Bankless: On-chain gacha FWA is reigniting the NFT market

Author: William M. Peaster, Senior Writer at Bankless

Compiled by: Jiahua, ChainCatcher

Fake World Assets (FWA) is an on-chain random NFT acquisition protocol launched by TokenWorks. Depositors place NFTs along with a certain amount of ETH into a liquidity pool, and buyers randomly obtain an NFT position at the pool price, then choose to either keep the NFT or accept a buyback offer from the original depositor. The author of this article discloses that he is a user of FWA and a holder of $FWA, thus the conclusions carry a clear supporter stance.

Skeptics have viewed the Fake World Assets launched by TokenWorks as a product that can only be popular for a short time: another on-chain application that attracts users through random draws and token rewards, which will lose its appeal once the initial $FWA reward period ends.

First, I disclose my interests: I am a user of FWA and hold $FWA, so the following text inevitably carries a supporter bias. However, I believe that the past month has provided enough evidence to show that this project is not just a short-term fad.

As I mentioned in last month's Beginner's Guide to FWA, the biggest question at the project's launch was whether this on-chain gacha mechanism could continue to operate after the 15-day initial $FWA reward release period ended.

Now, FWA has been live on Ethereum for a month, and the initial reward period has ended, but its token economic flywheel has not stopped; instead, it continues to operate and adjust. Meanwhile, the platform has begun to accumulate observable real business data, and the expanded ecosystem built around the core protocol is also growing.

Here are my main reasons for being bullish on FWA at this time, as well as several key clues worth paying attention to in the future.

1. Small Scale, Yet Revenue Ranks High

According to the FWA Pulse Dashboard, FWA's cumulative transaction volume has exceeded 17,239 ETH, with over 162,000 draw settlements completed; currently, there are still over 5,400 active positions, with a locked value of approximately 1,108 ETH.

The protocol has accumulated fees exceeding 1,777 ETH, of which about 406 ETH has been used to buy back $FWA, and approximately 138 ETH remains in reserves. For a protocol that has only been live for a month, these figures are quite significant.

FWA has also become a notable source of Gas consumption on the Ethereum mainnet. On July 25, during its most active period, it briefly became the largest single Gas consumer on the network, surpassing Tether and Circle. The community jokingly said that FWA is "saving Ethereum" by generating on-chain activity. Regardless of whether one likes random NFT draws, this at least proves that the Ethereum mainnet can still handle activity peaks brought by new applications.

Anonymous analyst Purposeful subsequently compiled early data on FWA from the perspective of revenue and valuation. Based on token holder income, FWA has repeatedly ranked among the highest revenue protocols on Ethereum; on certain dates, its revenue even surpassed the combined total of Pendle, Sky, and Uniswap, placing it in the top ten for protocol revenue in the entire crypto industry.

Purposeful pointed out that if measured by the ratio of fully diluted valuation to annualized token holder income, $FWA has valuation multiples of approximately 1.3x, 1.3x, and 2.3x based on 24-hour, 7-day, and 30-day data respectively; some comparable protocols are in the range of 29 to 237 times. According to this logic, even if FWA's revenue does not grow significantly, as long as the market assigns it a valuation level closer to that of similar protocols, it could bring significant room for value re-evaluation.

2. Developers Are Spontaneously Building Ecosystems

One of the most noteworthy changes for FWA in the past month is that more and more third-party developers are beginning to build products on top of the core protocol. These projects are not led by TokenWorks but are growing spontaneously through the protocol's permissionless composability.

Representatives of projects that have emerged so far include:

• FWAAH: An alternative front-end developed by Austin Griffith.

• Pull Pool: A joint drawing tool launched by on-chain artist ripe. Participants can pool ETH to speed up obtaining FWA positions and distribute settlement gains and $FWA rewards according to their contribution ratio.

• LFWA: A liquidity FWA treasury launched by madame/acc, which acquires $FWA and ticket fees through large shared positions, while also setting up a "King of the Hill" mini-game: purchasing tickets allows one to temporarily become the "King," and if no one challenges within a specified time, they can receive treasury rewards.

