Vault NFT

In recent years, Non-Fungible Tokens (NFTs) have revolutionized the digital landscape, reshaping our understanding of ownership and value. As we considered how best to integrate NFTs into our project, we recognized that these unique digital assets, especially the cards that form the core of our game, hold immense potential. Our goal is to build a sustainable, long-term game, and a powerful NFT standard is central to this vision.

To address the challenges and unlock the full potential of NFTs, we focused on three key aspects: liquidity, price discovery, and value storage. Press enter or click to view image in full size Liquidity

One of the major challenges facing NFTs is liquidity — the ability of an asset to be bought or sold without significantly affecting its price. Unlike fungible tokens, NFTs are relatively illiquid, making it difficult to quickly sell an NFT at its market value. This often forces traders to undercut the floor price to achieve instant liquidity. Unfortunately, this practice can have unintended consequences, such as creating negative sentiment within the community. Low floor prices are often misinterpreted as a lack of success for the project, leading to further speculative floor undercutting and potentially driving the project’s value down to zero.

NFT Automated Market Makers (AMMs) can help mitigate these liquidity issues to some extent by providing continuous liquidity and enabling more efficient trading. Price Discovery

Price discovery for assets typically occurs in two main phases:

Issuance Phase:

Bonding Curve: This method involves setting a predifined function that sets the price, creating a predictable price increase mechanism.
Auction (e.g., Dutch Auction) : NFTs are sold through a bidding process where the price decreases or increases until a buyer is found, ensuring fair market pricing.

A typical usage of this is liquidity bootstrapping pools (LBPs). LBPs begin with a pool containing 100% of one token type and 0% of the other. Over time, the pool rebalances by altering the liquidity curve to gradually sell off the initial token in exchange for the second token. The price is determined by the market, based on the demand for the first token, at each stage of the rebalancing process.

Trading Phase:

Constant Product AMM: This model, used by platforms like Uniswap, facilitates continuous trading and liquidity provision, allowing for more dynamic price adjustments based on supply and demand.

Currently, platforms like pump.fun combine these two phases to enhance price discovery. However, no such platform exists specifically for NFTs. A key differentiator between NFTs and fungible tokens is rarity, which adds a unique dimension to NFTs that requires specialized mechanisms for accurate valuation — something that is challenging to represent through a mathematical equation. Value Storage

Another crucial aspect of NFTs is their ability to store value. People typically invest in tokens because they believe in the underlying culture or technology. NFTs, through cultural consensus and community engagement, can serve as valuable assets within a project’s ecosystem. Get IncarnationGG’s stories in your inbox

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In our project, NFTs are not just digital collectibles; they are integral to the game’s economy and narrative. By incorporating a robust value storage mechanism, we ensure that NFTs maintain their worth and continue to provide benefits to their holders over time. What is Vault NFT?

Vault NFT is an innovative standard that defines a framework for creating yield-bearing NFT vaults. Inspired by ERC-4626, which standardizes tokenized vaults for fungible tokens, Vault NFT takes a unique approach by issuing NFTs as shares when users deposit fungible tokens into the vault. This hybrid model leverages the strengths of both asset types, offering a new and engaging way to interact with digital assets. Addressing Liquidity from the Issuance Phase

One of the fundamental issues with traditional NFT issuance is that the liquidity often leaves the system once the NFTs are sold, making the price highly dependent on market conditions and the issuer’s actions. Vault NFT addresses this problem from the very start:

Asset-Backed Issuance: To mint NFTs, users must deposit fungible tokens into the vault. These assets remain locked in the vault, ensuring that liquidity is always present. Unlike traditional methods where funds are taken out of the system, Vault NFT ensures that the underlying assets stay within the ecosystem.

Dynamic Pricing Functions

During the minting and redeeming process, Vault NFT can apply various price functions to determine the exchange rate. These functions can be constant, linear, exponential, or any other model that suits the project’s needs. This approach is similar to bonding curves but extends beyond the issuance phase, providing a flexible pricing mechanism.

Customizable Price Functions: The price functions can be tailored to the specific needs of the project, allowing for dynamic and adaptive pricing that reflects the value and demand of the NFTs.

Yield Generation

Each NFT represents a share of the vault, and the funds within the vault can be invested in low-risk portfolios, such as lending platforms. This allows the vault to generate a steady stream of income. This income can be used to support the NFT’s value and fund community initiatives. Incentivizing Long-Term Engagement

Vault NFT encourages issuers to build around their NFTs by aligning incentives with long-term success. Since the liquidity remains within the system and the vault generates continuous income, issuers are motivated to create valuable and engaging projects that benefit the entire community.

