Exploring Nested NFTs with Charged Particles

With NFT sales and floor prices declining in recent months, many are declaring that the NFT craze is over. While the hype for collecting and flipping is cooling, we’ve merely scratched the surface of what’s possible with non-fungible tokens. I’m interested in finding out what NFTs can do beyond collectible digital art, profile pictures, or access gating. Today, we’ll explore the possibilities of Charged Particles nested NFTs.

What are Charged Particles?

Charged Particles is a protocol for Ethereum and Polygon that enables you to deposit NFTs and cryptocurrency tokens inside of an NFT. It lets you mint a “particle” NFT that acts sort of like a backpack for ERC-20, ERC-721, and ERC-1155 tokens inside your digital wallet. You can sell, transfer, airdrop, or burn the particle NFT the same as with any other NFT—and the NFTs and crypto contained inside of it will go along for the ride.

This introduces the ability to organize multiple digital assets inside a particle NFT and enables you to transfer them to another wallet with a single transaction. For example, you could deposit several NFTs into a particle and transfer them for safekeeping in your hardware wallet all at once. You could also create collections of NFTs to sell as a package, or you could make a gift basket NFT containing a curated selection of digital art and tokens for the perfect Web3 gift.

If that was all Charged Particles could do, it would already be super useful. but there’s much more. The protocol has additional capabilities that bring some novel DeFi features and benefits to NFTs. The first is the ability to deposit interest-bearing tokens—such as aDAI or another aToken from Aave—into the particle. The interest accrued will “charge” the particle until its owner discharges it to collect the interest. The Charged Particles app is integrated with Aave, providing a simple way to deposit aTokens.

There’s also the option to time-lock nested assets, keeping them from being removed from the particle for some period. This creates some amazing new composability, staking, vesting, and investing possibilities for NFTs.

Let’s look at some opportunities for digital PFP and collectible NFT projects. Nesting allows creators to add new dimensions to their NFT drops. For example, you could create nested NFTs that include multiple unrevealed NFTs within them. They are revealed and unlocked over time—extending and repeating the excitement people feel wen reveal happens. Plus, a project could create a special NFT container that lets people store and easily transfer all the NFTs they’ve collected from a project or artist in one place.

In addition, NFTs with locked crypto tokens can build both a currency-backed floor value and crypto-investment upside into a project. For instance, say a DeFi protocol launched a collection of NFTs that had 100 of their governance tokens locked within each. In this example, let’s assume the mint price is .25 ETH and the governance token is trading at around 1 USD. Those who mint the NFT should feel confident that it’s worth at least 100 USD on mint day. Later, in addition to the aesthetic/rarity/utility value the market determines for the NFT, its built-in investment value can soar along with the performance of the tokens if the protocol takes off.

Another intriguing twist on art NFT projects is to nest interest-accruing tokens within them. Anons’ PFPs could be earning yield as they flex with them on their Twitter and Discord profiles.

For DAOs and Web3 communities, Charged Particles also usher in a wide range of opportunities for improving member engagement, tokenomics, and governance. Imagine membership NFTs that unlock access to exclusive benefits based on the number of DAO governance tokens time-locked within them. For instance, a DAO could require that people lock 25,000 governance tokens into a membership NFT for a year in order to become a full member of the DAO and gain access to all the privileges, perks, rights, and opportunities that members enjoy.

Not only does this demonstrate that members have “skin in the game” with the DAO, but the timelock can also reduce volatility of the token price by keeping a large number of tokens out of circulation. DAOs can reward contributors with nested tokens that vest over a period of time, which could encourage longer-term participation while also smoothing out sell pressure on the token.

Members benefit in that if they decide to leave the DAO, they could sell their membership NFT with the locked tokens inside on an NFT marketplace or wait until the timelock expires to release the tokens. With those options, they could get back some, all, or possibly even more than the cost of joining, depending on the token price or what the NFT commands on OpenSea when they sell. While the DAO might be sad to see some members decide to sell their membership NFTs, the secondary sales commission built into the NFT’s smart contract the DAO would receive could help lessen the blow.

Beyond enhancing the utility and value of NFTs, Charged Particles NFTs also have the potential to help improve what is possible in the area of on-chain reputation. Particle NFTs could be used as a sort of Web3 resume that contains NFTs that document an individual’s credentials, achievements, PoAPs, and other aspects of their pseudonymous/anonymous identity. I’d like to explore how soulbound NFTs could work with particles to create on-chain resumes with these types of NFTs that can’t be transferred to another wallet. But that will need to wait for another article.

To learn more about Charged Particles and access their NFT minting app, visit charged.fi

Of course, it’s crucial to consult an expert in securities law before attempting to launch a crypto-enhanced NFT-DeFi hybrid project. I’m just a guy who geeks out on new tech models and possibilities. This is very much not financial, investment, or securities advice.