DeFi+NFT rising to the top: An overview of 5 directions and 7 projects
Source: Block chain Institute
If there were only one word to describe the blockchain industry in 2020, it would be DeFi. And the next key word?
The answer in many minds is: NFT. The natural question, however, is: what will happen if NFT meets DeFi?
At the intersection of NFT and DeFi, more projects are gradually coming to the surface. What projects are worth our attention under the combined halo of the current hot DeFi and the much anticipated NFT in the future? This article takes you through.
DeFi is hot, and NFT is getting more attention
The heat of DeFi
With the first DeFi project Uniswap announcing the launch of UNI scrip and the launch of liquid mining, it can be expected that DeFi's popularity will continue for some time to come.
What does DeFi really mean to finance? It can be said that DeFi is piecing together the building blocks of the open financial foundations of the future in a gamified way.
We see the current chaos, the frenzied Pond design and the occasional FOMO. Skim these, we can also see, when the currency opened Pandora's box, when the wind is inevitable in the box to the financial sector, it is produced by the experiment of the DeFi: DEX, AMM, intelligent contract guarantee lending, derivatives, decentralized insurance, etc., all can take effect in the traditional finance model, can all be done with a DeFi.
The NFT is still in its early stages
Some people say that NFT is the hidden line of investment in 2020.
Innovation since Satoshi Nakamoto has never stopped. Imitations and ideas from the financial sector have gradually formed the niche of DeFi. And another new field is emerging: NFT, non-homogeneous tokens, which can be used to represent any different token asset.
NFT's supporters cannot hide their hopes and expectations that it will reshape gaming; NFT will transform the traditional collectibles market; NFT could even have an impact on the traditional property sector. Critics, of course, pour cold water on this: the NFT, which is still a niche interest, lacks standards and big money, will take a long time to mature.
Of course, as in the early stages of any domain, DeFi and NFT face a high degree of uncertainty. Take a closer look at DeFi. It's only been three months since it became popular. Under the influence of the flow of mining, everyone strive to be a "farmer", sweet potato yam pasta, pearl jadeite, agate and diamond, one project appears urgently. In a number of new rich farmer often day break ten thousand behind, also accompanied by a project fell off the road stolen, a few happy several sad.
Trading volume in NFT has also been tepid, with the NFT market only gaining steam in 2020 after CryptoKitties' brief highlights caused ethereum to become gridlocked three years ago.
Source: NonFungible.com
But for all that, we can see from a few figures that the NFT is emerging, albeit in a small minority.
Over the past seven days, 9,353 NFT units were sold for a total of $988,649, according to nonfungible.com.
On DCLBlogger's Twitter feed, a list of areas where THE NFT is making a difference goes like this:
"We've seen artists sell for more than $50,000 in a single day, and we've seen artists sell for more than $100,000. SuperRare alone has a $2.3 million trading volume.
DeFi and NFT associations
Although DeFi and NFT have different concerns, a different perspective might shed new light on the relationship between NFT and DeFi.
NFT full name is Non Fungible Token, Non homogeneous scrip. After all, it is nothing more than a Token, tradable and transferable. Traditional Token can do the same thing, NFT according to the order, but the value of the asset is different.
At present, DeFi USES the high-quality assets under the type of FT (homogeneous tokens, such as BTC, ETH, etc.) as the underlying assets, ACTS as the collateral for lease, and ACTS as the market-making assets in AMM. Extending DeFi to NFT tokens would also create some new possibilities. We'll look at a few examples of this below.
It should be noted that DeFi and NFT are both high-risk and emerging segments and this article does not constitute any investment advice and is for informational purposes only.
Mortgage NFT to generate tokens
WhaleShark, a British expatriate and a well-known avid collector of NFT, has launched the project: https://whale.me.
According to his introduction:
WHALE is a social currency whose value is supported by the world's most valuable NFT collectibles, driven by the most dynamic community in NFTland, and steadily growing through DeFi Mining and H2P (hold-to-play) initiatives.
There are no loans, no liabilities, and no legal fees.
Simply put, a user can issue a WHALE token as collateral against a valuable NFT. The NFT is now worth more than a million dollars as collateral in the project's coffers. According to Mason Nystrom's article, most of the NFT assets in the project as collateral are currently provided by WhaleShark, one of the largest buyers in the NFT market.
According to Messari, more than half of the NFT in the project's vaults comes from the Sandbox. Among The four projects, SuperRare, Gods Unchained, CryptoVoxels and The Sandbox, NFT assets accounted for 80% of The total value of The portfolio. (Data source: Messari)
One problem with mortgaging NFT to create a Whale is that NFT pricing itself is often not standardised, and how does it ensure a distribution mechanism, unlike FT? Since its launch in May, WHALE tokens have gone from $0.2 to a high of $6.70. (Non-small, current price is lower, at $4.55)
According to one interview WhaleShark information, for the most part vault of NFT for electronic artwork, NonFungible vaults for the project audit every month. The maximum number of WHALE tokens is 10 million, 50% of which is held by the initiator WhaleShark and 50,000 pieces are unlocked per month, of which 20,000 are used to purchase NFT directly and operated by WhaleShark himself.