Fee Structure: By charging fees during minting or redeeming, issuers can generate revenue over time, rather than relying on one-time sales. This pushes the creators to focus on the long-term growth and sustainability of their projects.
Community Development: The continuous income generated by the vault can be reinvested into the community, fostering growth and engagement. This creates a positive feedback loop where the success of the NFTs directly contributes to the success of the project.

Advantages of Using Vault NFT

Unlocking New Value: Vault NFT revolutionizes the way we perceive and utilize digital assets by enabling yield generation on fungible tokens and representing shares as NFTs. This innovative approach allows users to unlock additional value from their assets, transforming static holdings into dynamic, income-generating tools.w
Improved Liquidity: Vault NFT significantly enhances the liquidity of NFTs by enabling direct trading of NFT shares with the pool and utilizing dynamic price functions. This approach ensures a fluid market where users can confidently transact their NFT shares at fair values. Improved NFT liquidity benefits individual traders and contributes to the overall stability and robustness of the NFT ecosystem.
Interoperability: Vault NFT is designed with a standardized interface that ensures seamless integration with other DeFi protocols, NFT marketplaces, and gaming platforms. This interoperability allows third-party developers and platforms to easily adopt and integrate the Vault NFT standard into their own systems. By fostering a more connected and cohesive ecosystem, Vault NFT enables smoother transactions and interactions across various platforms. This makes it easier for users to leverage their NFT shares in a wide range of applications, enhancing the overall utility and reach of NFTs.
Enhanced Utility: Vault NFT significantly expands the utility of NFTs by transforming them into yield-bearing assets that can be used across a variety of applications. This enhancement increases the versatility and attractiveness of NFTs, making them valuable assets in multiple contexts.
Security and Transparency: The standardized approach of Vault NFT ensures that vaults are transparent and secure, making it easier for users to understand how their assets are managed and the risks involved.

How Vault NFT Works

1. Deposit & Mint

Users deposit fungible tokens (e.g., ERC-20 tokens) into the vault. In return, they receive NFTs that represent their shares in the vault. Each NFT can carry unique metadata, providing additional benefits or features.

1. Yield Generation

The vault uses the deposited tokens to generate yield through various strategies, such as lending, staking, or providing liquidity. The yield is reflected in the value or attributes of the NFT shares.

1. Redeem

Users can redeem their NFT shares to withdraw the corresponding amount of fungible tokens from the vault. The NFT is burned or returned to the vault upon withdrawal. Conclusion

Vault NFT represents a significant advancement in the NFT space, combining the benefits of fungible tokens and NFTs to create a unique and powerful asset management tool. By allowing users to deposit fungible tokens and receive NFTs as shares, Vault NFT opens up exciting possibilities for yield generation, and enhanced user experiences.

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How Vault NFT is Applied in Incarnation

Incarnation leverages Vault NFT as a core mechanism for card issuance, trading, and value creation. This innovative approach addresses the fundamental problems of traditional card games while creating a sustainable economic model.

1. Decentralized Card Issuance with Asset Backing

In traditional card games, when players purchase cards, the funds go directly to the developer, and the card values become purely speculative. Incarnation revolutionizes this model using Vault NFT.

Card Creation Process:

Step 1: Vault Creation

• When a player designs a new card, they create a corresponding Vault NFT

• The vault is configured with:

  • Underlying asset: $CARD token or other approved tokens

  • Price function: Bonding curve (exponential, linear, or custom)

  • Fee structure: Creator sets mint/redeem fees

  • Yield strategy: How deposited tokens generate returns

Step 2: Initial Card Minting

• Players deposit $CARD tokens into the vault to mint card NFTs

• Example: Deposit 100 $CARD → Receive 1 "Dragon Knight" card NFT

• The deposited tokens remain in the vault, backing the card's value

• Early minters benefit from lower bonding curve prices

Step 3: Card Trading

• Card NFTs can be traded peer-to-peer on marketplaces

• Alternatively, cards can be minted/redeemed directly from the vault

• This dual liquidity mechanism prevents price manipulation

Example Scenario:

Alice designs a powerful card: "Fire Phoenix"

