DeFi 💰 + NFT 🎨

NFT market will disrupt DeFi. Many people are unsure how it will happen. So let's explore 👇
NFTs (Non Fungible Tokens) are special tokens that comes unique properties associated with it. Unlike ERC-20 tokens like DAI, YFI, etc..., they are non-fungible in nature (duh)

Which means NFTs have individual characteristics that set them apart
Many items can be tokenized by NFTs. We have seen many examples in Digital Art, Games, Insurance, Domain Names (ENS), etc...

The cool thing about this is that they are transferable & they represent ownership to an item. All backed by cryptography
1) Digital Arts & Collectibles

Now you can buy various art objects from various platforms like @rariblecom, @opensea, etc...

Interesting thing here to note is that you can easily avoid counterfeits

Artists like @muratpak has sold $350K+ worth of art
2) Games

In games, you can tokenize the game objects. And you can trade them with other players

@decentraland has tokenized Lands, Wearables & Names

@AxieInfinity Axies
3) Insurance

By giving tokens configurable properties, you can make custom contracts required for each situation. This is how @iearnfinance does yNFT tokens
4) Domain Names + Trademarks

Well we have @ensdomains, they are in fact NFTs. Transferable and Customizable. Similar to this, we can tokenize real world trademarks
5) Options, Futures Contracts

We haven't seen any options & futures contracts in NFT formats. We only have fungible ERC-20 tokens. Much like insurance, they'll come. Tokenized flexible options & futures contracts.
So far we have seen what NFTs can do. Let's get into the DeFi + NFT part.

NFTs have inherent value because what it represents (ownership to an item) & there's a buyer-seller market.

But they are unproductive assets, all you can do is hold them.
Real trick happens when you turn unproductive assets into productive assets 👀

Imagine you lock up your precious NFTs (be it may paintings, cards, insurance, cryptokitties, etc...) in a vault and get a credit line assigned to it 🤯
So you just turned unproductive assets into liquid & productive asset by borrowing against NFTs.

But how do you determine the value of NFTs to assign a credit line for it?

This will be a huge market
This is like an oracle for NFTs. Existing marketplaces like @rariblecom, @SuperRare_co, etc... has a huge advantage on making this product.

This external oracle product will determine the intrinsic value of the NFTs
There are a lot of factors go into determining the value.

First you need to figure what type of NFT is it.

If it is art, it would depend on the artist, number copies, etc..

If it is insurance, depends on the cover, premium, expiry, etc...
So, you lock up multiple NFTs in a vault

Lending platforms will assign a credit line to the vault

You borrow liquid assets from the platform's lending pool

I can't wait to borrow money by locking up tokenized waifus, axies & ens domains
@MakerDAO is looking into bring real world assets into the platform. I won't surprised if it is in the form of NFTs

Existing lending platforms like @AaveAave & @compoundfinance can easily build a platform like this

But there's a lot of risk too
The platforms need to assess what the underlying asset is it and risk associated with it to determine the credit line.

Lots of bottlenecks, but I'm excited about what it brings to the ecosystem.
Other area I'm excited about is NFTs backed by DeFi products.

@aavegotchi is experimenting in this field, and it's super interesting

Many more products like Aavegotchi will come into the ecosystem
Soon we will see NFT powered DeFi and DeFi powered NFTs.

The ecosystem is super young, and the way forward includes lots of experimentation

Overall I'm very excited about what is about to come 🤗

Thanks for reading 🙏

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More from @zenithyne

12 Sep
Let's talk about @BalancerLabs. While it looks like an AMM on the outside, it is much more than that.

Let's dig into it
Unlike Uniswap, in Balancer you can adjust the *weights* and the trading *fees*

This interesting feature can be used as a portfolio manager. You can always keep your portfolio in a weighted manner.

Plus you get trading fees to rebalance the pool.
IMO, that's a least interesting thing about Balancer since the weight and fees cannot be updated once you create the pool.

But are they really constant once you create the pool?

Spoiler alert: THEY ARE NOT!
Read 18 tweets

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