If you have an idle NFT, how would you handle it? List it on a marketplace and wait? Or just let it sit in your wallet gathering dust?
Recently, a new project called Fake World Assets (FWA) has emerged on the Ethereum mainnet. Developed by the TokenWorks team, its official website is fwa.fun. In simple terms, this project creates a fully on-chain "NFT gacha machine." Anyone can deposit their NFTs as prizes into the machine, while others can participate in draws by paying a fixed fee.
It cleverly combines Uniswap’s liquidity provision concept, the thrill of blind box draws, and tokenomics. Today, we’ll break down this project in simple terms to see exactly how it works.
I. Relevant Terms
Before diving into the mechanics, let’s align on the jargon so everything that follows is easier to understand.
Position: In FWA, having an NFT alone is not enough to place it in the gacha machine. You must combine one NFT with a certain amount of ETH—these two components together form a complete "position."
Backing: The amount of ETH you allocate to your NFT. It serves as your principal and determines the probability of your NFT being selected.
Standing Bid: The collateral you put up essentially serves as a "permanent buyback price" for your NFT. If someone wins your NFT but doesn’t want to keep it, they can sell it back to you directly and receive most of your collateral.
Acquisition Price: The fixed price each participant must pay for each gacha draw. This price is calculated in real time by the system based on the status of all positions in the pool.
Crown: The position with the highest collateral in the pool wears a "crown" and receives an additional share of the lottery fees.
II. Core Mechanism: How Does the Gacha Machine Work?
The depositor locks their NFT together with a selected amount of ETH into the protocol to create a position. This ETH is called the Backing, and it fulfills three key roles:
1. Selection Weight (Probability of Being Selected): The weight is inversely proportional to Backing. Higher Backing reduces the probability of being selected, resulting in greater position safety and longer survival; lower Backing increases the likelihood of being selected.
2. As a Standing Bid: The backing is fully locked to support the repurchase commitment offered by depositors to entrants.
3. As a depositor, your principal Standing Bid is closely related to, but distinct from, Backing: Backing refers to the actual locked ETH principal, while the Standing Bid is a "ready-to-redeem" offer issued using that principal. By default, when a participant accepts the Standing Bid, they may claim 85% of the Backing (selectable in ETH or directly converted to $FWA), with the remaining approximately 15% serving as a settlement discount and defaulting to the protocol. Randomness is provided by Chainlink VRF, and requests are settled strictly in submission order to prevent front-running or manipulation.
Positions in the pool are roughly categorized by rarity as Common, Uncommon, Rare, Epic, and Legendary, primarily corresponding to different backing levels.
Three: Two Core Roles and Gameplay
1. Depositor — Market maker providing liquidity
Deposit an NFT from the whitelist (currently supporting dozens of collections including CryptoPunks, BAYC, Azuki, Milady, Pudgy Penguins, Ten Thousand Tokens, and more, with ongoing additions) plus any amount of ETH as backing (subject to a minimum threshold). Revenue source: · Each time someone enters a draw, fees collected are distributed equally among active positions after deducting the protocol fee and crown share (each position receives the same amount, regardless of backing size).
· The current highest Backing "crown" holder receives an additional portion of each fee.
· $FWA token rewards (allocated initially based on √Backing weight).
· Can be withdrawn at any time (as long as the position has not been selected and you wait for current pending requests to be settled or expire).
After being selected: The entrant keeps the NFT → the depositor gets back nearly all of the backing (minus approximately a 1% protocol fee) and loses the NFT. If the entrant sells it back → the depositor gets the NFT back but loses most of the backing.
2. Purchaser / Entrant — A randomly selected "player"
The payment system calculates a unified acquisition price in real time: the harmonic mean of all backing values, plus approximately a 10% surcharge and a small VRF service fee. Everyone receives the same price at the same moment, with slippage protection available. Upon successful payment, you are guaranteed one random position (with a much higher probability of receiving a low-backing position than a high-backing one). After being drawn, you must choose one of two options within a limited time window: - Keep the NFT. - Accept the Standing Bid and receive 85% of the position’s backing in ETH or $FWA, returning the NFT to its original owner. $FWA rewards are also distributed (in the early phase, evenly split among all successful draws on the same day).
This design makes low-backing positions "common items," keeping entry prices low and participation accessible, while high-backing positions become rare "prizes," attracting players seeking high odds.
Four, $FWA Token Economic Model
$FWA is a fixed-supply incentive token designed to bootstrap a two-sided market and convert protocol activity into token value.
Initial Allocation: 50% to Uniswap v4 FWA/ETH liquidity pool. 30% to 15-day early emission (2% of total supply per day, split equally at 1% for depositors and 1% for buyers). 20% to v1 snapshot airdrop (claimable via Merkle proof based on a specific block snapshot).
Early external purchases have been closed and can only be obtained through participation in the protocol; selling remains open at all times. This reduces early selling pressure. Value support and upward rationale:
When the entrant selects "Sell back and settle in $FWA," the system will use 85% of the Backing in ETH to purchase $FWA directly on the market.
