💢 Problems of Point Trading Marketplaces

Whales Market and Pendle are the current go-to marketplaces for points trading.

Whales Market is a vanilla points trading marketplace, where users can agree on price today and physically settle in the future, after the airdrop. While it introduced the point trading meta, its value proposition is still limited, plagued by excess capital requirements, poor liquidity, extreme volatility (10-20 times their token equivalents) and capped payouts.

Many fixed rate protocols, such as Pendle, Spectra, and Hourglass are retrofitted to serve the demand for leveraged point farming. By paying a fixed price to fixed-rate earners, point farmers can lever up their exposure to point streams for a fixed term. However, any points earned through Pendle can’t be re-sold into the market before the airdrop. Moreover, while point sellers can sell their future point exposure by locking in a fixed rate on Pendle, they’re subject to the fragmented liquidity of fixed-term markets on early exits before maturity.

Attempting to address some of the above issues, Pichi and Agent have reduced capital requirements by allowing users to earn points through ERC-6551 NFT wallets which can later be traded. However, their designs introduce new problems. First, many point farms accrue a basket of points to their participants, preventing users from trading singular point exposures. Second, NFTs hold different point allotments, reducing the granularity of tokenized point exposure to the detriment of market liquidity.

Bubbly is another project looking to improve upon the Whales Market design. Similarly, Bubbly accepts collateral from both sides of the market and requires the point seller to deliver the reward token after the airdrop. However, instead of an OTC limit order UX, Bubbly uses an onchain concentrated liquidity AMM for price discovery. Unfortunately, they still inherit the problems of capital efficiency and capped payouts; specifically, sellers need to front collateral to sell, and buyers’ max payout post settlement is capped at 2x their buy price.

Users need a solution that (1) is highly capital efficient, allowing sellers to sell points without locking up capital, (2) permits single-point trading, and (3) gives pure exposure to a point, including the full airdrop payout. They need a point tokenization protocol. They need Rumpel.