#AshTwo Metamorphosis: My Analysis / Thoughts and Finding Equilibrium
The long-awaited AshTwo Metamorphosis is out. The structure is fairly simple in design and can be found here, but there are many value layers/potential complexities. To be sure, this is NOT a drop guide (there are many other places that go for that). To be sure, the inferences and speculations in this article are my opinions only and require you to understand the rules first.
Basic Rules of Metamorphosis Token
7500 total tokens, 250 from each of 30 artists
Each token will give you a random chance of obtaining work from one of the 30 artists (instant reveal), minted or transferred to you directly from the artists’ wallet
Any 5 tokens can be combined to morph a chosen token (among the tokens you have). Morph destroys 4 tokens and reduces supply. If you have 4 NessGraphics and 1 Pak, you can get 1 morphed Pak token by consuming the 4 Ness tokens, or get 1 morphed Ness token by consuming the other 3 Ness and 1 Pak tokens
Creators with less than 50 supply are high tier burn enabled (both original tokens and morphed combined)
Only morphed tokens can be burned
For wording, I will use “tokens” to refer to the original NFTs minted or acquired and will used “morphed tokens” (or “morphed”) if they are combined. “Consumed” will be used for morphing while “burning” will refer to high-tier ASH burn.
A couple of points first
The 1 NFT per transaction during mint will limit large accumulation and Whale wallets. As a result, some will buy 1 and want to hold onto their ONLY token from Ash Two. This will lead to a wider distribution than if it was 10 NFTs per transaction
As a result, if a collector wants to do a lot of morphing or focus only on the pieces by an artist they like, they may need to buy on the secondary
Morphed tokens, which consume 4 tokens when they are initially morphed, will be 1/1s at first and then 1/X where X is very limited when things begin to morph
Rarity balance (simply) is achieved within a collection when there is equal tokens morphed and equal original tokens. Of course, morphed (part 2) tokens look different after metamorphosis
Let’s analyze the mechanisms ignoring high-tier burn for now. For simplicity, I make a few very simple assumptions that may or may not be realistic:
I categorize artists in two categories for simplicity: “in demand” (A artists) and “less in demand” (B artists). I assume that tokens of “in demand” artists (relative to others in #ASHtwo) won’t be consumed for morphing because they are more valuable (i.e. have a high floor price)
The tokens from “less in demand” artists will be consumed until there is a balance there
In a collection with numerous artists, some obviously will be in greater demand than others and this is meant to be relative
A very simple example is given above where we assume there are 10 artists in high demand (A) and 20 “in less demand” (B) in column E
We assume 41% of A artist tokens are morphed (column G). For example, a NessGraphics 1/100 goes for 3 ETH, a 1/25 goes for 7-10 eth. So there could be a considerable preference for rarer Ness pieces. In the above case, out of the 2500 NFTs from A category artists, 500 tokens morph (with 2000 original, unmorphed tokens)
Also assumed is that 0 tokens from A artists are consumed (if you have 5 NessGraphics it may be hard to imagine trading 4 of those NFTs in for 1 rarer NFT)
All the tokens consumed for morphing A artists come from B artists (column I)
Using these assumptions, you can see that the collection size of B artists drops to 900 and on average, consists of 45 NFTs per B artist. This would then make some of these artists’ collections high-tier burnable IF there are morphed B artist tokens
All the blue numbers can be adjusted, so we can play around a bit with a few scenarios, changing up A/B demand and adding in another demand C artist category (“medium demand”):
Including Ash Burn
From the above, there are a few cases where artists get to high-tier burn thresholds but it would be after quite a bit of morphing. And it would be B artists who get to a sub-50 collection size first first rather than A artists, who may not ever get to sub-50. And yet, ONLY the morphed tokens in the sub-50 collections can be burned.
I also expect morphed tokens will get more and more difficult to obtain over time.
IF Ash price goes up, burn will become more desirable. It will push more secondary demand for morphing, driving token consumption. A low Ash price would not drive activity at all.
So in effect, “in demand” artist tokens drive up demand from tokens of “less in demand” artists at the start. Then high-tier burn drives up demand further for “less in demand” artists until there is balance (so that B artists become A artists).
When a B artist reaches <50 tokens, their tokens could no longer be in demand for morphing (too valuable/high-tier burn). This could lead to equilibrium before reaching burn at all, or if ASH burn is highly valuable, consumption of "in demand" artist tokens may take place.
A few last thoughts
I can see certain collections where holders have no desire to morph or burn possibly
Morphing will be fast at the beginning, and then likely slow down
If everyone holds (or it isn’t possible to cheaply obtain consumable tokens) you could have an equilibrium where morphing completely stops. Ash price/desire to burn may then drive further consolidation
High-tier burn is unlikely to be an immediate factor
High-tier ASH burn may not even happen: if ASH price is low, there is less demand to get to a sub 50 edition (tokens + morphs) for an artist. If ASH price is high, it may entice consumption of “in demand” artist tokens which may be what is predominantly left for consumption
Possible no tokens end up burnable (or very few) as collectors horde certain artist category types, so that artist tokens never get consumed at all. In a sense, if 201 of a B artist’s pieces get consumed but not morphed, then it’s not burnable as only morphed tokens are burnable
B artists can become A artists, but not the other way around: paper hands will sell the B artists on secondary immediately, but those are some of the most valuable to hold for those who have A artists and want to morph. Collecting the least popular (likely cheapest tokens) could be favorable: if everyone thinks an artist is “in less demand,” that artist will be “in demand” as their tokens will be consumed
As always, I hope this invites some more discussion or helps you think of things a little more clearly through some simple examples.