1. Alice creates a Vault NFT for Fire Phoenix:
   - Underlying asset: $CARD
   - Initial price: 50 $CARD
   - Price function: exponential (1.1x per card)
   - Creator fee: 2% on mints, 1% on redeems
   - Yield strategy: Lend to Aave, 5% APY

2. Bob wants the card:
   - Deposits 50 $CARD into the vault
   - Receives Fire Phoenix NFT #1
   - The 50 $CARD stays in the vault earning yield

3. Carol also wants the card:
   - Price is now 55 $CARD (50 × 1.1)
   - Deposits 55 $CARD, receives Fire Phoenix NFT #2
   - Alice earns 1.1 $CARD as creator fee

4. Later, Bob no longer needs the card:
   - Burns Fire Phoenix NFT #1
   - Redeems ~55 $CARD (original + share of yield)
   - Exit price follows bonding curve down

2. Solving the Liquidity Problem

Vault NFT provides guaranteed liquidity for all cards, eliminating the traditional NFT liquidity crisis.

How It Works:

Always-Available Liquidity

• Players can always mint new cards by depositing tokens

• Players can always redeem cards by burning them for underlying tokens

• No need to wait for willing buyers or sellers

Price Discovery

• Bonding curves create transparent, predictable pricing

• No more "floor price panic" or predatory undercutting

• Market forces determine whether to buy from vault or from other players

Market Efficiency

• If marketplace price > vault mint price → people mint from vault and sell

• If marketplace price < vault redeem price → people buy from market and redeem

• This arbitrage keeps marketplace prices aligned with intrinsic value

3. Return of Liquidity to Players

Unlike traditional games where card sale revenue goes to developers, Incarnation returns liquidity to the community.

Revenue Distribution:

Creator Fees

• Card designers set their own fees (typically 1-5%)

• Creators earn fees every time their card is minted or redeemed

• Incentivizes quality card design and long-term community engagement

Yield Generation

• All deposited tokens in vaults generate yield through DeFi strategies

• Yield accrues to card holders and can be:

  • Distributed as increased redemption value

  • Used to fund card pool prizes and tournaments

  • Reinvested into the game ecosystem

Community Ownership

• Players who mint cards early benefit from bonding curve appreciation

• Card holders benefit from yield generation

• No single entity extracts disproportionate value

Example Revenue Flow:

Fire Phoenix Vault has 10,000 $CARD deposited:

1. Yield Generation:
   - 10,000 $CARD lent on Aave at 5% APY
   - Generates 500 $CARD/year
   
2. Distribution:
   - 80% (400 $CARD) → Increases card redemption value
   - 10% (50 $CARD) → Creator (Alice)
   - 10% (50 $CARD) → Tournament prize pool

3. Benefits:
   - Card holders can redeem for more than they deposited
   - Alice is rewarded for creating a popular card
   - Community gets funded tournaments

4. Card Pool Mechanism Integration

Vault NFT perfectly integrates with Incarnation's card pool system, enabling dynamic game balance.

Card Pool Economics:

Official Card Pools

• Tournament Pool: Only approved, balanced cards

• Ranked Pool: Competitive play cards

• Testing Pool: New cards being evaluated

Entry Requirements

• Cards must maintain minimum liquidity (e.g., 1000 $CARD in vault)

• Cards with insufficient backing are removed

• This ensures only valuable, wanted cards remain in official pools

Last-Place Elimination

• Periodically, underperforming cards are removed from pools

• Removal is based on usage statistics and community votes

• Removed cards can still be redeemed from vaults, protecting player value

• This prevents power creep and keeps meta fresh

Example:

"Ice Wizard" card in Tournament Pool:

1. Initial State:
   - Vault has 5000 $CARD deposited
   - 50 card NFTs minted
   - Popular in tournaments

2. Meta Shifts:
   - New fire-element cards dominate
   - Ice Wizard usage drops to bottom 5%
   - Community votes to remove from Tournament Pool

3. After Removal:
   - Card removed from Tournament Pool
   - Card remains in Casual Pool
   - Players can still redeem ~5000 $CARD from vault
   - No value lost, just usage restricted

5. Modular Card Design and Vault NFT

Incarnation's modular card system synergizes with Vault NFT for collaborative creation.

