What is an ERC-20z token?
Zora is making waves in the NFT space by launching onchain secondary markets for NFT collectibles in collaboration with Uniswap.
TL;DR
Onchain Secondary Markets: Zora has launched onchain secondary markets for NFT collectibles using the new ERC-20z token standard, allowing NFTs to be traded like traditional tokens and enhancing liquidity for collectors and investors.
Liquidity and Royalty Innovations: The initiative includes a mechanism to direct a portion of mint fees into a Uniswap liquidity pool, ensuring continuous trading opportunities and enabling onchain royalties for creators, thus ensuring fair compensation.
Transforming the NFT Ecosystem: This development is part of a broader trend to tackle liquidity challenges in the NFT space, with Zora's approach paving the way for a more efficient and rewarding marketplace for digital assets.
Introduction to Zora's Onchain Secondary Markets
The introduction of onchain secondary markets by Zora is facilitated through a new token standard known as "ERC-20z." This standard is an evolution of the ERC-1155 standard, allowing NFTs to be wrapped and unwrapped, making them tradable like traditional ERC-20 tokens. This development addresses a common challenge in the NFT ecosystem: the lack of liquidity once the initial minting phase concludes.
Boosting Liquidity in NFT Trading
To kickstart liquidity in these new markets, Zora has implemented a mechanism where a portion of the mint fees are directed into a Uniswap liquidity pool after the minting period ends. This allows users who missed the initial minting window to purchase NFTs on Uniswap, thereby creating a continuous market for these digital assets.
As Zora co-founder Jacob Horne stated, “When the mint ends, the market begins,” highlighting the seamless transition from minting to trading.
The first NFT collectible to utilize this new standard, named "Limitless" (ZRTK), experienced remarkable success, with nearly 493,343 mints generating approximately 54.76 ETH in revenue. This launch not only demonstrates the demand for such innovations but also indicates a growing interest in NFT trading as daily transactions on the NFT-focused chain surged by 181% shortly after the launch.
Empowering Collectors with Royalties
One of the standout features of Zora's new token standard is its ability to enable onchain secondary market royalties for collectors. Unlike traditional NFT marketplaces, where royalties are often enforced offchain, Zora's system ensures that creators and collectors receive their fair share of royalties directly onchain. This represents a significant shift in how royalties are managed within the NFT ecosystem, potentially increasing the attractiveness of NFTs for both creators and collectors.
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The Broader Impact on the NFT Ecosystem
Zora's initiative is part of a larger trend in the NFT space, where various projects are exploring new token standards to enhance trading dynamics and liquidity. Similar attempts have been made by other platforms, such as Bozo Finance and Ghost Labs, which have experimented with hybrid DeFi concepts on Solana, and the Pandora project on Ethereum, which sought to merge different token standards.
These innovations aim to address the liquidity challenges that have historically plagued NFT trading. By enabling fractionalization and creating fungible tokens tied to NFTs, these projects are paving the way for a more robust and accessible NFT market.
