Rari Foundation

Category: Ecosystem Fund Allocation Author: Campbell Law Abstract This document proposes a new $RARI rewards system for listing NFTs on Rarible and buying NFTs from the Rarible aggregated NFT marketplace to incentivize users and capture value. It introduces the concept of RARI Rewards Collections that veRARI token holders will be able to vote on to identify 5 NFT collections eligible for $RARI rewards on a weekly basis, as well as 0% marketplace fees for RARI Prime members. Motivation By introducing a long-awaited update to the $RARI rewards system, this proposal aims to establish a committed community of token holders and create a strong network effect that will increase engagement and attract new users to the Rarible aggregated NFT marketplace.

This is aimed tol be achieved by clear and concise mechanics for holders to lock their $RARI and receive veRARI that they can use to vote for collections to subsidize liquidity, and enjoy 0% trading fees on the marketplace. As a result, the hope is that this system will result in user stickiness leading to recurring trades on Rarible.

Liquidity incentives include:

Listing rewards paid to the lowest priced items with exponential decay. Purchase rewards paid proportionally to the volume of royalties paid, including purchases from other marketplaces, acting as royalties cashback.

This hopefully will create a vortex of liquidity moving from order books of carefully selected collections to Rarible Protocol’s order book.

Rationale Whether the goods are digital or physical, marketplaces compete for two things to provide value to users: listings and sales. The greater the number of listings on a marketplace, the faster a buyer will find the item they seek. And the more buyers a marketplace attracts, the faster a seller can sell at the desired price.

This creates network effects, where each user provides positive externalities to every other user, which in turn attracts more users. This means the more liquidity a marketplace already has, the more liquidity it will likely attract in the future. As liquidity thus compounds, user experience improves.

Neither additional features nor desirable branding compensate for lower liquidity. This is why both web2 and web3 marketplaces subsidize network effects to attract users to their platform.

$RARI started as a governance token with liquidity incentives directly incentivizing trading volume. The program succeeded in increasing volume, but at the cost of incentivizing wash trading and lacking long-term value capture. The RARI community voted to end the program in January 2022.

The proposed token incentives for listing and buying on Rarible and Rarible Protocol-powered community marketplaces let us attract liquidity and kickstart the virtuous cycle outlined above in a sustainable way.

The proposed comprehensive update to $RARI tokenomics introduces:

$RARI locking for power to vote for collections to receive liquidity incentives Listing rewards for Rarible Protocol orderbook Buying rewards for aggregated orders; royalties cashback RARI Prime benefits program

Voting To avoid spreading incentives too thinly (e.g. incentivizing all collections at once), this document proposes to concentrate liquidity incentives among a few collections selected by the community. To make the choice mechanism fair, this proposal contemplates introducing a Weekly leaderboard selected by veRARI holders. By rotating collections that receive liquidity incentives, veRARI holders can make sure hot collections are incentivized for a specific period of time in order to bootstrap native demand and user stickiness. Listing rewards To create a healthy marketplace, this proposal aims to incentivize listings (sell orders) as close to the fair market value as possible. The program will start by choosing 5 collections for liquidity incentives and implement the following model inspired by bonding curves:

The lowest priced listing with a price below 1.4X of the floor of a particular collection receives the highest reward with an exponential decay. The longer an item remains listed, the more value it provides to deter holders from listing items for mere seconds before delisting. Buying rewards: royalties cashback To process more transactions, both sides of the market are necessary. That’s why an objective of this proposal is to encourage buyers by offering them rewards as well. Rarible Protocol’s access to orders aggregated from other marketplaces’ order books plays a key part here. Regardless of wherever an item is listed, if a user bought such an item through an aggregator, they can claim a reward.

It’s important to note that we expect that the royalties cashback program will mainly be used to balance the supply/demand in the first weeks/months of the program, such that over time rewards will decrease. RARI Prime: 0% Rarible orderbook fees and other perks The RARI Prime program is intended to be built on top of the new token locking program. This mechanism aims to create value capture by providing fee discounts to “preferred” traders based on the time commitments, thus helping to establish a core community incentivized to cast votes to subsidize liquidity for promising NFT collections with long-term value additions. As a basic rule, it is expected that the orderbook fee will be 0% for power users that lock sufficient amounts of $RARI.

Key terms veRARI – a non-standard ERC-20 implementation representing non-transferable voting power a holder receives upon locking their $RARI in a voting-escrow contract for a chosen period of time. Technically, veRARI is a non-standard ERC20 token implementation.

Lock – an instance of locked $RARI with a specific Release Schedule. One address can have multiple Locks with different Release Schedules. E.g. one may have a Lock of 100 $RARI with a one-month Release Schedule, and another Lock of 1000 $RARI with a two-year Release Schedule.

Epoch – predefined period of time equal to 1 week, during which Buying and Listing Rewards are applicable for 5 selected Collections.

