Protectorate: A Definitive Guide

June 30, 2023

In conclusion

“And the problem?” 

“Well, liquidity.” 

Nope, it’s not a scene cut out from a finance rom-com about smart money using retail as exit liquidity. It's the reality of the whole NFT ecosystem today.

But before we get there, let’s understand a core problem and how it is currently addressed.

One of the biggest problems that NFT holders face is that of having adequate liquidity to buy their favourite NFTs - which may or may not be exorbitantly expensive for them. Fractional NFTs solve this problem. They enable users with limited funds to still get their hands on their favourite NFTs. 

The ERC-721 token gets split across multiple ERC-20 tokens that represent the shares to the holding of that NFT. These Fractional-NFTs, also known as F-NFTs are merely fractions (i.e., shares) of the whole NFT that people buy. This process can also be reversed i.e., when a single investor buys up all these F-NFTs to create into a single NFT that was originally fractionalized. 

The need for these F-NFTs has almost always been paramount. 

Why wouldn’t an investor with limited access to financial resources want their hands on a superior NFT? F-NFTs democratize NFT ownership ensuring that most people are able to buy it whenever they want. There are some benefits to these as well, such as enabling true price discovery mechanisms for the original NFT and increasing the overall liquidity of these NFTs.

But, this is where the problem comes in. The liquidity of these fractions is fragmented across the entire NFT ecosystem. Some of them are used for opening positions (such as capital for borrowing money), while some sit idle in users’ wallets. This creates liquidity pockets across the ecosystem with no recourse to them being utilized all in one place.

These fragmented liquidity issues are plaguing the NFT ecosystem today. While it's no secret that the leading protocols tend to acquire this liquidity pretty easily because they are, well, the leading protocols in the sector. Most other protocols struggle to acquire this liquidity because it’s a painful process of providing baseless incentives or worse, relying on certain whales to provide that initial liquidity - thereby relying on uncertain and risky sources.

So what's the solution?

Enter Protectorate 

Protectorate is a multi-chain protocol layer built on top of the base-layer NFTfi protocols that aggregates liquidity across a multitude of NFTfi protocols and maximizes the returns that users generate by depositing into the protocol. This helps cut down the cost that most NFTfi protocols need to spend to acquire liquidity via various methods such as providing incentives for acquiring liquidity.

For any individual, provisioning liquidity to the right “places/protocols” can be a daunting task as it requires an exhaustive research procedure. While users can also rely on following their favourite whales, it is often not the most optimal strategy. This is where Protectorate comes in. It removes all complexity associated with understanding NFTfi protocols and how they interact with each other, portfolio management techniques, and more. 

Core Features 

Protectorate offers the ability for users to provision liquidity to the protocol in various assets such as NFTs, ETH, stablecoins, and more. The liquidity providers (LPs) in this case are known as Envoys. The other stakeholder in the protocol are Elders (who stake the native PRTC tokens to get xPRTC), and they earn revenue from the yield generated via the protocol. This revenue is generated by providing liquidity to protocols in the NFTfi space.

Deepening liquid across NFTfi 

The NFT asset class has often been deemed as highly illiquid and averts all forms of investment by users who hold fractional-NFTs. This is changed by the Protectorate protocol as it carefully directs liquidity across various protocols in the NFTfi stack. Since the protocol’s smart contracts manage this liquidity provisioning, it ensures the highest possible returns that users can generate from providing liquidity. 

TAM 

The total addressable market (TAM) is a healthy metric for any protocol to measure its growth in the DeFi space. Luckily, for Protectorate, the TAM is incredibly high as it can cater to almost all of the NFTfi protocols that exist in the market today - since it interacts with every base layer NFTfi protocol. This creates a win-win situation for everyone - as 

NFTfi users can leverage the deep liquidity provisioned by Protectorate along with Protectorate’s Envoys getting consistently high returns. 

Thus, all the fragmented liquidity travelling across a variety of NFTfi protocols can be utilized by Protectorate.

Protectorate Token 

The PRTC token, which is the native token of the protocol serves multiple functions, including showing participation in governance. The total supply of the PRTC token is capped at 100M. The token distribution will be as follows. 

Advisors: All advisors of the protocol will get 1% of these tokens (i.e., 1M tokens). This distribution will have a 6-month cliff, and the tokens will then be monthly vested across a period of 36 months. This has been done to inspire vested interest in the advisors - for the long-term growth of the protocol. 

Investors: The investors in Protecc Labs will get 15% of the tokens (i.e., 15M) and the distribution will be via monthly vesting over a 3-year period. 

Team: Protecc Labs team will get 17.5% (i.e., 17.5M) tokens with a 6-month cliff followed by a linear 3-year vesting period. 

