Learn how to play NFT+Defi
NFT + Defi is a game that further expands the possibility of NFT.
DeFi is the fuel for NFTs
The financialization of NFTs through DeFi protocols solves many of the problems NFTs face today, in particular:
Because NFTs are unique by definition, buyers are often required to have expertise in a particular asset in order to make rigorous buying and selling decisions. Plus, the scarcity of unique assets can quickly push prices higher than retail investors can afford. These two factors raise the threshold for newcomers to enter the NFT market and hinder the value accumulation of NFTs themselves. Because part of an NFT's value comes from its underlying community, this limits buyers and makes it difficult for NFTs to penetrate the entire internet. DeFi protocols can reduce the capital and knowledge needs of users to participate in the NFT market, opening the door to a new wave of retail investors.
A liquid market with specific NFT buyers and sellers will facilitate higher price levels as it increases the speed at which NFTs can be traded on the secondary market. The more transactions, the better the perception of the NFT's fair market value. This makes it easier for sellers to monetize their work, and it makes it easier for inexperienced buyers to enter new markets and withdraw investments.
Ownership and provenance are important attributes of NFTs, they are uniquely backed by a permissionless crypto network, but their value proposition has yet to fully resonate with retail investors. Leveraging the greater utility of DeFi protocols, such as access to cash flow, content and experiences, will make it more attractive to mainstream audiences with NFTs.
Cooperation between DeFi and NFTs
1. Treat NFT as LP Token
Using NFT as a pledge certificate is an innovative cooperation between NFT and Defi, among which Uniswap V3 and Aavegotchi are more representative.
uniswap v3 presents its own LP token in the form of NFT. Since NFT is a multi-dimensional picture, it can reflect richer information in it, such as liquidity information, ID number, and the proportion of tokens initially invested Wait. However, it should be noted that this NFT is a certificate for redeeming liquidity. If the NFT is sold, the liquidity cannot be recovered. In reality, some people accidentally sold their LP NFT and caused losses.
Aavegotchi is a project developed by an innovative company invested by Aave. It relies on Aave's aToken and then generates NFT. Simply put, you provide liquidity in Aave to get aToken, and then lock aToken in Aavegotchi to randomly obtain ghost NFT. , and the value of this ghost NFT comes from the value of the aToken you pledged plus the rarity value of the NFT.
The gameplay of this NFT is similar to that of Axie Infinity. It also increases the rarity by purchasing items or upgrading, but the difference is that there is an aToken pledged behind each Aavegotchi NFT. If you want to redeem aToken, then the corresponding NFT Also destroyed, similar to Uni V3.
2. Fragmentation of NFTs (F-NFTs)
Although NFT is indivisible, sometimes an NFT is very expensive and cannot be participated by individual users. In order to reduce the cost of purchasing NFT, some platforms will fragment the NFT (Fractional NFT). The simple process is that the platform purchases an NFT , and then distribute this NFT token based on the value of this NFT, such as 100, each token is 1/100 of the original NFT value, then some ordinary users can buy 0.01 NFT, if you have all the tokens, you can directly Replace this complete NFT. The representative of this type of F-NFT, such as the sake SAKE mentioned earlier, supports the fragmentation of NFTs. When you collect a complete NFT, you can exchange for a bottle of sake. If you are just to participate in the growth of this SAKE , you can only buy 0.1 SAKE.
Is F-NFT still an NFT?
In my opinion, F-NFT can only be regarded as a financial derivative of NFT. In fact, it is a securitization method of NFT. Each token owner of F-NFT does not have complete ownership of this NFT.
3.NFT as collateral for lending
The price of NFT fluctuates a lot and the liquidity is not very strong, especially for art NFTs. Many NFT holders, such as Cryptopunk holders, will choose to pledge NFT to borrow instead of sell NFT when they need funds. There are platforms that support NFT lending such as Cream. When we consider NFT as collateral, we need to know what the real value of NFT is, and this price feed has always been a difficult point. I will explain it based on two transaction forms.
1）pledge to the platform
If the transaction object is a platform, this involves DAO voting. For example, if you want to pledge Cryptopunk to Cream, the current market price is 3000ETH, and you want to borrow 1000ETH. It seems that the loan risk is not high, but this transaction requires the entire Only DAO votes can be approved, and this model is difficult to implement smart contracts.
2）Pledge to Individual (P2P)
The P2P model is a more reasonable way of NFT pledge. It is a bit like "one willing to fight and one willing to suffer", because the value of NFT is actually difficult to estimate. If you put an NFT worth 1000ETH on a 300ETH loan order, then there are If the user thinks that the value of this NFT is higher than 300ETH, he will be willing to lend you money, because even if he is liquidated to get this NFT, he can sell it at a price higher than 300ETH.
Risks of NFT Lending
The biggest risk of NFT lending comes from the lack of standard price measurement, especially for art NFTs. Usually the price of an NFT is hyped up by means of a pending order auction. There is a possibility that the NFT owner places an order to buy it himself, gradually raises the price, and then mortgages and borrows to cash out when the NFT price is high. Therefore, NFT lending The biggest problem is the judgment of NFT value.