As Solana recovers from its outage it’s a good time to learn about some interesting happenings on the chain now that it is up and running again. One such protocol innovating in the NFT space is Tensor; it recently introduced its ongoing points program as well as an introduction to NFT derivatives with its Price Lock feature.
Last year, Blur overtook OpenSea with its vampire attack, rewarding traders for using the platform with points. But the platform brought actual innovations to the scene, beyond what OpenSea could provide. These include bidding by traits, no royalties requirements, marketplace aggregation, sweeping tools, batch transactions, portfolio analytics, charting, and more. Tensor has provided similar advanced NFT infrastructure but for Solana, which is arguably an even more interesting NFT landscape to watch in the future as Ethereum gas fees price out the vast majority of those interested in speculating on NFTs.
Background on Tensor
The Tensor Founding team believed that trading onchain could be split into two simple categories; fungible and non-fungible tokens (NFTs). Almost all talent was focused on trading of fungible tokens, so Tensor’s inception was a reaction to a lack of talent and builders focusing on the NFT space. This was exemplified by the fact that the team chose Solana, which had an even smaller pool of talent.
Most notably, Magic Eden stood as the primary competitor, being the 1st dominant NFT exchange on the network before being overtaken by Tensor. Upon launch, Tensor went from 0% to 10% marketshare instantly. Tensor’s vision was to help accommodate the growing world in which NFTs might play a role, from gaming to real estate, IRL concert tickets, RWAs, and more.
During the bear market, the team was encouraged by a lack of price-action-esque talk among their community, although they were definitely worried by Solana’s crash to sub-$8. Perhaps the most popular Solana NFT project, DeGods, infamously migrated to Ethereum; they today announced they would be reiterating their presence on Solana via Wormhole interoperability tech.
Today, the sentiment for Solana is much better than maybe ever before. While price may have been higher years ago, there was not the vibrant ecosystem, especially relating to NFTs, that there is today. NFT trading and NFT derivatives have also found a foothold, with Blur finding great success and new projects emerging.
The Tensor team has stated that they realized they need to serve regular users and collectors, rather than the initial group they had been targeting, traders. The analogy of eBay vs Bloomberg when it comes to the UIs of competing NFT marketplaces has been thrown around. The aim of Tensor was to create a UI more representative of a CEX than eBay or Bloomberg, as they felt this was their ideal userbase.
Tensor Lite vs Pro UI
NFTs are a very data-rich asset class; every item has traits and metadata, so a fast and performant backend is required to cache this data from the chain and deliver it to the API user.
Background on Price Lock
Price Lock is a new spin on existing financial primitives within NFTfi. It exists as Tensor’s first foray into NFT derivatives, competing with protocols like nftperp. It took 10-20 UX iterations to settle upon a comfortable design and receive positive feedback from users. Traders had asked for capital efficiency and the ability to hedge. These are common functionalities in TradFi, but not so in NFTs. With this in mind, the team made sure to design Price Lock to be used by the existing userbase, not necessarily advanced or pro traders.
Price Lock is a way to long or short NFTs. The duration of these trades is fixed, at 7 days. NFT derivatives are a new market, an uncertain playing field. This is somewhat similar to Sharky’s approach to NFT lending on Solana, capping borrow durations at 16 days, with the majority of repayments being due at just 7 days. NFT lending, borrowing, derivatives, etc. is in its infancy.
With Tensor Price Lock, users can pay as little as 3.8% in fees while doing so. Users have to choose one price which is locked in for the duration of the 7 days, hence the name ‘Price Lock’. This applies to both the long and short side of a trade.
All trades can only be open for 7 days; this means the price action in between a trade’s opening and closing is more or less irrelevant, only the final price matters.
To purchase these locks, whether long or short, they need to be funded. Going long can be funded by providing an NFT as collateral. Going short can be funded by providing $SOL as collateral. When a user locks in their price, they will receive their NFT or $SOL + or - any profits or losses, respectively.
Overall, this is a very simple introduction to NFT derivatives, and the team recognizes that it is definitely not the most feature-rich solution. Instead, it serves as a sort of building block for new ideas to be built on the NFT asset class.
The team thought about how to deliver these two aspects with as little effort required from the user as possible. Users can’t choose the percentage fee or duration. They can only choose the price as the independent variable.
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Points & Future Plans
The native Tensorians NFT project gives holders giveaways, better multipliers, more features, airdrops from partner protocols, and referrals for the platform. The floor price has significantly increased, sitting at ~80 $SOL, nearly $8k. The NFTs currently also emit points in the Tensor points program, as well as giving access to a private chat.
The project first implemented points over a year ago; it is now in its 3rd season. 1st season participants were able to get free NFTs, including MadLads, which are one of the most valued Solana NFTs. In season 3, points are hidden and the leaderboard only updates once a week, to prevent gaming of the system. The team took measures to strip points for people who found ‘exploits’ or ways to wash trade, place bids and list NFTs in a supposedly inorganic manner. As of recent, a significant portion of points has been devoted to users of the Price Lock feature.
Tensor has partnered with FlashTrade to help get involved with other types of NFTs, although they are not interested in getting involved with spot trading of fungible tokens. FlashTrade is a perps DEX which includes markets for Gold and precious metals as well as Forex. Inscriptions is another interesting area which the small team has expressed interest.
The Solana NFT ecosystem is expected to become diverse in the coming years; cheap fees enable new use cases. DePIN is another area that has seen project deployments like Helium and Hivemapper promoting cheap fees and fast transactions (should the chain be running) as being primary factors in chain choice.
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