TokenWorks reversed course twice in under 24 hours after FWA holders learned none of the roughly $3.2 million in launch-period revenue would fund buybacks, sending the token down more than 40%.
By:The Defiant Team•
NFTs & Web3
TokenWorks, the two-person team behind NFT gacha protocol Fake World Assets, will route 80% of future protocol fees to FWA token buybacks and spend 327 ETH, about $610,000, buying the token for a team reserve.
The commitments came after holders learned that the team’s original plan for FWA’s trading debut directed none of the roughly $3.2 million earned during the protocol’s two-week launch to buybacks, setting off a selloff that took the token to a record low.
FWA traded at $0.0083 on Tuesday, down 43% over 24 hours after hitting an all-time low of $0.0066 overnight The token sits 78% below its July 26 peak of $0.03856, and its market capitalization has slid to about $8 million
The dispute focuses on how much of a protocol’s revenue should flow to its token holders, a recurring point of conflict in token launches. It also comes as the incentives behind FWA’s rise expire: the protocol’s 15-day emissions program, which distributed 30% of the token’s supply to users, ends today, the same day external buys of the token open at 3 pm ET.
Fake World Assets, which relaunched July 20, lets users deposit ETH-backed NFTs into a pool while buyers pay for randomized draws settled with Chainlink’s verifiable random function. Winners keep the NFT or sell it back for most of its backing, and losing pulls earn FWA rewards. The protocol has generated $8.8 million in fees over the past 30 days and holds $5 million in total value locked, per DefiLlama, and at its peak briefly trailed only Sky in daily revenue among Ethereum protocols, The Defiant reported.
Roundtrip Ticket
The selloff began after TokenWorks announced on Monday evening that external purchases of FWA — so far restricted to protocol participants — would open Aug. 4, with 50% of the team’s share of future protocol fees routed to a buyback mechanism. Buyback proceeds would be split 70% to purchasers, 10% to depositors, and 20% burned, while the fee charged on each purchase would drop from 5% to 2.5% and depositors’ bid would rise from 85% to 90% of backing. Gacha purchases are paused from 9 am to 12 pm ET on Tuesday to let depositors withdraw ahead of the changes.
The announcement made no provision for the fees already collected.
“So as it stands 0% of the 2000e in fees generated the last two weeks are going towards buybacks,” posted Cirrus, an NFT trader with more than 103,000 followers on X. “Looks like I punched a roundtrip ticket from high 5 fig pnl to mid 5 fig loss.”
From Zero to Eighty
Adam, TokenWorks’ co-founder, known as Rhynotic on X, responded an hour later, rejecting retroactive distributions while raising the buyback allocation.
“There is no percentage of retroactive fees that would satisfy everyone,” he wrote, adding that he didn’t think a one-off buyback “would do anything other than temporarily increase the token price, only for people to sell into it.”
He committed instead to routing up to 80% of future protocol fees to buybacks and to using 10% of TokenWorks’ accumulated fees to build a team reserve, noting the team held no FWA and he personally owned about 1% of supply.
“TokenWorks has a huge financial incentive to continue working on FWA,” he wrote. “Since we’ll be redirecting 80% of future protocol fees to buybacks of the token, it makes sense for TokenWorks to hold as much of the token as possible.”
The reversal appeased at least some critics.
“This is a pretty good outcome tbh,” Cirrus wrote Tuesday morning. “Respect to Adam for listening to his users.”
Skin in the Game
Kunal Doshi, a researcher at Blockworks Research, said the dispute comes down to a principal-agent problem: a team that owns none of the token supply has little reason to spend revenue buying it back. The reserve pledge doesn’t change much, he argued, putting it at around $230,000, or roughly 2.5% of FWA’s fully diluted valuation. “Would you buy a stock if the management team only owned 2.5% of the company?”
Doshi also questioned the token design. Distributing 30% of supply over 15 days equated to roughly $300,000 in daily incentives against about $100,000 in daily revenue, he wrote, and he expects liquidity providers to withdraw and gacha purchases to slow once emissions end. “We’re already seeing early signs of that.”
Make Ethereum Fun Again
TokenWorks “has historically launched an idea once a month for over a year,” Adam wrote, and the self-funded team previously spent four months focused on PunkStrategy, part of the NFTStrategy ecosystem that reached a $202 million market cap last October. “Thank you for helping us make Ethereum fun again,” the team wrote in Monday’s announcement.
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