delegate highlights these tradeoffs. Users will be dynamically minting new ones and burning old ones over time. There’s no fixed supply, no way to know what collections people will deposit, no way to know what images the NFTs will have. While a 10k pfp collection can pin to IPFS and call it good, we need more dynamism.
The solution? Immutable onchain attributes, and mutable images. Immutable attributes are info like the deposited token id, deposited token address, and who deposited it. The mutable image is a user-friendly way to display this information, grabbing offchain helper data like the collection name, the token image, date displays, whether it’s expired, and automated verification mechanisms to avoid impersonator Liquid Delegates. This means nobody can spoof basic onchain info about the delegation, and we’re also able to help users avoid common scams.
Comparison with Lending/Rentals
Liquid delegates are a safer way to earn yield on your NFTs than traditional lending or renting. Simply put, when you transfer your NFT to someone else, there’s no guarantee that they’ll return it. For the original holder, the payoff profile resembles selling an OTM call option. This isn’t great in an asset class with asymmetric upside, caps your profits.
In contrast, Liquid Delegates have zero liquidation risk, zero theft risk, zero insolvency risk, none at all. You are 100% guaranteed to always get your NFT back from escrow once the Liquid Delegate expires. This rock-solid guarantee makes Liquid Delegates the best primitive for individuals and DAOs to earn yield without risking any of their principal.
Caveats
While we designed this for full generalizability, the breadth of creativity within the NFT space means there are a couple scenarios to pay attention to. If the utility is based on a snapshot of holder addresses instead of token ownership, then Liquid Delegates won’t apply to that benefit. Flashloan functionality means that bored apes with staked apecoin should unstake & withdraw before participating. It also requires NFT escrow, so moonbird holders should weigh the benefits of Liquid Delegates against resetting their nest. This is a new primitive, and while fully safe when used as intended, it’s important to understand what rights liquid delegation will grant the holder.
Contracts & Code
They can be found on both Ethereum and Goerli at
LiquidDelegate: 0x2E7AfEE4d068Cdcc427Dba6AE2A7de94D15cf356
LiquidDelegateMarket: 0xA54E8f1eA1cD5D208b0449f984E783da75a6887dGitHub repo is open-sourced at https://github.com/delegatecash/liquid-delegate.
And the frontend interface can be found at delegate.cash/liquid.
Happy delegating!