Mimetic Metadata: How To Create A Truly Non-Dilutive NFT Collection In 2022
Preface: This article is the first piece in a series in finding the best way to create extendable collections. Today, we are discussing a more general version of non-dilutive tokens as the metadata is not on-chain and merely operates through a URL.
In the last six months of NFTs, collections have increasingly begun using fancy tactics to control their supply and the liquidity flowing within their ecosystem. For many, this has proven difficult, yet the core of NFT market floor dynamics boils down to the model of token release.
Constantly dilutive releases are not a problem exposing a specific niche of NFT collections. Dilutive practices are hammering all NFT collections that want to release anything. The fundamental model of every update and its release mechanism determines a massive part of the market reaction and valuation. NFT projects will always have their respective prices; however, the market dynamics providing the liquidity remains the same for all but a select few.
Today, we will be looking at the upcoming release of Doodles: Space Doodles and how they've misled a vast part of the NFT market to believe a lie.
It is standard to see an NFT collection release a "generation two" series. Not just average; expected. To understand the dilutive issues all NFT projects face, let's move step by step and understand each piece as we progress through the journey.
In the current ecosystem, projects choose to drop an entirely new population of tokens with the perspective that they are increasing the value within the ecosystem. The market has grown tired of this and has finally appropriately begun valuing these "additions" for their worth.
Remarkably, the market managed to find another implementation that is just as bad for creators and holders! The Doodles team has decided that instead of increasing the total supply of tokens in the ecosystem, the holders will have an option to forfeit their token into a vault in return for a new token from the Generation 2 collection.
On the surface, this is an acceptable plan and doesn't directly increase the number of tokens available. This model is better under almost every criterion than releasing a collection that doesn't have a take-and-give mechanism to receive Generation 2. Unfortunately, Doodles has coined this 'upgrade without dilution.'
While that term may be valid with a stringent definition of dilution, it hides many aspects of the truth. When we pull back the curtain and consider what is happening, we see many downsides.
Although the total number of tokens has not changed suddenly, a buyer faces an extreme amount of consumer friction that they never even had to consider before.
It is not a crazy assumption to make that a convicted buyer will have seen most of the collection when there is one collection. However, wrapping tokens into new collections makes this a monumental task for every market participant. Every step along the way, we introduce a new collection to be sifted through, and the generational art is not even natively explorable at any given time. Meaning that you cannot see your Space Doodle or the attributes of that Space Doodle through the initial Doodle Contract. Instead, you will need a second-level tool like OpenSea or a personal gallery.
This idea that the Doodles model is non-dilutive falls apart if we look further down the road and examine this claim.
Let's visualize what is taking place:
- We have one token; it has its' metadata and collection.
- Every generation following is a newly minted token in a new collection.
With a traditional model, by the time a project reaches far into their lifetime of the building, they can have multiple collections with tokens spread out all across the place.
If this model genuinely offers upgraded tokens without dilution, can 50 collections be released without impacting the market? Of course not.
The model of wrapping tokens is not a sustainable or even recognition-deserving model. Wrapping tokens is an idea from 2017, yet a massive part of the NFT community and market has been led to believe otherwise.
Doodles will be okay realistically. They have a ton of support and have misled people long enough to believe this model is non-dilutive.
The spread of the belief that wrapping is a clever solution will ruin the hopes and dreams of many projects yet to launch. Everyone in the market will be running in every direction, saying, "Why is my companion not a wrapped token." Meanwhile, the value of their holdings will be constantly devalued because the model was misunderstood before it even launched.
The lasting market impact is why the claims and market concepts built around this upcoming drop are less than ideal. The ripple effects of allowing this misleading nomenclature to plant deep into the mind of non-technical NFT buyers will ruin many market cycles to come.
Finally, even the non-technical can see the difference. We aren't just left with words to use as a rebuttal. Instead of pitching a tent on a mountain filled with words, I am here with an actual code solution, breakdown, and explanation.
So, how does a non-dilutive ERC721 look? Introducing, Mimetic Metadata, the solution you didn't know you needed.
