About
Floor Indexes is a non-fungible token financial primitive introduced by Bridgesplit to create a novel liquidity option for collectors and collections. Floor Indexes are a layer of fungibility on top of fractionalization.
Fractionalization of an NFT is a valuable tool because selling partial ownership in an asset helps owners reduce risk and create some liquidity while maintaining some exposure. On the converse side, it offers users the ability to get exposure to assets that are otherwise out-of-budget.
However, fractionalization alone carries challenges. Questions around governance, utility, and pricing can make it a confusing or intimidating financial product for many users. This leads to low volumes on fractionalized assets and a worse user experience. In practice, only assets coupled with significant marketing are good candidates for fractionalization. Even then, liquidity in those markets is not sustained.
Floor Indexes introduce a new layer of fungibility that creates instant liquidity for fractions for all assets.
A Floor Index is a collection-specific index of assets. The assets in the index are fractions of individual NFTs in that collection. Index shares of a Floor Index don’t represent shares of any particular NFT, rather a generic share specific to the collection.
Floor Indexes are considered “Floor Indexes” because they tend to attract floor-priced assets because the pool values all fractions equally.

What it solves

Immediate liquidity for holders

Selling an NFT today, especially a high-value NFT, can take days if not weeks. Depositing to the index offers sellers immediate liquidity. DRAG can be immediately swapped for SOL in the AMM for holders who want their liquidity in SOL.

Liquidity option for holders of rarer NFTs

Protocols like NFTX demand holders swap their whole NFT for 1 token to represent the pool. This forces sellers of rarer or above-floor NFTs to sacrifice all added upside for immediate liquidity. With Floor Indexes, a seller may sell 20% of their asset at floor to get some liquidity but sell the whole asset later and still retain 80% of the upside.

Composable and liquid NFT exposure

By aggregating NFT liquidity and minting a fungible token which mechanics in place to track the value of the collection, Floor Indexes create a token with NFT exposure that can be used in other DeFi protocols. This enables new financial products like derivatives on top of these tokens.

Passive income on NFT exposure

Due to the composability and fungibility described above, holders of an index token can provide liquidity to the index token-SOL pool to receive trading fees as an LP. This creates the first DeFi passive income opportunity that can be earned with exposure to NFTs.

Blue-chip exposure at lower dollar cost

Floor Indexes offer a solution for investors looking to get either lower-dollar or liquid exposure to the floor value of a collection.
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Outline
What it solves
Immediate liquidity for holders
Liquidity option for holders of rarer NFTs
Composable and liquid NFT exposure
Passive income on NFT exposure
Blue-chip exposure at lower dollar cost