Alpha-DAO: Proposal #16

Disclaimer: This is not investment nor investment advice. Only you are responsible for any capital-related decisions you make and only you are accountable for the results.

The information made available in this report is NOT for replication. The purpose is to share the thought process behind the DAO’s decision making – additionally, this is a HIGH RISK journey for the DAO which means capital has also been allocated in accordance with this. Once again, DO NOT REPLICATE.

This proposal focused on an NFT project on Solana that had a utility that was associated with a DeFi project in the Solana ecosystem. The proposal was short-term in nature and aimed to capitalize on the hype and impending changes to the project that the author of the proposal felt had not yet been priced in.

Status: Voted & rejected

Asset: Lifinity Flares | NFT on Solana Description: A bet on the success of Lifinity

Thesis

Lifinity Flares are NFTs created by Lifinity Protocol at launch to raise capital. Revenue from trading fees and royalties is used to buy back Lifinity Flares. This means that the available supply decreases as Lifinity Protocol generates more revenue.

Every time someone trades Lifinity either through the website or through the integrated Jupiter aggregator liquidity providers receive 0.15% fees per trade and 50% of that, plus NFT royalties is used to buy the flare floor.

The current size of the pool is about $1M from the sale of Lifinity Flares, as they have not yet made their pools available to everyone. I will share a picture showing the amount of revenue they have generated right now. I'll take any bet that this amount will increase as the pools go public and lead to either a repricing of the NFTs or a supply squeeze of Lifinity Flares as the buybacks happen.

I will share the podcast when it is live as it will give you a more detailed explanation of Lifinity, but basically, it can deliver better prices than Raydium & Orca, and therefore most of the transactions on the aggregator Jupiter are used by it, which significantly increases its revenue.

Valuation

In terms of valuation, I would argue that NFTs should be valued closer to GenesysGo's prices. Taking into account current revenues, I would say that a fair valuation should be between 50-100 SOL. Probably @Bill Papas and I can get together and do some precise calculations to support this argument & come up with a more detailed valuation.

Exit strategy & Risk management

We will sell our NFTs when they get momentum and people realize that there will be buybacks. Right now the amount is small, but when the pools open and TVL goes up, the amounts will be much larger. In conjunction with IDO we should have the ability to sell within 1-3 months as it is not a long-term investment but a bet that the market has not yet priced in the upcoming buybacks.

We should exit between a valuation of 50-100 SOL, but there is a possibility that investors will disagree with our thesis. In that case, I would argue for the price to stay between 10-20 SOL. Since we will always have the option to sell to Linfinity itself at the minimum price during the buybacks, there is not much risk as investors should know this as well and will probably not undercut prices too much to find buyers

Research Links

The current revenue of Lifinity

DEX Performance Post-Jupiter Integration

Implementation Plan:

Purchase $10k SOL ( 94.878397) then use this SOL to buy Lifinity Flares. The floor price is currently 12,8 SOL but is very thin so can't quote an exact amount.

Votes: 3 NO 1 YES

Comments from DAO members

KA: I have voted ❌ as I am not convinced by why Lifinity is being compared to SSCs valuations.

Bill: was initially going to vote yes as I was the one that told Stan to publish it, but the floor price has gone down on them - not exactly sure as to why. I'm a fan of the proposal but it might not be suited to alphaDAO trying to trade NFTs at such volume especially with the volatility.

Bill: Due to buying in bulk as well to meet the investment requirement our volatility and liquidity is severe impacted as well. I think we should amend this to maybe acquiring just one or two if the NFTs - will help increase the chances of being able to flip them successfully.

Stan:  For an NFT to reach a floor of 50 SOL, there needs to be a lot more volume and people willing to spend their SOL on NFTs, as we saw last year, but it looks like not many collections are able to do that right now because reaching such a floor means that liquidity is drying up elsewhere.

Conclusion

The proposal was created with the idea of capitalizing on the hype surrounding the opening of liquidity pools and increased revenues leading to increased buybacks of NFTs. However, as you have seen in the comments, the proposal was rejected because the members of DAO were not convinced that it would generate high valuations.

Bill also pointed out that the volatility and liquidity of DAO would be severely impacted by the bulk purchase of NFTs to meet investment needs. Given the declining volume in the NFT sector in general, I too decided that this would not be a good proposal, believing that it would be much more difficult for an NFT project to achieve these high valuations in current market conditions than it was in, say, November.