Merge Mechanism Musings
Diving into impossible mass values
On December 2nd, the primary sale will begin on Pak’s Merge collection sold on Nifty Gateway. This project allows individuals to buy individual mass units that will be minted into a single Merge NFT, and once minted, any time a Merge token is present with another Merge token in a wallet, the lower 'mass’ NFT will disappear and its mass will be added to ther higher mass NFT. For more information on the basics of this drop you can read my one-page summary of the drop on Github here.
Importantly, Pak has stated that the mechanism which connects Merge with the ASH ecosystem and allows Merge tokens to be converted into ASH currency will only be revealed after the Merge sale, likely in several weeks. These conditions are perfect for wild speculation on what this mechanism will look like, and this newsletter is where I will flesh out my speculations on Pak institutions and incentives, separated cleanly from my Poets Pulse polls or my one page/whitepapers which consolidate information provided by others without my opinion.
Consideration of what the mechanism may look like should begin by acknowledging several constraints which Pak has already announced or which are persistent priorities of Pak in their NFT experiences. I’ll list several constraints and then offer an idea for how these constraints could be resolved in a fun and profitable manner.
Constraint #1: More Mass is Better
In Discord, Pak has indicated that buying more mass will be rewarded in the long run, which suggests that any ASH mechanism for the Merge collection will return higher ASH payoffs for Merge tokens with higher mass.
Constraint #2: Inclusivity
Pak has persistently described the Merge project as being inclusive, both in price and in terms of the mechanism. Additionally, Pak has stated and delivered on a priority of providing a role to participants at every price point. This suggests that any ASH mechanism for the Merge collection will directly or indirectly include utility for low mass tokens even if higher mass tokens create greater returns.
Constraint #3: Breaking the Curve
It was revealed recently that Merge tokens possess the ability for a ‘true burn’ which would mean that burning Merge tokens would not simply send the NFT to the burn wallet, but destroy the token. This means that the total amount of mass in the Merge system will always remain in circulation outside the burn wallet. At the same time Pak revealed that Burn.art does not have the ability to conduct a true burn, and thus the existing Burn.art burn for ASH functionality, which uses a bonding curve, would not be applied to Merge. Pak has also said that the ASH redemption mechanism for Merge would be ‘fun’ and indicated that Merge tokens would not simply be burned for the going rate of ~680 ASH as is the case for other ‘whitelisted’ Pak NFTs.
The Provocative Idea: `Impossible’ Masses
Thus far, I’ve laid out three constraints on the Merge ASH redemption mechanism - it is expected to provide more ASH for tokens with greater mass, it is expected to create value for low mass Merge buyers, and it is not expected to follow the existing bonding curve.
Adding to this is the idea of 'impossible’ mass values in the collection. (I will immediately note that these values are certainly possible, but only impossible at the time of minting.) Notably, Merge includes a mechanism which provides a bonus mass on top of that purchased during the primary sale from December 2-4. Individuals who buy a given amount of mass, M, will be awarded a bonus, B, after the sale. They will then receive a minted Merge NFT with mass equal to M + B. The formula for bonus calculation is B = (M x log(M)) / 10, with bonus values rounded down to integers.
Thus, a purchase of 9 mass units will have a value of B lower than 1, receive no bonus mass, and result in a minted Merge NFT with a weight of 9. However, a purchase of 10 mass units will have B=1, recieve one free mass, and result in a minted Merge NFT with a value of 11. This system ensures that no Merge NFT will be minted with a mass of 10, and this is an example of what I call an `impossible’ mass.
The sequence of impossible masses below 100 is 10, 18, 25, 31, 37, 43, 49, 55, 61, 66, 72, 77, 83, 88, 94, and 99. As the values increase, they grow closer together. While these masses are impossible at the time of minting, Merge NFTs would be able to acquire these mass values by merging with another Merge NFT. For example, if a holder of a Merge token with a mass of 9 recieved a Merge token with a mass of 1, the two tokens would combine into a single Merge NFT with a mass of 10.
The Speculation
A theory I am contemplating is that the constraints of the Merge mechanism would be satisfied by a system in which 1) Merge tokens may only be burned if they have a mass which is in the sequence of impossible masses, and 2) that the ASH returns for Merge burns increase with the sequence.
This has several attractive properties which satisfy the identified constraints above. First, Merge tokens with high masses would be redeemable for more ASH than lower values, and require merger with smaller, more common Merge tokens in order to reach an impossible mass (as the sequence values grow closer together as it increases). Under this mechanism, more mass is always better for ASH redemption.
Second, this mechanism creates high secondary market demand for low mass Merge tokens as high mass holders seek to add one or a few mass to allow their Merge to become burnable. The jump in value for low mass Merge tokens could be significant if this information were revealed.
Third, the mechanism does not follow the existing ASH bonding curve.
Economic and Cultural Implications
This system has several other attractive properties, which are worth noting. First, it provides a direct incentive to every Merge holder to attempt to transfer a token, merge, and reach a burnable impossible mass, which, if fulfilled would reduce the supply to half if not more over the long run. 30,000 Merge tokens could very easily reduce to 15,000 even before being burned if this mechanism were implemented. Building on this, as every Merge token would have to absorb another (if not multiple) to be burned, the practical number of ASH convertible NFTs added to the system is probably significantly lower than half the initial number of Merge tokens if this mechanism were implemented. The scarcity and ASH tokenomics value of this mechanism or one like it are quite attractive.
Second, on a cultural level this mechanism would encourage members of the Pak collector community to find a friend or partner to pair up with for the drop in order to most efficiently mint two Merge tokens which can be simply combined to create an impossible mass. Of course, this information would have to be revealed or be obvious during the 48 hour sale period for this cultural function to have an impact. Within the Pak community, this could incentivize the creation of many two-person partnerships, who could combine, burn, and split the proceeds of the burn premium. Empirically, such trust games tend to cultivate community trust over time, which would help build the culture of the Pak community in a very strong, incentivized manner. Additionally, if this mechanism is close to what is implemented, it would encourage Pak believers to mint 9 mass Merge NFTs and convince a close friend who is not currently part of the Pak community to stick their toe in the water and pay for a single $400 mass unit. After minting, the old pro and the newbie friends could merge and burn, and the new member of the community could experience an immediate return from a small participation amount. In either case, this mechanism if hinted at during the sale period would encourage and develop partnerships within the community and foster new participation by friends of Pak fans.
Concluding Thoughts
Fundamentally, this speculation is just that- speculation! There is no direct evidence that it is going to be what Pak chooses to implement. Furthermore, the mere existence of this newsletter before the drop makes it likely that even if this speculation is perfectly prescient that Pak would make changes to the plan to prevent unseemly gaming of the system. Nevertheless, half the fun of participating in a Pak experience is speculating on which behaviors are encouraged by the rules Pak sets, and which rules would result in the group dynamics Pak wants to see. Furthermore, even if this mechanism isn’t implemented in the Merge drop, there are some really fascinating possibilities that such a mechanism could allow for in other projects and contexts.