The NFT market’s biggest problem may no longer be demand. It may be liquidity.
That is the thesis behind Fake World Assets (FWA), an Ethereum-based protocol launched six weeks ago with an unusual approach to NFT trading: instead of relying on individual sellers and buyers to create markets for each collection, FWA combines NFTs and ETH into a single liquidity pool.
Its creator, Adam Rhynotic, believes the model could address one of the structural weaknesses exposed by the NFT market’s collapse following the 2021 boom.
Speaking on Bankless, Rhynotic argued that NFTs did not necessarily lose their appeal because collectors stopped caring about digital assets. Rather, many collections collapsed because buyers disappeared and sellers were left without meaningful bids.
Bankless co-host David Hoffman described the problem more bluntly, pointing to the wave of scams, speculative projects and liquidity drying up across the sector.
FWA is designed to provide something the market often lacked: a persistent buyer.
How FWA’s NFT liquidity pool works
FWA’s mechanism resembles an automated market maker, or AMM, similar in concept to the systems that helped establish decentralized trading on protocols such as Uniswap.
NFT owners deposit an asset into the FWA pool alongside an amount of ETH representing their valuation of that asset.
When someone pays the required fee to enter the pool, Chainlink’s random-number system selects an NFT from the available assets.
The buyer then has two choices: keep the NFT or take the ETH backing it.
If the buyer chooses the ETH, they receive 90% of the amount deposited against the NFT. The remaining 10% effectively acts as a protection mechanism for the depositor.
That structure creates incentives for participants to price NFTs close to their perceived market value.
For example, if an NFT is backed by 300 ETH and is genuinely worth around 300 ETH, a buyer has little reason to surrender it for 270 ETH. They would generally be better off keeping the NFT and potentially selling it elsewhere for a higher price.
However, pricing an NFT too low creates a different incentive. If an asset worth 300 ETH is deposited with only 250 ETH of backing, an arbitrageur could potentially acquire it and resell it closer to market value.
Rhynotic argued that depositors therefore have little reason to deliberately underprice their assets.
Overpricing also creates risks. If an NFT is backed at a value significantly above what it is worth, a buyer may simply take the ETH rather than keep the asset.
| Pricing strategy | Likely outcome | Reason |
| Near market value | Buyer keeps NFT; depositor earns fees | NFT may be worth more than the 90% buyback value |
| Underpriced | NFT is quickly acquired | Arbitrage opportunity |
| Overpriced | Buyer takes backing ETH | ETH value may exceed NFT’s market value |
| Extremely overpriced | NFT may remain in pool | Low probability of selection |
The protocol has already experienced examples of the model under real conditions. A CryptoPunk backed by 300 ETH was deposited and subsequently pulled, while a tokenized Charizard card has been placed in the pool with backing of roughly 20 ETH.
Rhynotic acknowledges that some valuations may appear unusual but argues that accurately pricing NFTs onchain remains difficult. Traditional NFT marketplaces do not provide a reliable onchain price oracle for every asset, while off-chain bids are not always accessible to smart contracts.
Why FWA launched its token differently
FWA also took an unconventional approach to its native token.
For the first two weeks, the FWA token could not simply be purchased on the open market. Participants had to interact with the protocol — either by depositing NFTs or making purchases — and could choose to receive rewards in FWA rather than ETH.
Rhynotic said the approach was influenced by previous experiences launching crypto projects.
He has reportedly launched around 16 projects through Token Works over the past two years and described how bots and speculative traders had previously disrupted token launches.
The participation-based distribution was intended to reduce the ability of automated traders to immediately acquire a large allocation at launch.
Protocol activity drives FWA token demand
The FWA token is designed to derive value from activity within the protocol.
Fees generated by the system are used in an automated buyback mechanism that purchases FWA from the market. The protocol charges fees associated with buybacks, NFT purchases and taking NFTs from the pool.
The tokens purchased through the mechanism are then distributed among participants and partially burned.
Under the current structure, approximately 40% of the purchased tokens goes to purchasers, 30% goes to NFT depositors and another 30% is burned.
The exact distribution percentages remain subject to change, but the underlying concept is straightforward: greater activity on FWA should generate more fees, which in turn creates more buyback activity.
That also creates an important test for the protocol. If NFT activity declines significantly, fee generation and token buybacks would decline with it.