• FWAP: Fake World Asset Pools, developed by Quit and Jameson. This shared pool pairs NFTs and ETH provided by depositors according to the minimum support amount, then executors continuously cycle through these positions and distribute profits and losses along with $FWA rewards among participants.

• Gacha Battles: A multiplayer winner-takes-all game developed by Eric Conner. Players draw NFTs directly from the FWA real-time liquidity pool, and the player with the highest ETH-supported position in that round wins the entire prize pool.

• FWA.gg: Another layer of gaming application developed by hov, which adds a card pack battle and continuously expanding prize pool to the FWA drawing mechanism, with plans to introduce an on-chain prediction market in the future.

These projects are neither developed by TokenWorks nor actively solicited by the team. For a protocol still in its early stages, this spontaneous, decentralized, and creative development activity is an important signal of whether it can establish long-term viability.

3. FWAIR Opens New Paths for NFT Issuance and Distribution

The latest mechanism launched by FWA, FWAIR Launches, allows a new NFT series to directly enter FWA's shared random draw pool without having to complete a traditional minting issuance separately.

The basic logic is: supporters first provide support for positions in the series to be issued using ETH, and once all positions receive adequate support, the series will enter the FWA liquidity pool. Thereafter, artists no longer rely solely on one-time sales revenue at issuance but can continuously earn fees from liquidity pool activities.

The first test project, FWAIR PFPs, created by TokenWorks, consists of 111 PFPs, with each position supported by 0.25 ETH. According to a recap report released by Adam, a total of 591 wallets initiated 17,735 purchase attempts to obtain this series. According to the author’s calculations, this made the day the second highest in terms of draw counts and ETH expenditure since FWA's launch.

This means that more similar issuances have the opportunity to become growth catalysts for FWA, rather than just short-term gimmicks.

The second FWAIR project is artist Sterling Crispin's Save ETH. This series includes 1,000 fully on-chain NFTs, themed around preserving Ethereum's early history, and comes with a card game, with each position requiring 0.05 ETH in support. At the time of the original publication, the series was scheduled to launch at noon Eastern Time on August 27; TokenWorks later confirmed that the project had opened ETH support to whitelisted wallets.

4. Custom Liquidity Pools Will Open Up the Next Phase

FWA's current achievements are primarily built on the first version of its infrastructure. Two developers from TokenWorks can continue to expand around the underlying protocol, with the most imminent feature being the introduction of "user-owned liquidity pools," providing more flexible customization options for liquidity pools.

User requests previously solicited include: no longer mandating ETH support when depositing NFTs, establishing independent liquidity pools by specific categories, such as Pokémon pools, blue-chip NFT pools, and new issuance pools, as well as setting clear withdrawal deadlines. Once user-owned liquidity pools are opened, they may further give rise to more gameplay and products.

Additionally, FWAIR PFPs can qualify for early deployment of custom liquidity pools through staking. This also indicates that a more complex synergistic relationship is forming between the FWA protocol and surrounding products: random draws direct demand towards existing NFTs, new series issuances attract collecting demand, while NFTs with accompanying functional rights create long-term holding demand.

5. FWA Has Surpassed the "One-Time Fad" Stage

Can FWA grow from an on-chain gacha application into a major digital collectibles market? Can the core liquidity pool continue to incorporate more diverse assets? Can the token economic flywheel operate in the long term? These questions remain unanswered and require continued observation.

But it can at least be confirmed that even though the initial reward period has ended, FWA has still accumulated quite considerable business data; a third-party ecosystem is forming, and new features are being added continuously. Meanwhile, it is also bringing real activity to the Ethereum mainnet through ongoing Gas consumption, serving not just users who enjoy random NFT draws.

Considering all these factors, my judgment on FWA is clearly bullish. A month after its launch, it has not been a fleeting phenomenon; rather, it has brought a level of activity to the long-dormant NFT market that has been rare in recent years.

Moving forward, I am most concerned about whether FWAIR Launches can become an important NFT distribution channel and what new mechanisms will emerge on top of the core protocol—whether they come from TokenWorks or community developers.

If you previously viewed FWA as a novelty but temporary product, or have not yet taken it seriously, then it is at least worth re-evaluating.