ABSNFT:Securitization and Repurchase Scheme for Non-Fungible Tokens Based on Game Theoretical Analysis

Hongyin Chen, Yukun Cheng, Xiaotie Deng, Wenhan Huang, Linxuan Rong

Financial Cryptography and Data Security. FC 2022

Abstract

The Non-Fungible Token(NFT) is viewed as one of the important applications of blockchain technology. Although NFT has a large market scale and multiple practical standards, several limitations of the existing mechanism in NFT markets exist. This work proposes a novel securitization and repurchase scheme for NFT to overcome these limitations. We first provide an Asset-Backed Securities(ABS) solution to settle the limitations of non-fungibility of NFT. Our securitization design aims to enhance the liquidity of NFTs and enable Oracles and Automatic Market Makers(AMMs) for NFTs. Then we propose a novel repurchase protocol for a participant owing aportion of NFT to repurchase other shares to obtain the complete ownership. As participants may strategically bid during the acquisition process, our repurchase process is formulated as a Stackelberg game to explore the equilibrium prices. We also provide solutions to handle difficulties at market such as budget constraints and lazy bidders.