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lanyinzly committed Jan 27, 2024
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---
eip: 7527
title: Token Bound Function Oracle AMM Contract
title: FT and NFT Interconversion through Function Oracle AMM

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description: Interfaces that wrap FT to NFT and unwrap NFT to FT based on an embedded Function Oracle AMM
author: Elaine Zhang (@lanyinzly) <lz8aj@virginia.edu>, Jerry <jerrymindflow@gmail.com>, Amandafanny <amandafanny200@gmail.com>, Shouhao Wong (@wangshouh) <wongshouhao@outlook.com>, 0xPoet <0xpoets@gmail.com>
discussions-to: https://ethereum-magicians.org/t/eip-7527-token-bound-function-oracle-amm-contract/15950
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## Abstract

This proposal outlines interfaces for wrapping ERC20/ETH to ERC721 and unwrap ERC721 to ERC20/ETH. A function oracle feeds mint/burn prices based on an embedded equation to Function Oracle Automated Market Maker(FOAMM), which executes and clears the mint and burn of NFT.
This proposal outlines interfaces for wrapping [ERC-20](./eip-20.md) or ETH to [ERC-721](./eip-721.md) and unwrap ERC-721 to ERC-20 or ETH. A function oracle feeds mint/burn prices based on an embedded equation of Function Oracle Automated Market Maker(FOAMM), which executes and clears the mint and burn of NFT.

## Motivation

The motivation behind Function Oracle Automated Market Maker(FOAMM) is to achieve decentralized endorsement and thus quantifiable decentralized credit with liquidity in nature. This creates an applicable infrastructure for credit creation, transmission, and oracle in payment, social, and financial context. Decentralized credit can be implemented in the form of Non-fungible tokens, compatible with current Ethereum environment, which also expands its application scenarios. The concept of decentralized credit is highly integrated with dApps development. It aims to foster a more trustless environment.
Liquidity can be a significant challenge in decentralized markets, especially for unique or less commonly traded assets like NFTs. To foster a trustless NFT ecosystem, the motivation behind Function Oracle Automated Market Maker(FOAMM) is to provide automated pricing solutions for NFTs with liquidity through transparent, smart contract mechanisms.

This ERC provided innovative solutions from the following aspects:

- Automated Price Discovery
- Liquidity Enhancement

### Automated Price Discovery

Transactions under FOAMM can occur without the need for a matching counterparty. When interacting directly with the pool, FOAMM automatically feed prices based on the oracle with predefined function.

### Liquidity Enhancement

In traditional DEX models, liquidity is supplied by external parties, known as Liquidity Providers. These LPs deposit assets into liquidity pools, facilitating trade by providing the necessary market depth. The removal or withdrawal of these LPs can introduce significant volatility, as it directly impacts the available liquidity in the market.

In a FOAMM system, the liquidity is added or removed internally through `wrap` or `unwrap`. FOAMM reduces reliance on external LPs and mitigates the risk of volatility caused by their sudden withdrawal, as the liquidity is continuously replenished and maintained through ongoing participant interactions.


## Specification

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