With over $2B in trading volume facilitated, Tensor has emerged as one of the most exciting Solana-based protocol. Dive into how Tensor works, and learn more about the native TNSR token.
Non-fungible tokens (NFTs) exploded in popularity in the 2021 bull market, largely led by popular Ethereum NFT collections such as CryptoPunks, Bored Ape Yacht Club, Art Blocks and several other iconic collections of the period. While Ethereum kickstarted the NFT boom, gas fees priced many crypto users out of mainnet. This led to a surge in NFT trading on other layer-1 blockchains, with Solana standing out as one of the leading chains with strong and vibrant NFT communities.
However, as the NFT market grew, the inefficiencies and inadequacies of existing NFT infrastructure became apparent. For one, traders had to scour across multiple NFT platforms to seek the best prices to buy or sell their NFTs at. Additionally, for sellers, getting instant liquidity was difficult as they had to list their NFTs and then wait for a willing buyer to purchase it, while hoping that another seller does not undercut their listing price in the process.
These struggles led to the development of NFT marketplace aggregators, with a variety of functions designed specifically to improve the advanced NFT trading experience. On Ethereum, this manifested as the Blur NFT marketplace, while Tensor was launched on Solana to tackle these issues.
Source: Tiexo
Launched in July 2022, Tensor is now the leading Solana marketplace in terms of volume, unique wallets and new users in the past 6 months, cccording to data platform Tiexo. The NFT protocol, which is backed by Placeholder VC, Solana Ventures, and Solana founders Anatoly Yakovenko and Raj Gokal, recently launched its native governance token, TNSR, on April 8.
Let’s dive into how Tensor works!
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How Does Tensor Work?
The core features of Tensor are its NFT marketplace aggregator and their integrated automated market maker (AMM). The NFT marketplace aggregator consolidates liquidity from NFT marketplaces across the Solana ecosystem, including incumbents Magic Eden and Solanart, as well as NFTFi protocols such as Elixir and Hadeswap, among others. This ensured that traders saw only the best possible prices for NFT collections they were interested in, without having to cross-check across multiple platforms.
The integrated AMM enables a variety of advanced features which significantly increases liquidity for NFT trades, which had always been a long-standing problem in the NFT space. From the perspective of the buyer, Tensor’s AMM allowed for easy sweeping of multiple NFTs at once, enabling large buyers to make their purchases quickly, especially when trading on time-sensitive information. Additionally, the Bid feature allows traders to essentially set limit orders for single or multiple purchases from a collection, with additional automatic reduction in bid price every time an NFT is sold into your bids. Bids can also be set on specific traits, such as high rarity traits, to allow collectors to set strategic bids for specific NFTs in a collection.
From a seller's perspective, sellers can sell multiple NFTs more effectively using a ladder, where the listing price of each NFT is increased after a sale, allowing sellers to achieve a better sell price for their NFTs. Of course, if a trader is looking to quickly get rid of a set of NFTs, they can also dump directly into resting bid orders on the collection, thereby acquiring liquidity from their NFTs immediately.
Moreover, both buyers and sellers have full visibility on existing bids and orders, allowing them to set more strategic orders for a better trade, similar to analyzing orderbook depth on an exchange.
Price Locks
Beyond just buyers and sellers, Tensor also introduced a new primitive for the NFT space: Price Locks.
Price Locks, in essence, are options for NFTs. Traders could go long or short on supported NFT collections, enabling them to reap much greater returns for lower capital put up, effectively leveraging their SOL to express their bias on certain NFT collections. This functions in the same way as call and put options in traditional finance where a premium is paid and holders have the choice to exercise their option before or at expiry.
To create the liquidity for these trades, traders are also able to take the opposite side of the trade, providing either NFTs or SOL depending on which direction they expect the price to move. Funding a lock using SOL expresses a neutral to bullish opinion, similar to a cash-secured put in the traditional finance world, taking the opposite side of a Short Lock.
On the flip side, providing liquidity with NFTs takes the opposite side of the Long Locks, similar to a covered-call strategy in traditional options. Funding a Long Lock expresses a neutral to bearish position, earning a yield to protect against downside on the NFT provided.
Tensorians — Tensor’s NFT Collection
Tensorians is a 10,000 supply profile picture (PFP) NFT collection that was launched by Tensor on August 08, 2023. It is a collection for the then-budding Tensor community, including early users and hardcore members of the Solana NFT marketplace. Holding a Tensorian unlocks numerous benefits, including access to a gated community, points rewards, Tensorian staking and more. For instance, in the new Season 4, Tensorians will receive a boost on points earned, with 1 Tensorian earning a 1.25X boost, 10 Tensorians getting 1.5X, while those holding 50 Tensorians will get a 2X boost.
It minted at the price of 1.69 SOL, then worth around $40. As SOL rallied and Tensor and the wider Solana ecosystem started heating up in Q4 2023, Tensorians surged in value, reaching a peak of over $11,400 per NFT in December 2023. Tensorians are currently trading at 17.85 SOL, or roughly $2470, after a drastic 60% sell-off. This is likely due to users cashing out after claiming their TNSR airdrop.
The TNSR Airdrop and Tokenomics
Tensor kicked off their first Season of rewards in September 2022, in the depths of the bear market. Season 1 lasted six months, rewarding eligible users who traded on Tensor and TensorSwap with a set of treasure boxes.
Season 2 lasted a year, with points allocated to users who provided liquidity on Tensor, on both buy and sell sides, with more points given to orders and bids that were closer to the floor price. Loyalty boosts were also introduced for users who did not list NFTs on other marketplaces. In 2023, Tensor also launched their own NFT collection, Tensorians, which when staked, gave a boost in points to its staker. Staking a Tensorian also enabled the user to generate a referral link to Tensor, earning them more points based on their referees.
Season 3 kicked off at the end of January 2024 and came to a close on 3rd April, culminating in an airdrop where all treasure boxes from Seasons 1-3 could be opened for TNSR tokens. The claim went live on 8th April, with trading going live shortly after.
The total supply of the TNSR token is 1 billion tokens, with the bulk of it going to the Tensor community. Of the 55% allocated, 12.5% is allocated to the token airdrop, which goes to mystery box holders and Tensorian NFT holders. The remaining portion will be allocated to grants, liquidity provision and incentive programs.
Source: Tensor Foundation Docs
As for the allocations to the investors, advisors and core contributors, which make up 36% of the total supply, they will be subject to a three year linear vest with a one year cliff. Half of the allocation to the community for ecosystem growth and the reserve allocation will be subject to a three year linear vest while the other half will unlock immediately on the token generation event (TGE).
Source: Tensor Foundation Docs
TNSR launched on April 8 and is available on major centralized exchanges like Binance, Coinbase, OKX, Bybit, KuCoin and more.
Users can also participate in season 4 of its Treasure Box reward program, and earn points by bidding, listing, market-making, and using price lock on Tensor.
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