All-Art Protocol Litepaper v1.02

Vision

Non-Fungible Token (NFT) infrastructure holds the key to disrupting the current art & collectables market. We are driving the structural change that will remodel the art & collectables industry by establishing an improved NFT standard with embedded license rights and a new liquidity protocol. The All-Art Protocol will enable NFTs to become perpetually traded like any crypto token, with continuous liquidity through a new type of AMM liquidity pool.

Mission

Launching an infrastructure which enables proper rights management and constant liquidity of non-fungible tokens. Empowering creators, collectors, and investors to generate, utilize and trade art in a way never before done.

Overview

The problem

It is no secret that the current NFT market is unsustainable and has no room to grow.
What are you actually buying when you buy an NFT? A hash value, metadata, or a work of art itself. Copyright and other associated rights were never a design feature of NFTs. An emerging number of cases started challenging the concept, making it harder for the market to adopt a new tech stack as a full-time solution for a longstanding problem.
When we look at the art market as a whole, there is one crucial aspect to consider. Most of the art in the world is hidden behind closed doors. In the Art & Finance Report 2019 by Deloitte and ArtTactic, it is estimated that the wealth associated with art and collectibles is worth over US$1.5 trillion, but most of that art is stored away in freeports.
While blue-chip art is inaccessible to small collectors, there is also a significant barrier to entry for new collectors within the blockchain space due to the inoperability of current platforms. The DeFi movement crafted a new playground for innovative projects but still fails to include the NFT concept into its ecosystem due to the tokens’ non-fungible characteristics. A lot of stakeholders are waiting for a proper solution to transform the market.

The solution

The new infrastructure must be substantially better to transform the status quo and move the art market forward.
Art must become a liquid asset class. Transaction fees must be cheap. Transactions must happen almost instantaneously. Energy consumption must be minimal. Registered art on the blockchain must be compatible with established regulations and copyright law. Collectors must be able to benefit from purchased art beyond speculative trading. Art on the blockchain must follow international standards for provenance documentation and verification.
When the proper protocols are in place, we have a base for unlocking almost US$2 trillion in art value stored behind closed doors. For this to happen, collectors must have confidence in the underlying technology, and there must be a proven track record and widespread institutional adoption.
Once transaction fees are lowered, a proper solution for license rights is introduced. There are immediate benefits to collecting and utilizing those rights, incentivizing more people to enter the NFT space. This mechanism will create a positive adoption loop, where more and more galleries and artists will realize the benefits of bringing art to the blockchain. In a way, this process is already taking place.
The new market dynamics could stimulate prominent collectors to reveal their holdings and bring valuable art into the open. An abundance of priceless art with significant historical value is hidden away and only accessible to a few people, but if those artworks and artifacts were shared with a wider audience, it could create an unprecedented cultural shift that would benefit the global civilization.

All-Art Protocol

The core of the All-Art Protocol are the first decentralized NFT swap pools running on Solana. On top of the protocol lies a new NFT standard which solves a major shortcoming of the current concept by embedding license rights into the very structure of NFTs and their behavior. We call this standard NFT-PRO.
License rights and legal contracts embedded into NFTs ensure that any transfer of ownership is properly managed on-chain, where both buyer and seller know exactly what is the agreed arrangement. As in real-life, there can be multiple types and levels of license rights for a single NFT item.
To bring liquidity to NFTs, each NFT is represented by its own LORT tokens (License Ownership Right Tokens). LORTs are not fractions of an NFT, but a utility token used to purchase licenses for that NFT. Each license has a price in LORTs, defined by the creator. LORTs make the value of licenses interconnected as they are universally required to obtain a license.
To buy a license for an NFT, a collector needs to purchase its LORTs and lock them in that license. Once the collector obtains a license, he is granted a license token (a receipt). If he wants to sell the license, depending on the type of license, he can return the license token (the receipt) in exchange for locked LORTs.
The All-Art Protocol ensures constant liquidity for NFTs by introducing a novel liquidity pool called cAMM (Capped Automated Market Maker). Once minted, LORTs are placed in cAMMs where all trades of LORTs happen.
The liquidity provider for NFT-PRO pools is the AART token. It is the infrastructure token of the All-Art Protocol that connects all NFT-PRO pools together. The All-Art Protocol creates cAMM pools for NFT-PROs with LORTs, and AART tokens are the fuel for the liquidity of each NFT-PRO. As the collateral in all pools, AART token enables easy swapping of NFT-PROs’ LORTs between pools, effectively creating an omnipool of NFT-PROs.
The All-Art Protocol runs on a new superior blockchain - Solana, with four key benefits:
    Blazing speed and cheap transactions running on L1
    Scalability
    Low energy consumption
    Upgradable smart contracts

