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# Contracts design

Design of the solidity contracts in the MORFD ecosystem

# Fee splitting and conversion

  1. The initial idea is to convert the fees genearted on minting from Eth to Taste tokens using some DEX router
  • This apprach has some drawbacks such as slippage
  • Uncontrolled exchange rate, possibility of loss
  • Buy pressure and then later Sell pressure as Artist want to cash out
  1. An alternative approach involves depositing the generated fees into a DEX pool as LP tokens. The target pool consist of the Eth-Taste pair. Adding liquidity in such pool involves having a reserve of TASTE tokens ready to use for this purpose
  • One drawback of this is the Impermanent Loss (IL)
  • Artists own LP tokens instead of TASTE. We have to keep track of LP ownership and support withdrawal of LP shares from the DEX pool
  • Contribute to Market liquidity
  • Balanced stake in the market
  • Generate a return in the form of LP fees
  • Encourage long term hold

# Liquidity provision approach

In this approach, we propose a Liquidity Provider (LP) token-based fee distribution mechanism for the ERC-7007 NFT contract. Instead of directly swapping ETH for TASTE tokens and sending it to the art creator, we deposit the ETH allocation for the art creator into a DEX (e.g., Uniswap, SushiSwap) ETH-TASTE pool.

LP tokens are issued to represent the liquidity position and are stored in the artist escrow for future withdrawals. This approach contrasts with the direct swap mechanism, where ETH would simply be converted into the TASTE token and sent to the escrow without contributing to liquidity.

# benefits

  • Promotes Token Stability: Reduces volatility and deepens liquidity.
  • Provides Passive Income: LP tokens accumulate trading fees over time.
  • Lowers Sell Pressure: Artists are incentivized to hold rather than dump tokens.
  • Encourages Long-Term Participation: LP tokens can be staked, vested, or governed.

Direct swaps introduce market risks that can harm the token’s long-term growth. The LP token approach aligns incentives between NFT minters, artists, and token holders, making it the preferred strategy for sustainable ecosystem growth.

# Implementation details

  1. Collecting Minting Fees When a user mints an NFT, ETH is collected. The community share is sent directly to a wallet. The artist share is paired with TASTE tokens and added to the liquidity pool.

  2. Adding Liquidity to the Pool Use UniswapV2Router to add ETH and TASTE to a DEX liquidity pool. LP tokens are sent to the artist escrow.

  3. Managing LP Tokens in Escrow LP tokens can be: Claimed by artists immediately. Vested for a certain period to prevent dumping. Staked for additional yield rewards.