Beginner's Guide to NFT-Fi: Exploring New Possibilities with NFTs

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Have you ever imagined that your favourite NFT JPEGs  could be, well, more than just JPEGs?

Of course, when you consider what NFTs actually are, it may come as no surprise that NFTs can do much more, such as in Decentralised Finance (DeFi).

An NFT is a blockchain record of ownership facilitated by smart contracts. What we see as a NFT JPEG is a digital representative picture of the record, but not the blockchain record. 

As such, an NFT is not just a piece of digital art. Its unique feature of being a blockchain record of ownership allows for it to be used in many other areas.

This is exactly what many projects are currently working on, building solutions that leverages on NFTs to expand its use cases in the DeFi sector.

This includes lending and borrowing, yield farming, pay later and much more.

This is also affectionately known as NFT-Fi.

With the NFT-Fi sector now starting to gain traction, there is no better time now to get introduced to some NFT-Fi verticals, project offerings and problems they are trying to solve.

Some main problems include:

• Illiquidity of NFTs

• Credit issues with NFTs

• Various data sources for NFT prices

NFT Liquidity Solutions

Liquidity has been a major issue for NFTs as an asset.

For other crypto tokens, you can typically find a DeFi exchange with sufficient liquidity to trade your tokens.

To sell your NFTs, traditionally you would need to list your NFT on popular exchanges like OpenSea or Magic Eden, and hope that someone comes over to purchase them.

This bid and ask model makes NFTs as an asset highly illiquid.

To solve this, there are new Automated Market Maker (AMM) solutions developed from projects such as Sudoswap.

It allows users to buy/sell NFT via instant liquidity pools. Sellers can instantly sell their NFTs into bonding curves for the best price possible.

Liquidity providers (LPs) can even deposit into pools with both NFTs and tokens, with a spread, to capture trading fees.

NFT Credit Solutions

There are also problems with credit in the NFT space. This can be observed in 2 main areas:

For NFT holders, the NFTs they hold traditionally cannot be used as collateral to obtain loans, unlike other cryptocurrency tokens.

For NFT buyers, there are also no easy ways to purchase high-priced NFTs on credit.

Then came along credit solutions in NFT-Fi seeking to solve these problems.

Projects like BendDao now allows you to provide your NFTs as collateral to borrow ETH. On the flip side, lenders can lend out ETH to the same liquidity pool to earn interest.

This help NFT holders who do not wish to sell their NFTs, to leverage on their NFTs instead to obtain liquidity.

NFT buyers can also use Buy Now Pay Later platforms such as ApeNow and Voyage Finance to make a purchase with a partial deposit and pay the remainder through a series of instalments.

This allows potential buyers to better manage their liquidity, finance their NFT purchases while being able to lock in the NFT purchases at their desired prices.

NFT Aggregator Solutions

Finally, with numerous NFT marketplaces and exchanges emerging in recent times, it can be tough for users to scour through different platforms just to find the best priced NFT to buy and sell.

NFT Aggregator solutions like Gem, Genie (on Ethereum) and Hyperspace (on Solana) are also now present to solve this problem.

They can serve as a simple one-stop resource for potential NFT buyers to research prices across various exchanges.

Conclusion

These are promising developments in the NFT space which further cements their use cases as an asset in crypto, beyond just being a JPEG or a Profile Picture (PFP).

These NFT-Fi projects also boast many useful features that solve many needs for current NFT holders.

That being said, there needs to be further developments in onboarding new users into NFTs in parallel to grow the overall NFT space.

Exciting times ahead!

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