NFT-PRO

A Non-Fungible Token (NFT) is a digital registration of a unique item, indivisible by nature. But a work of art is much more than a binary relationship between an individual and the work. Each art piece has multiple levels of legal rights associated with it even if it is registered as an NFT, and buyers should be aware of all these legal obligations when they engage in NFT trading.
NFT-PRO has a three-layer system designed for the next generation of legally-compliant item-representation on the blockchain - what we usually refer to as NFT.
Layer 1 (mandatory): The core NFT data layer, so called metadata - basic information about every NFT
That information is stored on-chain and represents an NFT item. The minting process creates an account for NFT-PRO containing core metadata with information on the creator and important data fields. This data set is not stored in a URI referenced file, but in the account itself. Additional data can be stored in an externally referenced file, but is not mandatory.
LORTs (License Ownership Rights Tokens) can be minted here, or in Layer 2 setup. Once LORTs are minted they can be distributed to potential owners.
Layer 2 (optional): License rights data layer (embedded into NFT) - defining terms and conditions of each license
Every NFT-PRO can have additional license information (Terms & Conditions) linked to the Layer 1 data structure and the NFT-PRO itself. Each license has its value in LORTs. Each license is represented by its own license receipt token, as proof of ownership of a specific license.
Layer 3 (optional): Transaction layer - cAMM pools, auctions or other sales mechanics
Once the license layer is set up and has a defined value, the transaction layer (a market) can be created for the NFT-PRO, either through a cAMM pool for LORTs managed by the All-Art Protocol, or through auction contracts that can create liquidity in cAMM polls.
If the creator wants to represent an item in the form of an NFT, Layer 1 metadata is needed. If an NFT is for sale, a contract of a sale or license transfer is necessary, thus Layer 2 is needed. And if sales are happening on-chain through automated market making or auctions, Layer 3 is needed.
Thanks to this new standard, collectors won’t be buying an art piece without understanding what they will actually own. Now they will own clearly defined license rights for every NFT they purchased.

Capped Automated Market Maker

To enable on-chain liquid art trading, the All-Art Protocol introduces a novel approach called Capped Automated Market Maker (cAMM). All-Art Protocol’s cAMMs use the same x*y=k constant product formula as UniSwap. On one side of each cAMM are an NFT-PRO’s LORTs (License Ownership Right Tokens), while on the other side is the collateral in AART tokens. The cap is placed on how many LORTs can exist in the pool.

Why is capping essential?

For creators to be able to monetize their work, they hold a certain number of LORTs outside of a fully capped pool, representing ownership of their NFT-PRO. These LORTs are in their wallet, but cannot be monetized while the pool is capped and full. To recoup, they must wait until the first sale happens and the pool is depleted of some of the LORTs. This solves the biggest challenge of placing NFTs in pools and ensures that artists are compensated for their work once a true sale has been made.

How are pools created?

When an NFT-PRO is minted on the All-Art Protocol, it is minted along with 150 LORTs. 100 of them are placed in a cAMM and 50 are placed in the creator's wallet. Once a buyer draws LORTs from the pool and deposits the required value in AART tokens, the artist is given an opportunity to swap his LORTs with the corresponding amount of AART tokens.

Who owns the pool?

The All-Art Protocol programmatically creates and owns cAMMs. It mints LORTs for each NFT-PRO and places them in the newly created pool and in the creators’ wallets.

AART TOKEN

AART tokens are the native infrastructural token of the All-Art Protocol and are used as collateral in cAMMs. Their main purpose is to provide the necessary liquidity in cAMM pools. To purchase an NFT-PRO, every collector must buy AART tokens on an open market and exchange them for LORTs from that NFT-PRO’s pool. This system creates a natural market pressure.
As AART tokens are used in all NFT-PRO pools, this creates a unified standard for valuing works of art in what can be considered an omnipool of NFT-PROs collateralized in AART tokens.
This kind of solution opens up the possibility for easy swapping of NFT-PROs’ LORTs, as they are all collateralized in the same value of exchange.

Value proposition

By introducing legal regulation and liquidity for NFTs, we are enabling a new model of ownership and trading in the art & collectables world, effectively establishing a new financial system for NFTs. This new paradigm is aiming to bring and lock liquidity into the world of NFTs, much like the DeFi movement did for DEXes and lending protocols. Once the NFT sector stores value instead of just moving it, there is a new era of collecting, trading and creating upon us.

Roadmap

Q1

    Core protocol structure
    NFT-PRO design
    Solana chosen as blockchain solution

Q2

    Protocol development
    NFT-PRO creator & explorer
    Marketplace with support for NFT-PRO liquidity pools
    Unity engine wallet + first VR wallet
    Integration with VR-All-Art
    Solana hackathon - won 2nd place in NFT track

Q3

    Release on Solana Testnet
    Release of an open-source Solana wallet for Unity
    Art & Ecosystem Partnerships
    Fundraising closed
    NFT Wormhole: cross-chain integrations
    Legal and license rights infrastructure

Q4

    Open-source integration for marketplaces and websites
    On-boarding of artists, dealers and marketplaces
    Release on Solana Mainnet
    Virtual exhibitions featuring art NFT-PROs
    Public sale
    Community awards
Last modified 3mo ago