Essentially, we are thinking ahead and considering the things a team is building for their NFT collection. If an update impacts the visual or technical functions, that should not be a new token and especially not in a new collection.
Instead, an update is handled entirely within the token so that a token can be evolved to the next generation.
There is genuinely no downside beyond the team being held accountable by its supporters. Let's walk through it.
The usage of Mimetic Metadata starts with the experience we are all used to:
- Mint token.
- Wait for the art/metadata reveal.
There are no new limiting factors put in place. Nice.
Following mint, the collection has built up quite an audience and level of support. The team wants to release a Generation 2 that extends the token's metadata already held. Accomplishing this is very simple.
Mimetic Layers allow for 1:1 operations of your standard drop. That means a team can still:
- Have a reveal.
(When the metadata/art is revealed)
- Charge for the upgrade.
- Set an evolution window.
(When holders can no longer evolve into this generation)
- Make a generation immutable.
(Cannot be disabled by the team)
- Make a generation situational/seasonal
(Can be disabled by the team)
- Make a generation sticky.
(Holder cannot rollback to the previous generation)
- Make generation removable.
(Holders can go backward as well)
The unique use case implementations are endless because not one sacrifice has been made while gaining incredible benefits. Multiple generations of token metadata are packed within the same token without betraying the trust or security of our holders!
How do we accomplish?
- Load new Mimetic layer with criteria.
That's it. You don't have to do anything else. When you're ready for the drop, all you have to do is let holders focus the generation by:
- Enabling the generation evolution.
Suddenly, holders have extendable metadata that does not constantly fragment the bodies, money, and attention focused on the primary collection. Once a generation has been enabled, tokens can evolve (if they meet the creator-defined criteria), and the token will update to the desired generation.
Technical sidenote: There is no token transfer taking place during this processing so the amount of on-chain processing that can take place is far larger than normal. Additionally, the gas costs of a many-token implementation such as Space Doodles only becomes more costly as holders swap back from Space Doodles to Doodles as holders have to pay for two token transfers.
Mimetic Metadata is so simple that a creator doesn't even need to know what they will create in 9 months, only that they will be creating in 9 months.
As they build new features and generations, the creators can plug in mimetic Layers, and their community gets an upgrade without being hammered by downsides!
The benefits also aren't one-sided, though. The creators also receive an extreme amount of benefits in return for offering their holders a newfound level of security and thoughtfulness.
For the first time in tokenized history, the creators of NFT projects aren't diluting the concentration of liquidity with every update. Finally, all liquidity can be focused on one funnel as the creators add value.
These surface-level things are not where the capabilities and benefits end. Can you see why I am so passionate about this? The power of Mimetic Metadata only becomes more potent if we walk through a few examples, so let's do that.
Please note I am not going to go through all possible implementations. Only the ones that help form the concept around Mimetic Metadata.
Let's start with a simple progression mechanism. Let's imagine that you are a knight in medieval times for this scenario, and you are challenged to go on several missions that will subsequently upgrade your knight.
As the player progresses, the knight levels up, puts on armor, grabs their weapon, etc. All without introducing a new dilutive mechanism while being fully in control of the holder.
However, we are not just limited to linear progression. Let's continue with our medieval metaphor and imagine that the NFT collection has introduced the High Council, which presents governance capabilities.
With that, now new knights are faced with different value-branches that can be tailored to fit their desires without negatively impacting any part of the market.
Instead of training to become a knight, would they rather abandon that life path and join the council? With the decision to follow the route of the High Council made, the player can gain access to a generation not accessible by Knights.
Again, all without diluting the collection or forcing the buyer into a different collection.
Now, I would be remiss not to cover how Doodles could have done this release better. It's the most simple of all models we've looked at so far—a simple back-and-forth conversion between two generations.
With this, Doodles have their Phase 1 art and would connect their Phase 2 art. With a standard drop experience, holders can first gain access to their Space Doodle and choose to evolve to or back from their Space Doodle at any time. These models are just scraping the surface of what can be accomplished with this NFT primitive.
Additionally, I want to make it painfully clear that Mimetic Metadata MUST operate with holder-controlled
tokenURI() exposure at all times.
