[V0 Looking for feedback] Warranty Contract, a next-gen DeFi Primitive

[V0 Looking for feedback] Warranty Contract, a next-gen DeFi Primitive

What is a Warranty Contract?

Warranty Contract is the provisional name of a next-gen DeFi Primitive that is also a perfect fit for Nervos L1 cell model.

A Warranty Contract is a special type of contract that operates like a two-sided agreement, represented as a functional Non-Fungible Token (NFT). In this contract, there are two main roles: the Warranty Issuer and the Warranty Holder.

Roles Explained

  1. Warranty Issuers:

    • This entity creates the Warranty Contracts and set their details.
    • They can choose:
      • Assets involved: for example a specific NFT and 4200 USDI. (Or for example a specific NFT, 4200 USDI and 4200 RUSD: this lets the Warranty Holder choose between paying in USDI or RUSD)
      • Initial Supplied Asset: for example the specific NFT artwork being wrapped into the Warranty Contract.
      • Active duration: for example 2 years.
      • Initial Fee: for example 42 USDI, not covered by the Warranty Contract itself, but possibly refundable at the choice of the Warranty Issuer.
    • Once created, they can post their active Warranty Contracts for sale in a Markeplace of their choice.
    • Once expired, they can claim the remaining asset from the Escrow, being it the the Paid Amount or the Original Asset.
  2. Warranty Holders:

    • They can buy a Warranty Contract from the Warranty Issuer by paying the Initial Fee, usually non-refundable.
    • Once they have the Warranty Contract, they can:
      • Pay in Full the Asset wrapped in the Warranty Contract to extract the Asset and get ownership of it.
      • Since they Paid Amount is held in Escrow in the Warranty Contract, they can change their mind between the Asset and the Paid Amount as many times as they want until the Warranty Contract expires.
      • No extra fees are applied in relation to these changes of mind for the duration of the Warranty Contract.

Both Warranty Holders and Warranty Issuers can transfer their role to someone else.

Benefits for Users

  • For the Warranty Holder: They benefit from the ability to enjoy more flexible ways of purchasing assets. They can change their mind as many times as they want on the Asset thanks to the use of an Escrow. This allows them to understand at their leisure if the Asset provides the value for which is being sold. Also they can capitalize on the Asset transient market fluctuations, without committing to the asset purchase.

  • For the Warranty Issuer: They can offer their assets targeting more effectively user needs. They earn an initial fee from the Warranty Holder when the contract is accepted. After the contract ends, they can claim the remaining asset from the Escrow, being it the the Paid Amount or the Original Asset.

Conclusion

The Warranty Contract offers a unique opportunity for both Warranty Holders and Warranty Issuers in the decentralized finance (DeFi) space. Warranty Holders benefit from the ability to enjoy more flexible ways of purchasing assets, while Warranty Issuers can offer their assets targeting more effectively user needs. This structure creates a dynamic space where users can leverage their expectations about asset values.

Requested Funding

Similarly to the [DIS] iCKB & dCKB Rescuer Funding Proposal (Non-Coding Expenses), the Open-Source development of the Warranty Contract could be sponsored by the Nervos Foundation, while the CommunityDAO could sponsor the audit of the contracts, deployment of the contracts on-chain as a public good and hours spent for user & dev support.

More details at a later date!! :grin:

Log of Changes

This proposal is gonna be updated many times as it becomes more refined and a perfect name is discovered for this contract. Follows the log:

  1. Pivoted from “:rightwards_hand::leftwards_hand::handshake:” Contract to Warranty Contract. This change underlines the utility of this contract within the creators economy.

Feedback

Do you have any doubt or question? Please feel free to ask and provide any feedback!!

Do you have any particular name suggestion?

Love & Peace, Phroi

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Would seemingly be a good protocol to have. Especially if you can incorporate NFT’s as an asset. Could see some interesting lending applications being built with this in the future. Glad you put the note about the name at the end, I was going to ask for you to clarify if it should be referred to as “left, right, shake” or “right, left, shake”?:joy:

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Yup yup, for example this protocol could be used to offer warranties on on-chain assets like NFTs :grin:

In the Physical World we are used to warranties of 1-2 years for electronics, conversely in the On-chain World we are so used to the concept of Rug Pulling that it basically doesn’t even make the news anymore. That’s a big difference right there.

Since I’d don’t like these get-rich-quick schemes, I’d like to offer an instrument that allows trustworthy builders to prove to the users without a doubt that they are willing to keep building on their own projects well past the launch date.

Back to us, let’s assume a builder has created a NFT collection and he now is selling this collection to users, while also proclaiming that he will build an ecosystem on top of it within two years.

Well, now this builder can prove that he does not intend to rugpull it.

How?

On one side, let’s say that an artwork without a functioning ecosystem is valued at 42 USDI, given the work that the artist already put in for creating it.

On the other side, let’s say that the artwork within a working ecosystem is valued at 4242 USDI, given research from previous collections in other ecosystems.

The artist can sell his NFT wrapped in a two years Warranty Contract:

  • Assets involved: this particular NFT and 4200 USDI

  • Initial Supplied Asset: the NFT artwork

  • Active duration: 2 years

  • Non-Refundable Fee: 42 USDI

After the user buys the Warranty Contract, he has 2 years to decide what to do with it. In these 2 years the buyer can change idea as many times as he pleases, switching between his 4200 USD and the NFT artwork as much as he wants without paying any additional fee.

Nice thing about this warranty is that is transferable, so if within these 2 years these user sell the NFT + warranty to a new user, this new user would get exactly the same rights as the first user.

Of course, if the artist doesn’t deliver a working ecosystem, he’ll likely not get those sweet 4200 USDI, instead he’ll just get the initial 42 USD and his NFT artwork back.

Conversely, let’s say that one year after the first sale the artist has already completed half of the ecosystem, he could try to sell some more of his NFTs wrapped in a Warranty Contract that give him a more edge, so for example at a higher initial fee.

All this reasoning can be applied in the very same way to sell to the market Memecoins in a more ethical way, so Memecoins with a warranty.

That note is also at the beginning of the post! :rofl::rofl::rofl:

Currently I have renamed them to Warranty Contracts, but feel free to suggest more funny names that could tangentially capture the idea!!

Love and Peace, Phroi

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