Weekly voting leaderboard – weekly ranking of collections voted on by veRARI token holders, listed in the order according to the number of received votes.

Points – listing rewards accumulated by a user every 10 minutes according to the predefined formula. Points are converted into $RARI tokens at the end of every day.

Claiming – the process of receiving $RARI rewards from the claims contract. Rewards are not distributed automatically to a user’s wallet and need to be claimed.

RARI Prime – a status granted to $RARI lockers alongside with benefits including veRARI voting power, 0% marketplace fees, a special badge on Rarible marketplace, and private Discord access. Specifications This document proposes to allocate a total of 420,000 $RARI over the period of 1 month for these liquidity incentives:

1 week - 30,000 $RARI/day 2-4 week - 10,000 $RARI/day 30,0007+10,0007*3 = 420,000

75% of daily rewards to be allocated as listing rewards (1 Week - 22,500 $RARI) 25% of daily rewards to be allocated as trading rewards (1 Week - 7,500 $RARI) Voting A long-term oriented community of veRARI holders will decide which collections should receive liquidity incentives. The top 5 collections ranked by number of votes at any time will receive liquidity incentives. To enable fair participation, a collection will not be able to receive liquidity incentives for longer than 2 weeks out of every 4 weeks.

Terms: There is a weekly Epoch cadence for elected collections. Votes are locked in every week at the same time (12 am UTC) Every week veRARI holders can cast their vote for a specific collection to be allocated$RARI rewards the following week Vote is attached to a collection as long as the veRARI balance is kept. Ex: I’m casting 100 veRARI for the collection “mfers” Votes can be changed up until the point of epoch lock-in and recast to another collection Top 5 collections sorted by total sum of votes attached to them are deemed eligible for incentives. A collection can’t receive more than 2 weeks of liquidity incentives during any 4 weeks time period. The Rarible team reserves the right to vote for 1 Collection every week with the team’s tokens. Rewards Lock To avoid potential inflationary issues tied to incentive allocations, this proposal suggests the following distribution process:

20% of allocated rewards to be released instantly to users; 80% of allocated rewards to be automatically locked for 1 month and gradually unlocked over the course of 4 weeks.

The proposed process is aimed at incentivizing users via ongoingly rewards, hopefully creating sticky behaviors. Listing rewards Terms: Only listings in Rarible native orderbook under 1.4x of the floor price are eligible for rewards Every 10 minutes, sorted listings will be updated by price from low to high. Starting from listing #1 to listing #100 according to the floor price, each listing generates POINTS for every 10 minutes of existence according to the following formula: Points(N) = 900/N+100, where N is the listing number. Now this might sound complex, but let’s see examples: Listing #1 gets 1000 points every 10 minutes Listing #2 gets 550 points every 10 minutes Listing #3 gets 400 points every 10 minutes Listing #4 gets 325 points every 10 minutes Listing #5 gets 280 points every 10 minutes Listing #6 gets 250 points every 10 minutes … Listing #20 gets 145 points every 10 minutes … Listing #50 gets 118 points every 10 minutes Listing #100 gets 109 points every 10 minutes

If there is a “fresh” (i.e., new) listing, it should be live for at least 5 minutes before the first 10 minute epoch to qualify for rewards. (This aims to address bots listing just before the epoch and delisting seconds after) Rewards are valid while listings are active. Every 24 hours, points are converted into $RARI. Daily $RARI rewards are distributed proportionately in accordance to each user’s accumulated Points among all accumulated Points $RARI can be claimed at a user’s discretion. Buying rewards: royalties cashback Terms: The same list of top 5 eligible collections participates in the program. Each user’s U.S. dollar value of royalties is calculated. Every 24 hours all royalties spent by all users are summed. If that number is less than total amount of $RARI rewards allocated daily for the Royalties Cashback (7,500 RARI for the first week): Reward = $royalties_paid If total royalties paid are greater than the daily rewards pool, this pool is split equally among all the buyers proportionally to royalties they paid. In this case, Reward = $royalties_paid/total_royalties * Daily_reward_pool

It is intended that the royalties cashback is a temporary program that will decay over time, and the Listing Rewards program will take greater priority / share of allocated rewards. Rari Prime Requirements: Own 20 veRARI from all your Locks, which is an equivalent of 100 $RARI locked for 1 month.

Benefits: 0% Rarible marketplace & protocol fees (i.e. buy and sell on Rarible and Rarible Protocol-powered marketplaces for free) Fee discounts schedule is expected to be actively governed to achieve protocol efficiency Prime Status on Rarible Marketplace Access to a gated Discord community

Steps to implement Transfer to a separate wallet for Safe Contract controllable via veRARI (address: 0xcD9f82Fe3B60a5C8482A69279AB5C8d0Be19cA24) 420,000 RARI for the program Approve spending from Safe to Claims Contract