It is also important to note that having an off-chain interface to change the asset is not an implementation of Mimetic Metadata.
We are not building a system in which we can handle everything off-chain without any actual asset interaction. That is not Mimetic Metadata, and that is a very dangerous anti-pattern to promote.
For an example of what not to do, we now have the Little Lemons launching a "new" method.
Where your Pixel Lemon is packed within the same URL.
- No on-chain interaction.
- Not in control of the owner.
- Not dilutive because the pixel lemon isn't even real.
Little Lemons updating to this metadata implement is an incorrect usage of an ERC721. The intentions were so pure. The implementation so was wrong and borderline betrays the trust of holders.
Not only is everything packed into a single off-chain URL, but there is also no way to retrieve the state in which your Lemon is on the contract. Essentially, as it stands, Little Lemons are Schrodinger Little Lemons as both versions of the art simultaneously exist and don't. The Lemons' method is not Mimetic Metadata, simply improper and dangerous usage of centralized metadata updates.
All Lemon holders may not realize, but the creators are not just paying for the hosting of the assets but are actively messing around with them when that was not the case at the time of purchasing. Are you comfortable knowing that your asset could change at any time without any interaction, buyer awareness, or even approval on your behalf? Individuals cheering on this method are setting a mind-blowingly dangerous precedent.
With Mimetic Metadata, we gain the genuine distinction of the Pixel Lemon, as the creators would not have to mess with base Lemon to do so. Do you see how many problems Mimetic Metadata solves?
Mimetic Metadata is not a theoretical implementation either. I've open-sourced all the code that you could need to see a real-world performance and utilization:
I have also gone through and documented every piece of code. This way, anyone willing to read can understand what every line of code accomplishes.
Today we have explored just one type of Mimetic Metadata. While we've focused on off-chain metadata today, there is a far more significant challenge in creating on-chain Mimetic Metadata. That is not easy, and there is a valid reason no project on ETH has implemented it.
In conclusion, Mimetic Metadata will eventually become the expectation of holders. However, we aren’t here yet today because we have the massively influential Doodles leading the market into a situation that isn’t entirely accurate.
If we pull everything together and make an apples-to-apples comparison, the strength of Mimetic Metadata only becomes more apparent:
Edit: With the release of Space Doodles we can now see that they have added on-chain traits that may/will have impacts on upcoming events. With an incrementing rank, the graphic was updated to reflect Fork in The Road Ready under wrap. Nice surprise and pretty cool excited to see how they work with it!
All these gained benefits and still no downsides. It almost sounds too good to be true, does it not?
Thankfully, we have absolute proof. I have included everything you will need to develop your own non-dilutive ERC721 smart contract in the repository. The code is MIT Licensed so that you can copy and paste it while molding it to best fit your needs. For those that want to implement this code, go ahead.
The one limiting factor in place is how fast this concept spreads throughout the NFT industry.
- Will you help me educate others in the space and show them that a better solution exists?
- Will this idea take three years to gain traction before we begin seeing production-level implementations?
It all depends on you, the reader. As a holder in the market, what power do we hold to correct the course?
- Tell the project creators that different art has a different appeal.
- Tell the project creators that you won't be digging into every token of every collection forever, especially as more collections are launched.
- Tell the project creators that wrapping a token into a new collection is still dilutive even if they aren't changing the number of total tokens.
- Tell the project creators that they should not ignore consumer friction as it determines the rate at which new community members join.
- Tell the project creators you don't want to pay increased gas costs for a misguided implementation.
- Tell the project creators that you don't spend your time equally across all collections released.
- Tell the project creators that a better solution exists and is cheaper to launch and use.
Words can often get lost in translation, so I have created a simple infographic that brings together everything we have talked about:
Welcome to the future where Mimetic Metadata will eventually rule all.
Author note: Thanks for taking the time to dig in. This is just the first article in a series of many that explore the idea of Mimetic Metadata. In each, we will be exploring a different implementation as we prove that nearly every single vertical in the market is better served by utilizing Mimetic Metadata. Have thoughts or questions? I would love to hear them.