Send to users to create genuine, sustained buying pressure (especially strong when high-backing positions are drawn).
Protocol fees are configurable for repurchasing $FWA (currently disabled by default); after repurchase, 40% is redistributed to depositors, 40% to buyers, and 20% is burned.
Higher protocol activity leads to stronger fee and settlement buy pressure, resulting in more pronounced deflation and demand. Token transfers are restricted and primarily conducted through official pools, with a 1% trading fee applied.
Five, Sources of Income
1. A 1% fee on each lottery cost (1% of the pool acquisition fee) is deducted from the acquisition price paid by the user. The actual price paid by the user remains unchanged; this 1% is taken from the additional fee portion.
2. The settlement fee (1% of the collateral) applies only when the entrant chooses to keep the NFT and is deducted from the backing reclaimed by the depositor. This fee does not apply when selling back the NFT.
3. Settlement discount (15% of margin) upon sell-back is currently allocated entirely to the protocol. In the future, it may be redistributed to all depositors.
4. The $FWA token trading fee (1% on buys and sells) is sent independently to a dedicated fee wallet and does not pass through the above Splitter distribution.
Six, note:
The user's payment price = Pool's expected value (EV, harmonic mean) + 10% surcharge + VRF service fee.
For example, if a user pays 0.1 ETH as a pool fee, the complete sequence is as follows (assuming VRF service fees are ignored):
1. First, break down the structure: EV (Expected Value) ≈ 0.0909 ETH, 10% fee ≈ 0.0091 ETH, total 0.1 ETH
2. The protocol takes a 1% fee = 0.1 × 1% = 0.001 ETH (deducted from the additional fee)
Currently: The EV portion is approximately 0.0909 ETH, the remaining fee is approximately 0.0081 ETH, and the total distributable amount is approximately 0.099 ETH.
3. From the distributable fees, allocate 5% in Crown rewards ≈ 0.099 × 5% ≈ 0.00495 ETH (to the person with the highest Backing). The Crown allocation is drawn from the entire distributable fees, thus affecting both the EV portion and the additional fee portion simultaneously.
Distribution of the final remaining balance (key point): After deducting the protocol and crown fees, the remaining funds are handled separately by source: The portion belonging to EV (主体, approximately 0.09): Equally and fixedly distributed to all active depositors, unaffected by hot or cold status.
The portion of the additional fee (approximately 0.008): divided into hot and cold pools: Hot pool → more/all allocated to depositors (continued equal distribution) Cold pool → more/all converted to $FWA for successful lottery winners
Purchase limit: Smooth transition during intermediate states
Current Splitter Allocation
Seven Key Design Elements
1. The clever combination of inverse weighting and evenly distributed fees: Higher Backing → Lower chance of being selected → Longer lifespan → More opportunities to receive fees. However, each fee distribution is split equally among all positions, regardless of Backing size. The result: Small depositors are incentivized to continuously provide “cheap liquidity,” while large depositors earn higher total returns by “surviving longer.” Both sides have a reason to participate.
2. Harmonic Mean Pricing
The lottery price is determined by the harmonic mean of all backing amounts. The harmonic mean is strongly pulled down by the lowest backings, so even if the pool contains extremely high-value prizes, the overall lottery price remains affordable. This allows “low-cost, high-frequency draws” and “high-value, rare prizes” to coexist without conflict.
3. Dynamic Cold-Hot Allocation of Remaining Fees
The remaining fee is not fixed for any one party but adjusts dynamically based on pool activity: Hot pools → More goes to depositors (encouraging continued liquidity provision) Cold pools → More goes to lottery participants buying $FWA (stimulating demand and kickstarting activity) This allows the protocol to automatically balance supply and demand without manual intervention.
4. Standing Bid (Permanent Repurchase)
The backing locked in by depositors also becomes an irrevocable repurchase offer. After being selected in the draw, participants can choose one of two options: keep the NFT, or directly claim 85% of the backing (with the option to convert it to $FWA). This design safeguards depositors' assets (as the backing is always fully covered), provides participants with a “stop-loss” or cash-out option, and generates real demand for $FWA—significantly lowering the psychological barrier to participation.
5. Mandatory buy order settled in $FWA
When a participant chooses to redeem and settle in $FW, the system uses 85% of the Backing's ETH to directly purchase $FW on the market. This converts a portion of the depositor’s principal into genuine token demand, creating a direct link between protocol activity and token price.
6. Asymmetric trading (also known as the community's "anti-Pixiu")
Initially, selling was allowed but buying was not. As a result, only two types of people acquired $FWA: early users who received snapshot airdrops, and genuine participants in the protocol—NFT depositors and lottery winners. This design ensured that early token circulation flowed exclusively to real participants rather than external speculative capital, giving the protocol ample time for a smooth launch. A very interesting project.