2.3. Buying and Selling of NFTs
2.3.1. Auction Marketplace
Added to the multiple uses that each owner or holder can make of their NFTs, at Nash21 we have a marketplace that allows you to auction the different tokenised rental contracts.
Thus, “Investor-Buyers” and “Owner-Sellers” of NFTs converge in the Marketplace to trade their tokens. This way of operating can equip Nash21’s NFTs with the attribute of “liquid”.
From a legal and technical point of view, this transaction consists of a “transfer of rights for consideration of the collection of the rents” In order to simplify and homogenise terms, we will call these rights “Future Yield NFT”.
This way of operating enables the owner of the NFT to bring forward the future charges from their rental contract and obtain liquidity without having to assume liabilities or future obligations. Without a shadow of a doubt, this type of operation injects dynamism into the rental market and enables owners and large holders to be able to finance the growth of their businesses with the growth produced from the activity itself. They transfer their future flows to be collected in exchange for receiving net USDT “upfront” with a discount rate that will emerge from the free interaction between offer and demand in the marketplace.
2.3.2. Auction Model
The auction model chosen for the initial version of the protocol was designed with the aim of incentivising the sale of NFTs. The model combines models from traditional auction systems (Dutch, English, and at fixed price), giving flexibility and dynamism to each sale, thereby encouraging individual bids and purchases and discouraging purchases by traders.
The seller of the NFT can either select a desired value and receive offers of the “fixed price” type, or they can choose the option of setting a maximum and minimum price and select the duration time of the auction. This option enables “Buyer-Investors” to bid both upwards (starting from the minimum price) and downwards (starting from the maximum price).
The seller of the NFT can either wait until the end of the auction, when the sale will be allocated to the winning bidder, or accept a specific offer before the auction deadline has been reached.
2.3.3. Auction of NFTs on Opensea and similar
Nash21's NFTs may also be auctioned on OpenSea and/or on any NFT marketplace. They will be identified under the title “Nash21 Collection”. This option will bring with it the additional costs that “OpenSea” or whichever marketplace is chosen may charge in addition.
2.3.4. Examples of auctions
Example 1: sale of an NFT at a fixed price.
Alice decides to tokenise the rental contract of her apartment in Calle Satoshi 21, whereby she will rent her apartment to Bob. In this way, Alice is guaranteed to collect the full amount of the rent and will liquidate her contract when needed.
From this rental contract, and among other obligations, it follows that Bob will pay Alice $1000 per month for 3 years (36 months).
Let’s suppose Alice decides to bring forward the next 12 payments of that contract (it could be 12, 24 or 36, there is no technical limit for this, but it is to be expected that, with a larger number of months, the implicit discount rate increases). To do so, Alice selects her NFT which represents the apartment rental contract form her user profile on Nash21, and she must determine the number of payments to bring forward (12 in this case), the desired value and the length of time the auction will be open for:
Number of months of rent to “Bring forward (auction)” = 12
“Contractual” amount of the monthly rent = $1000 -12 (months) x $1,000 (rent) = $12,000 NFT Nominal Value
Amount desired by Alice: $11,200 (Initial sale value of the NFT for auction)
Discount rate: A = B / (1-d), where
A = Expected value of the obligation with specific expiry
B = Actual recognised or desired value
d = discount rate
NFT Nominal Value = $12.000
Value of sale at auction = $11.200*
Implicit discount rate = $6,67%
* In the example used, Alice manages to auction her NFT at the value she desired.
Example 2: Auction with a Range of prices.
Number of months of rent to “Sell/bring forward” = 12
Value of the monthly rent = $1000 -12 (months) x $1000 (rent) = $12,000 NFT Nominal Value
Amount desired by Alice: the closest amount to the nominal value
Auction period = 5 days
Maximum price = $12,000 Selected by Alice (Equal to NV)
Minimum price = $11,000 Selected by Alice
Offer 1: $11,100
Offer 2: $11,300
Offer 3: $11,400 → Winning offer (= sale price)
Implicit discount rate = 12,000 - 11,400 / 12,000 = 0.05 = 5%
It is worth mentioning that it is to be expected that there will be “Buyer-Investors” with the specific aim of buying and selling NFTs for speculation, buying NFTs to automatically auction them again. This is a totally valid option and will inject liquidity and dynamism into the marketplace.
2.3.5. Nash21 as a Buyer of NFTs
In order to increase circulation and stimulate the demand for NFTs at auction, Nash21 may act as a “Buyer-Investor” of NFTs through its guarantee fund, with the particular feature that it will only do so as a “last bidder” and in vacant auctions (without a buyer) within 12 hours of their ending. Hence, Nash21 will not take part in the active auction or compete against different “Buyer-Sellers” while the bid for the NFT is live, and will only appear on the scene when the auction in question is nearing the end without an allocated winner. Nash21 will make a specific offer at a “fixed price” that the seller may or may not accept.
Added to the two requirements above, in order for this option to be available, certain additional conditions must be met:
The Reserve Fund will not be able to allocate more than a certain percentage of the excess total net liquidity of the MCR to the purchase of NFTs. This percentage is determined based on market parameters and at the discretion of Nash21’s Liquidity Management team.
The implicit discount rate offered by Nash21 for the purchase of the NFT may not be less than 9% (*value of the implicit limit rate for offers from the RF will be adjustable according to the conditions and current market rates at any time, with the objective of stimulating the marketplace and prioritising the benefit for “owner-sellers” and “buyer-investors” always prevailing).
The purchase of NFTs by Nash21 is a transaction that does not involve any additional risk by the Reserve Fund. This is because, from the moment each of the NFTs are created, the “risk of non-payment” is assumed by the Reserve Fund, regardless of who is the owner of the token.
This way of operating generates a virtuous loop which is beneficial for all parties:
Nash21, by purchasing last-minute NFTs in the marketplace, increases the quantity of auctioned contracts, and directly increases the revenues of auction premiums; as a result, the Guarantee Fund will also increase (as it receives more revenue from these premiums) and will therefore have more capacity, since it is larger, to buy new last-minute NTFs.
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