The system is designed to operate without requiring its creator or Token Works to remain directly involved in day-to-day operations.
Flare could change how NFT collections launch
FWA’s most significant upcoming development is Flare, a mechanism intended to help artists launch new NFT collections through the protocol’s liquidity system.
The first test collection consists of 111 NFTs backed by 0.25 ETH each. These NFTs are designed to serve as beta passes for early access to custom user pools.
The first major artist launch is expected to involve Sterling Crispin’s “Save Ethereum” collection.
The model attempts to reverse several characteristics of the traditional NFT minting process that became common during the 2021 boom.
Instead of an artist collecting upfront mint revenue and immediately leaving the project exposed to secondary-market speculation, the collection is initially backed by ETH supplied by participants.
An artist establishes a fixed price for the NFTs, while backers provide the ETH backing individual pieces.
Once the collection is fully backed, the NFTs enter the FWA pool.
A purchaser who receives one can either keep the NFT or take the ETH backing. If the purchaser chooses the ETH, the NFT returns to its original backer at the predetermined price.
The artist, meanwhile, earns revenue through fees generated as the collection participates in the pool.
That creates a potentially different economic model for NFT creators.
For example, a 1,000-piece collection priced at 0.05 ETH would represent 50 ETH in total value. Rather than necessarily receiving that amount immediately through a traditional mint, the artist would earn through activity and fees generated by the collection over time.
The model could also reduce some of the problems associated with NFT launches, including gas wars, instant sellouts and distribution concentrated among a project’s existing community.
From NFTs to tokenized real-world assets
FWA is not limited to digital collectibles.
The pool already includes tokenized Pokémon cards, with assets brought onchain through Emblem Vault.
That has led to a broader possibility for the protocol: using the same liquidity structure for real-world assets.
Eric Conner, who appeared on the Bankless episode, suggested that real-world assets could eventually account for a significant share of the most valuable assets in the FWA ecosystem.
Potential examples include luxury goods, physical collectibles and eventually other tokenized financial assets.
Rhynotic has said he does not intend to take custody of physical assets himself. Instead, he favors relying on specialized custodians and asset-management companies.
The risk structure could also shift some of the traditional burden away from buyers.
If a tokenized collectible turns out to be fraudulent, the purchaser can potentially choose the ETH backing instead of accepting the questionable asset. The financial loss would therefore primarily fall on the person who deposited the asset.
That represents a significant change from traditional NFT markets, where buyers typically assume much of the risk associated with authenticity and valuation.
Ethereum remains the primary home
FWA currently operates within the Ethereum ecosystem, reflecting the concentration of high-value NFT activity on the network.
Rhynotic has also discussed deploying the protocol on Layer 2 networks, where lower transaction costs and faster settlement could improve the user experience.
Cross-chain infrastructure such as LayerZero could potentially support the FWA token across networks, while Chainlink’s availability on additional chains could simplify deployment.
Speed remains one area where the protocol could improve.
Because transactions depend on Chainlink callbacks, a purchase can currently take roughly a minute to complete. Rhynotic has acknowledged that the delay is manageable but said faster execution would make the experience more engaging.
Can FWA solve the NFT liquidity problem?
FWA arrives at a critical moment for the NFT sector.
The market that once generated billions of dollars in speculative trading has spent years dealing with declining liquidity, falling valuations and a loss of mainstream attention.
FWA’s approach is therefore less about creating another NFT collection and more about rebuilding the market infrastructure surrounding NFTs.
Its central proposition is simple: NFTs need buyers, and a shared liquidity pool could provide one without requiring a separate marketplace and order book for every collection.
But the model still faces a major test.
The protocol needs sustained activity rather than short-term speculation. Its token economics are directly linked to transaction volume, meaning declining usage would eventually translate into lower fee generation and fewer buybacks.
The upcoming Flare launches could provide an important indication of whether the model works beyond experimental deposits.
If artists can successfully distribute collections through FWA, large NFT holders begin supplying meaningful liquidity and user-generated pools attract sustained participation, the protocol could become more than an experimental NFT mechanism.
It could evolve into infrastructure for a broader onchain asset market.
For now, however, FWA remains an ambitious experiment. Its technology may provide a new answer to the liquidity problem, but whether the market actually adopts that answer will determine whether it becomes a lasting part of the NFT ecosystem or another promising mechanism that fails to achieve scale.
