The problem Tribe3 solves

The market exhibits robust speculative demand for exotic assets (e.g. NFTs, watches, sneakers, TCGs) where the market size has expanded to ~$400 billion in 2023. Yet conventional spot trading mechanisms often result in significant liquidity being sidelined due to spot being a highly inefficient trading vehicle, i.e.:

• Large ticket size
• High platform fee / commission
• No hedging / shorting
• Security / storage cost
• No leverage

Tribe3 solves these pain points by building a derivatives DEX for NFT and RWA price indices:

• Eliminating minimum trading thresholds, facilitating leverage, and permitting shorting
• Offering broad-based price indices that enable diversified exposure to exotic assets (e.g., BAYC Floor Index, Rolex Daytona Index)
• Capitalizing the less saturated exotic assets (NFT / RWA) segment compared to token DEXs
• Integrating social and gaming elements to enhance user engagement and retention

Our platform is catered to not only target Web3 natives but also Web2 normies. In particular, the locked demand in the exotic market is massive, especially for RWAs with cultural relevance, where a lot normies are untapped and are yet to participate. We are excited to join Base on this ongoing excited journey to onboard more users from the general public onchain and to our platform.

Challenges I ran into

Selecting and constructing the underlying price indices: Exotic assets, by nature, are non-fungible and have a huge universe of assets (e.g. NFTs with different traits, sneakers brands, TCG with different rarities). A price index that encompasses assets from the whole universe is impractical to implement. So we focused on the most liquid segment of the asset universe with the highest trading demand. For instance, for NFTs, we focus on the floor price items as they represent the most frequently traded portion of a collection, as opposed to higher-value NFTs with rarer traits.

Designing oracles for exotic asset perps: All existing oracle solutions for exotic assets that rely on historical transaction data / have a fixed TWAP, which is unsuitable for perps trading due to its slow response time in a volatile market, making it difficult for the system to react and liquidate positions in a timely manner. We thus have implemented our own oracle construct. Our proprietary NFT oracle utilizes mid-price of top collection offer and lowest listed floor price, with a dynamic TWAP period that adjusts based on market volatility. During v1 beta that we launched last year, our oracle demonstrated a favorable balance between resistance to manipulation and high tracking speed. After $100 million of trading volume, the incurred bad debt was a mere $200, which was significantly lower than most exchanges.

Implementing a hybrid system to maximize liquidity: Unlike tokens, exotic assets tend to be less liquid. To maximize liquidity, we developed a hybrid system that combines the liquidity of AMM and order book, where the AMM would help bootstrap liquidity and provide support for long-tail assets like NFT and RWA, offering users flexibility in providing liquidity actively / passively.