Litepaper
Introduction
The era of NFTs is upon us. From $69M Beeple paintings, to SNL skits, the term "NFT" has entered popular culture in a major way. The non-fungible asset class is here to stay and NFTs will continue to command attention and investment from existing and new markets.
It is clear that NFTs have value. However, due to the unique nature of NFTs, that value is locked in an illiquid state that can only be unlocked when a buyer and seller come together on the open market. While this arrangement works well enough for niche use cases such as gaming and art, it becomes a major limiting factor for innovation on top of NFTs.
At the core of this limitation is the lack of a reliable, data-driven method for NFT valuation. Mainstream hype and a frothy crypto market have led to astronomical pricing that has blurred the line between objective and subjective valuation. While it is tempting to assume that NFT values will continue to rise and remain stable over time, this assumption lacks the nuance and data needed to drive a valuation framework that will bring longevity to the non-fungible asset class.
Once NFTs can be objectively and reliably valued, novel products and use cases will emerge in same way that composability unleashed a wave of innovation in DeFi. As new applications emerge, there will be a massive opportunity to unlock the potential of NFTs through innovative approaches to asset valuation and liquidity transformation.
What is the Rate Network?
The Rate Network is the first cross-chain network dedicated to data, ratings and appraisals for the NFT asset class. By combining several technological innovations, a robust token economy and an open data network, Rate is building a next-generation protocol to power the NFT ecosystem of tomorrow.
Why we are creating the Rate Network
As innovators and active participants in the NFT ecosystem, we are all too familiar with the issues surrounding NFT asset valuation. The buzz around NFTs at the height of a crypto bull market has driven insatiable interest and wild price fluctuations that make it difficult for enthusiasts to know if they're making sound purchases.
While some NFTs are "pure art" and are considered impossible to value, we hold to our conviction that not all NFTs will follow this same pattern of subjective price evaluation. As use cases emerge that unlock the potential of NFTs, we believe that an objective, data-driven pricing methodology will be critical to the growth and adoption of NFTs.
How does the Rate Network work?
At the core of the Rate Network is a multi-faceted approach to asset valuation. The following steps outline the high-level approach to asset valuation.
Data is harvested and combined from a diverse set of sources. This data, which includes on-chain transaction data and off-chain indicators, is aggregated and modeled for analysis.
An array of analysis models are used to derive historical price movement, current value and predictive price estimates. Each of these analyses is weighted using contextual indicators such as time on market, relative price ranges and relative volume. This helps answer not just the question "what is an asset worth?" but also "what is an asset worth relative to the rest of the NFT market? (the more important question for objective analysis).
After asset valuation and weighting is performed, the asset is then assigned an asset category and grade which can be used alongside the valuation estimate to guide interaction with the asset.
Dapps, marketplaces and other data consumers can access this data through a network of decentralized oracles. This is a familiar pattern in the crypto industry that mimics the way that smart contracts currently access cryptocurrency price data.
The above process is dynamic and responsive. As the NFT market matures, the Rate Network will continually adapt the analysis to include new and relevant price indicators.
Rate Token (RATE)
All interaction across the Rate Network is facilitated by Rate Token (RATE). This utility token enables trustless participation in the network and seeks to limit malicious behavior. Here is how RATE is used across the Rate Network:
Data providers RATE is used as the payment mechanism to reward data providers for contribution to the network. Data providers must stake RATE to contribute data and rewards can only be claimed after a data evaluation is performed by the network.
Oracle nodes To participate in the delivery of data, oracles are required to stake R.ATE This ensures that oracles are disincentivized from tampering with valuation data and incentivizes high network availability.
Data consumers Dapps, marketplaces and smart contracts use RATE to access valuation data. This requirement seeks to prevent malicious behavior such as DDOS attacks on the network.
Governance In the future, RATE will provide governance functions that will allow RATE holders to weigh in on important network changes to reward mechanisms and data source additions.
Collateral
With the launch of the Rate Synthetic Asset platform, RATE will be required when a user vaults an NFT to produce an index token or other synthetic asset.
RATE Tokenomics
Distribution
Amount | Total RATE | % Total |
Initial Vault Sale (IVS) | *2,000,000,000 | *20.00% |
Team & Consultants | 2,500,000,000 | 25.00% |
Staking (Validator) | 4,000,000,000 | 40.00% |
Misc. (Referral Program, DEX Liquidity, etc.) | 500,000,000 | 5.00% |
*RATE is created from vaults on per block basis. The total amount of RATE emitted from vaults may vary slightly due to the slightly inconsistent nature of block times.
Note: these distributions are subject to change.
Initial Vault Sale (IVS)
The Initial Vault Sale (IVS) is a new form of digital asset launch that enables startups to sell NFT collectibles that can be independently leveraged by users to farm fungible utility or governance tokens via Rate Vaults.