Collaboration Models:

Art + Mechanics Separation

• Artist creates card artwork, links it to vault

• Game designer sets card stats and abilities

• Developer implements smart contract logic

• Revenue is split among contributors

Vault Composition

• Each module can have its own vault or share a unified vault

• Artists can earn from artwork usage across multiple cards

• Mechanics can be reused and generate ongoing fees

Example:

Modular Card: "Shadow Assassin"

1. Artist (Alice):
   - Creates "Shadow" artwork
   - Sets up Art Vault with 1% mint fee
   - Any card using this art pays Alice

2. Game Designer (Bob):
   - Creates "Assassin" mechanics (stealth + critical strike)
   - Sets up Mechanics Vault with 1% mint fee
   - Other cards can license this mechanic

3. Final Card:
   - Combines Shadow art + Assassin mechanics
   - Players mint the card for 100 $CARD total
   - Fees split: 1% to Alice, 1% to Bob, 1% to integrator
   - Everyone benefits from the card's success

6. Integration with AI Agents (x402)

Vault NFT and x402 create powerful synergies for automated asset management.

Agent-Enhanced Operations:

Automated Market Making

• Agents monitor vault prices vs. marketplace prices

• Execute arbitrage trades to maintain price efficiency

• Provide consistent liquidity for all cards

Strategic Card Investment

• Agents analyze card performance in meta-game

• Automatically mint promising cards from vaults

• Redeem underperforming cards to rebalance portfolio

Yield Optimization

• Agents move vault assets between different yield strategies

• Maximize returns while maintaining liquidity requirements

• Compound yields automatically

7. Tournament and Event Integration

Vault NFT enables new types of tournaments and events.

Prize Pool Mechanisms:

Vault-Backed Tournaments

• Entry fees deposited into tournament vault

• Vault generates yield during tournament

• Winners receive portion of vault + yield

• Remaining funds rolled into next tournament

Card Rental System

• Players deposit collateral to "borrow" expensive cards

• Collateral earns yield in rental vault

• Cards automatically returned after event

• Enables f2p players to compete with high-value decks

8. Long-Term Sustainability

Vault NFT aligns incentives for long-term project success.

Sustainability Features:

Built-In Value Floor

• Every card has minimum redeemable value (vault backing)

• Prevents complete value collapse

• Players protected even if game popularity declines

Creator Incentives

• Creators earn ongoing fees, not just initial sales

• Incentivized to maintain card balance and popularity

• Aligns creator success with player satisfaction

Community Funding

• Vault yields fund development, marketing, tournaments

• No need for continuous fundraising or token inflation

• Self-sustaining ecosystem

Technical Implementation in Incarnation

Core Vault Operations

The Vault NFT system implements several key operations:

Minting: Players deposit fungible tokens (like $CARD) and receive unique NFT cards in return. The price is determined by configurable bonding curves (linear, exponential, or custom formulas).

Redemption: Card holders can burn their NFTs to withdraw the underlying tokens, with the redemption value including their share of accumulated yield.

Price Discovery: Multiple bonding curve types allow card creators to design appropriate pricing mechanisms that balance accessibility and scarcity.

Integration with Game Logic

Card pools integrate with the Vault NFT system through:

Liquidity Requirements: Cards must maintain minimum vault liquidity to remain in official pools (Tournament, Ranked, etc.). This ensures only valuable, community-supported cards are playable in competitive modes.

Performance Monitoring: The system tracks card usage statistics and win rates, feeding into the last-place elimination mechanism for pool curation.

Dynamic Balancing: Cards that underperform naturally lose value and exit pools, while successful cards attract more liquidity and maintain their position.

Benefits for Incarnation Ecosystem

For Players:

1. Protected Investments: Cards always have redeemable value

2. Genuine Liquidity: Can always enter/exit positions

3. Passive Income: Card holdings generate yield

4. Fair Pricing: Transparent bonding curves

For Creators:

1. Ongoing Revenue: Earn fees from every transaction

2. Aligned Incentives: Success depends on card quality

3. Community Support: Players invest in good cards

4. Flexible Models: Set own fee and yield structures

For the Game:

1. Sustainable Economy: No dependence on new player influx

2. Self-Balancing: Poor cards naturally lose value/exit pools

3. Community Ownership: Players are stakeholders

4. Innovation: New card designs continuously funded

Conclusion

Vault NFT is not just a technical standard for Incarnation—it's the foundation of a new economic model for card games. By ensuring that liquidity remains in the ecosystem, enabling yield generation, and aligning incentives among all participants, Vault NFT creates a sustainable, player-first economy that can thrive for years to come. Combined with x402 AI agents and fully onchain game logic, Incarnation represents the future of decentralized gaming.