Treasury: Upon launch, 25% of the tokens will be allocated to the Treasury, allowing it to ensure that the basic operations of the protocol are carried out. The remaining funds will linearly vest across a period of 3 years. The funds collected in the Treasury will be allocated to bonding programs (such as users being able to bond NFTs, ETH, or even stablecoins) - all these decisions will be made by the DAO (Elders). 

PRTC holders will be able to lock their tokens to get xPRTC in return and get a return on the protocol-generated profits. The revenue will be split 80:20 where 80% of the profits will go to the depositors in the protocol and 20% will be accrued to the protocol, with 10% going to xPRTC holders and the remaining 10% going to the treasury.

Governance/Protectorate DAO 

The governance of the protocol will be the responsibility of the Elder Council, which is a team of 5 appointed members whose interests are aligned with the long-term growth of the protocol. One of these members will be from the Protecc Labs team and the other four will members will come from the team of investors and advisors. Elder Council will be responsible for safeguarding the protocol’s governance in the initial phase and ensuring that it is duly passed on to the Protectorate DAO when that transition is needed.

xPRTC holders will be granted the governance power once the DAO formation is complete, enabling them to cast 1 vote with their 1 xPRTC token.

The incredible Protectorate journey 

The team has also taken a novel way to market the protocol. If you go through their Mirror, they paint an almost surreal narrative of what the protocol is about. It’s good and interesting in ways more than one. The story tells of a discoverer undertaking a journey through the wild lands of a different world. The dreamy setting is akin to the world of NFTs that the protocol aims to thrive.

The newcomers were called Conscripts, defined as those who are key to the strategic growth of the protocol. When the protocol does launch (which is going to be soon), it will allow Conscripts to deposit their idle ETH into the protocol.

The protocol opened for “wallet collection” (or the whitelisting of early users) between June 14th and June 20th in its first iteration known as v0.1. And on June 23rd, it opened its gates for deposits from Conscripts and Wardens. In addition to this, users can stack what are known as Credits, which help them scale up the Protectorate Hierarchy

But now, everyone in the community seems to be anticipating Event Horizon, an initial $PRTC distribution event reserved only for Wardens.

Capsule Deployment 

It's an event of Protectorate Protocol where they allow users to deposit their ETH. The protocol has already started accepting these deposits (as of writing this piece). As part of this, Conscripts will deposit their ETH to the protocol - which will then be used across a variety of yield-generation strategies.

Event Horizon 

From the total supply, 10% of $PRTC tokens (i.e., 10M $PRTC) will be distributed in this event via Dutch Auction (an auction where the initial price starts high and it goes down until a buyer is willing to pay for it at the market price). This token generation event for Protectorate will be open for 72 hours from June 28th. Wardens will have access to these tokens for the first 48 hours and the remainder of the community (Allegiants, Conscripts, Plebians, etc.) will get access to it for the last 24 hours

The reason behind this early whitelist for Wardens is to ensure that they dictate the market price in the case of the auction. The hard cap for this auction is $3M USD, and the Event Horizon will close if it is filled. The soft cap is $1M USD, and if this is not filled then all the participants will be refunded. 

Security 

Protectorate Protocol has placed an immense amount of emphasis on the security of its architecture, and that is why it has even delayed the mainnet launch from when it was originally scheduled (i.e., 26th June). 

Team behind Protectorate 

Well, if there is one word in which I’d sum up their team, then it’d be sexy. I’m not lying, the entire narrative and storytelling that the protocol’s team has used are phenomenal, to say the least. And it is really reassuring to know that there is a smart team behind the protocol. Their core team includes @OxOmnia, who has been in the DeFi and NFT space for a while and has written extensive analytical pieces on the protocols in the space. The second core team member is the highly capable Magnus, who seems to be the creative brain behind the protocol and its masterful tales!

Community 

The community behind Protectorate is highly inquisitive. Folks on their Discord are actively engaged in conversations about the protocol and they have been excited about Capsule Deployment. The protocol may have a decently large following and membership across their socials, but some of the smartest people in the industry are keeping an eye on its growth! 

Closing Thoughts 

Protectorate protocol aims to concentrate liquidity across a basket of NFTfi protocols to increase the overall liquidity across the asset class. By doing so, they are opening up a plethora of opportunities for liquidity aggregation, thereby cementing the position of NFTs as viable investment options. 

I know what you may be thinking. NFTs are a niche space, which has highly volatile demands. But, the space needs maturation. And that’s where Protectorate comes in. It renders sophistication to the ecosystem via its liquidity-aggregation capabilities. I’d say that Protectorate is helping the NFT space step into a whole new world of a mature and superior asset class. 

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