Through IVS, users are able to purchase dedicated collectibles (artwork, in-game items, etc.) that are accepted as units of staking value within a Rate Vault. You can think of these NFTs as the machinery that is needed to make a Rate Vault function to produce rewards.
We have developed the IVS model to be incredibly flexible and capable of fitting into a variety of project types, including blockchain games, NFT art initiatives, DeFi protocols, and more. With Rate Vaults, projects are able to fully control the reward conversions and inflation rates associated with their staking periods.
Rate Network Token IVS
There will be 4 distinct vault series, each will only accept NFTs that are exclusively available for purchase during the discounted and full public sales. Each discounted vault will have a specific RATE allocation that can be earned over a 12-month staking period, with rewards distributed at each block.
For the non-discounted vault series, the staking period to fully earn the RATE rewards will be ~24 months.
Additional RATE from the IVS allocation is planned to be distributed via fair launch and retroactive reward drops.
Rate Network Data
Input data
The Rate Network uses a diverse array of input data types sourced from a decentralized group of data providers.
The following table outlines the major input data types used throughout the Rate Network.
Data Type | Source | Description |
Transaction history | On chain | Transaction data collected directly from the blockchain |
Wallet behavior | On chain | Activity data connected to a watch list of active wallets |
User activity | Off chain | Anonymized user activity data captured by data providers |
User preference | Off chain | User preference and purchase intent data from data providers |
Social and trend activity | Off chain | Social activity and trend indicators from a watchlist of sources |
Market sentiment | Off chain | News and market data from a variety of relevant sources |
Output data
Collected input data is analyzed through series of algorithms that compare historical transaction data, market prices and predictive price estimates. Pricing metadata is then assigned to assets.
The following table outlines the pricing metadata that is associated with asset valuation.
Metadata | Description |
Category | An inferred category assignment based on asset traits |
Price estimate | Weighted price estimate based on historical, current and predicted price |
Price direction | Indicates predicted price movement in the next 7 days |
Volatility | Indicates price volatility relative to similar assets within the assets category |
Data sources
L1 chain data
Through a web of index nodes, the Rate Network will provide comprehensive and up-to-date indexing of NFT transactions. New index nodes can join the network by staking RATE and are rewarded for high uptime.
Rate oracles
To introduce off-chain data for NFTs, we will have a series of oracle contracts that allow 3rd parties to stake and earn RATE. It is possible to have custom oracle systems that can price complex NFTs on the fly for RATE payment. This will be an important graduation avenue for popular models used in the Rate Network.
Proprietary Research
A major component of NFT pricing is aesthetics and cultural movement. This is not so easy to capture in on-chain smart contracts. Through NFT Market Cap, the Rate Network has access to ongoing social research, trend-spotting via interactive experiences and trend mining. This kind of hard to reproduce data will provide an enduring advantage for Rate Network participants.
Integration with NFT platforms
Today, NFT platforms and marketplaces rely on marketing buzz and influencer reach to explain the benefit and value of NFTs. The new user onboarding process becomes more compelling when quantitative valuation data is embedded in asset interactions. Users can rely on a trusted third party to provide independent valuation that can be brought to the forefront on an NFT platform. This is similar to web 2.0 patterns of using third parties to value assets (ex: TrueCar, Zillow, etc.).
NFT platforms can also leverage the custom pricing model capabilities of the Rate Network and stake RATE to prioritize the execution of pricing models for their NFTs. They can also publish these models via NFT Market Cap to get open source and peer review and increase confidence in the prices. This transforms the value relationship with users from "trust us" to "trust the data and code" and reinforces the ethos of an open and decentralized economy.
Data providers
The Rate Network is an open data ecosystem that allows data providers to actively contribute data to the network. We anticipate the addition of many data providers and are committed to creating a decentralized ecosystem that promotes equitable data provider relationships and fair ecosystem growth.
NFT Market Cap
NFT Market Cap is a sister organization to Rate that will act as the data and analysis clearinghouse for the Rate Network. NFT Market Cap combines input data types sourced from data providers and performs the analyses required to provide asset valuation metadata to the Rate Network.
Open pricing model approach
The Rate Network implements a typescript-based hosted execution environment. This approach allows data providers to create and share custom pricing models that can be executed by dapps, marketplaces and custom smart contract environments.
Example pricing model scenario A custom pricing model execution might allow a smart contract to request a discounted cash flow analysis for one or more NFTs.
The creator of a model can allow the model to be executed on a continual basis by staking RATE to signal the importance of the model and provide a means to get it evaluated on a frequent basis (eg: every 10 ETH blocks). Models can provide an API that charges RATE to call or use it, allowing the valuable IP of a model builder to provide rewards and incentivize building on the Rate Network.
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