Rogue Protocol: A Framework For NFT Royalties Tokenisation

Résumé : The crypto ecosystem has evolved into a formidable channel for raising venture capital. Each new wave of capital inflows has been epitomized by a new type of investment vehicle, may it be ICOs, DAOs, or NFTs. Regrettably, none of these paradigms tried to address the issue of investor protection, a pillar of efficient capital markets. Moreover, very few projects tried to generate economic revenue, focusing instead on marketing alone to attract new investors. Without revenues, price discovery was impossible, while investors were left without any protection against rug pulls. This has forced regulators to take a hard-line approach to the ecosystem, and rule that certain tokens are securities when they are not intended to be. Regulators have left the door open to cryptocurrencies with truly decentralised activity like Ethereum, most notably the SEC in its interpretation of the Howey test for digital assets. We believe that a great number of decentralised projects could benefit from this regulatory exception. A system where project revenue is automatically directed to a treasury pool, and the price of tokens is computed following a predetermined bonding curve, would allow to efficiently raise capital, while investors would have automatic guarantees of fair participation in the success of the project. Such a framework would incentivise founders to design decentralised projects that create value instead of hype, while making the application of securities laws less stringent or even needed. NFT royalties in particular are an example of decentralised economic activity that generates cash flows, used to back the value of associated tokens. We propose a cryptographic system that ties the price of tokens to the success of a decentralised activity, guarantees the fair distribution of tokens, and rewards founders and participants in the system in line with the amount of risk they are taking.