Curation staking

Liquid staking hits NFT art

A digest of the curation staking mechanism for reputation, curation and discovery proposed by SuperRare Labs. It leverages decentralized finance to create a reputation network in the context of NTFs for digital art.

1. Docs

2. App

The problem

NFTs have created a vibrant, new creative industry by solving digital art’s ownership and provenance problems, but as the space catapulted from a small group of artists and collectors who mostly knew one another (even informally / only by reputation) into a massive community of strangers, the continued reliance on Web2 platforms for social connectivity and exploration (eg, Twitter and Instagram) has created a serious artwork discovery problem.

It feels like there are thousands of us, together but alone, lost in a sea of our own creations.

Simply put, strategies for solving the NFT/art discovery problem remain trapped in Web2 constructs designed for different purposes, and most strategies for solving the curation problem around NFTs remain reliant on the unscalable tastes of hand-vetted experts.

Curation staking composes of:

1. Rarity Pools that serve as a decentralized reputation system;

2. Staked Lists that serve as a new discovery engine, in addition to being a decentralized curation system.

A decentralized reputation system: Rarity Pools

A rarity pool is a smart contract in which a holder locks up their tokens to signal support for another actor (artist, collector, or anyone else with an Ethereum address), in return for rewards from their future sales. Any payouts to pool members are based on sales by the seller, or any other rewards that accrue to the pool target.

Image from RARE Staking white paper

A user can make three actions on a rarity pool:

1. stake an amount of tokens, receiving a corresponding amount of synthetic tokens;

2. claim the accumulated rewards, which are proportional to the staked amount of the user;

3. unstake part of or the whole staked amount.

The Rarity Pool token economics are as such that, the smaller a pool is when a new member stakes, the greater the rewards they’ll receive whenever that pool recognizes a sale.

Thus, stakers are incentivized to search out undervalued or undiscovered actors for whom they can increase both reputation and pool rewards.

Formally, when a user stakes $s$ tokens, it receives $r$ synthetic tokens such that (we omitted costants for the sake of simplicity):

$$r = \sqrt{s} \cdot (\sqrt{s + T^2} - T)$$

where $T$ is the total amount staked in the pool. Initially, when the pool is empty ($T = 0$), we have that the user receives as much as they stake (that is, $r = s$). However, as soon as the pool stake $T$ grows, the user receives less and less tokens ($r < s$), and this number decreases to 0 as the pool stake grows to infinity.

Staking in rarity pools is somewhat akin to liquid staking, since synthetic tokens, specific to the rarity pool, are received in exchange for the staked tokens. These synthetic tokens could be easily referenced by token gates, creating and automatizing the discovery of communities of individuals with similar artistic taste.

This highlights the social aspects of staking in somebody’s rarity pool. Stakers are not just saying “I think this person makes, collects, or curates good art and will generate economic activity”, they are also joining a community of people who share the same interests, philosophies or opinions as the pool’s target.

Reputation network and score

Over time, staking in rarity pools builds a reputation network made of addresses and links between staking and staked addresses. Each link is weighted with the amount staked and, moreover, it has a temporal connotation, since users can stake and (partially) unstake at any time. Essentially, each link is made of a pair of addresses and a dynamic amount of stake changing in time.

Notice that reputation network links encode three interesting information:

1. who stakes on who,

2. how strongly they stake, and

3. for how long they stake.

A quantifiable reputation score for rarity pools (addresses) could be computed on top of the reputation network.

The reputation score could be calculated using a model similar to Quadratic Funding, in which not only the overall staked amount counts, but also the number of stakers is important. For example, with this method, 10 small stakers each staking 1 token have the same staking power then one big staker staking 100 tokens.

Related to Quadratic Funding, an ingredient that might increase reputation of an actor is the diversity or heterogeneity of the stakers. Vitalik Buterin proposes to detect and discount correlation among voters in Quadratic Founding. A similar approach might be applied for stakers in rarity pools: given a large enough network, it is relatively simple to compute a similarity metric among nodes (actors) of the network. If a pool is staked by clustered (very similar) actors, the acquired reputation might be diminished, since “such a staking group is more likely to be a group of Souls who are making the same error in judgment or who share the same bias”.

All else equal, the more diverse are the stakers, the higher the accrued reputation by the staked pool.

Furthermore, with regard to the temporal information (how long a staker stakes), it makes sense to consider the stability/volatility of the staking:

All else equal, an actor that is being staked by stable stakers should have higher reputation than another one being staked by volatile stakers

Incidentally, this is akin to Conviction voting.

Finally, the reputation of the stakers might be relevant to gauge the reputation of the staked address.

If a specific pool is sizable with reputable participants staking in it, one can assume that this address belongs to a reputable actor. If a pool has little or no stake, or is staked on only by unknown actors, then the social reputation of that address is significantly lower.

This closely resembles the logic of eigenvector centrality, a popular recursive centrality measure used in network science, akin to Google’s PageRank algorithm.

Improved discovery for artists and collectors: Staked Lists

When a user stakes in one or more Rarity Pools, a beneficial side effect is the creation of a list of addresses on which the user has staked, known as a Staked List. These lists then become canonical, on-chain curated feeds.

The Staked List of a prominent artist or collector then becomes visible to all network participants and a source of insight for keen observers to browse. We can even think to mechanisms of copy staking, akin to copy trading.

As more people participate and reputation builds throughout the system, thousands of undervalued artists, keen eyed collectors, and amateur curators – whose creations and collections remain undiscovered or under-appreciated due to the endless inventory on aggregated marketplaces – will start rising to the surface.

Reputable artists and collectors alike will experience the excitement felt by the crypto art OGs of the early days – with an opportunity to make their mark on the larger space.

A platform agnostic, community-driven approach

As the Rarity Pool and Staked Lists ecosystem matures, it will create a decentralized mechanism for signaling reputation throughout the whole crypto art ecosystem.

Since Rarity Pools can be deployed for any Ethereum address, they can help create cross-platform curation signals. This will increase both the quality and ease of art discovery for collectors and artists across the entire NFT ecosystem - not just on a single platform such as SuperRare.