Source: OpenSea, WHALE vault
Whale tokens have several USES:
For general use, buy NFT, such as from vaults, or WHALE partner merchants and platforms; For leasing purposes, you can rent NFT block chain property in the Treasury through WHALE tokens; Consulting services, you can pay WHALE in exchange for WhaleShark's business consulting services.
In addition, the WHALE community has set up mining incentives:
Uniswap mining pool participants can divide up the 5,000 WHALE bonus cryptographic artworks per month. Creators can pledge their NFT artwork or contracts to get more WHALE tokens.
In terms of liquid mining, 5000 WHALE tokens will be distributed in proportion to the pool share each month as long as the user provides more than $500 working capital in the Uniswap pool of the project party. In addition, the threshold for participating in the pool will increase by $50 per month, compared with $550 in September.
To encourage NFT artists to participate in the creation, the project has established an NFT mining bonus pool of 2,000 WHALE tokens per month, which will be allocated to 10 NFT creators. The NFT created by them is specially sold and priced at WHALE. The project side will screen the candidate artists according to their qualifications, and enjoy the profits for three months after the selection.
WHALE's innovation is to issue tokens using high-value NFTS as collateral, an approach that may be copied by other project parties. But there are still many questions to be addressed, such as the value of the NFT as collateral and the scenarios in which the tokens are created.
Fluid mining NFT
WHALE chose to use NFT as collateral to generate social tokens. On the other side, you play DeFi mining and get tradable NFT.
CryptoWine takes aim at DeFi miners.
GRAP grape coin, a DeFi liquidity Mining project mine coin, is available by providing liquidity and is also available for direct purchase on Uniswap. How can DeFi mining be combined with NFT? CryptoWine is played like this:
In the GRAP pledge pool, each player receives random NFT drops from CryptoWine. CryptoWIne is an encrypted painting showing the theme of wine bottles; After players obtain CryptoWine, they need to take the extraction step to consume brewing score as the service fee, and GRAP pledge pool will provide brewing score for players; A fee for the winemaking points is injected into the prize pool and used to provide incentives to the artist. In addition, the CryptoWine collected by the player will have corresponding scores, combined with the CryptoWine score and the brew score earned by the player, to rank the player. The top three will divide the prize pool, while the remaining one eighth will be given to the artist who contributed the work.
CryptoWine play, more like a creative experiment, see DeFi + NFT play can have any new ideas. NFT's application to the feature of encrypted paintings can be well combined with the rewards DeFi mobility incentive brings to the crowd, further forming their own community culture in different DeFi communities. CryptoWine has this type of gameplay that I'm sure you'll see in more DeFi projects.
So, air coin mining + NFT, what will play? People in the community are actually doing it: MEME, a jokey spin-off of the NFT + DeFi Mobile Mining project.
The project began as a tweet: On August 15, Jordan Lyall, who is responsible for DeFi products at Talsys, ridiculed DeFi as "wasteful finance," casually using an Emoji as a Logo, then copying it to a proven contract and creating it. In fact, this is true of many DeFi projects on the market.
It took the community a few hours to create MEME COINS and make the joke into project DeFi. Then Jordan Lyall, together with the community, introduced NFT into the mobile mining design. Players who pledge tokens in THE NFT Farm MEME can harvest the pineapple points (the Logo of the MEME) and then exchange the pineapple points for the NFT collection card. This collection card can be directly attached to OpenSea for sale.
Use the pineapple gains from mining for the NFT collection
This project also has a series of fun MEME images that you can search for if you are interested.
Generating Token generates NFT
Aavegotchi, which is the project we're going to focus on today, is called GHST.
Aavegotchi is an NFT project supported by DeFi. Let's break it down and start with the aspect of DeFi.
Aave is a DeFi platform focused on asset lending. Users can get aToken by mortgaged assets on the Aave platform. With aToken, users get an interest cut. For example, if users deposit DAI in Aave, they will get aDAI as deposit certificate and interest-bearing token to share the interest of DAI deposit.
Aavegotchi, on the other hand, was the first NFT platform created based on aToken in the Aave ecosystem. You can think of the Aavegotchi as an NFT digital collection, implemented using the ERC721 standard. Each Aavegotchi has its own characteristics, values and scarcity. To create Aavegotchi, you need the aToken mentioned earlier to mortgage, which is a typical project that combines DeFi + NFT.
In AaveGotchas, the value and scarcity of aavegotchas are determined by the number of collateral assets, features, and corresponding game equipment. While the nature of NFT collectibles is usually established, Aavegotchi has a growth potential, varying with the level of play and the equipment it owns, and with the scarcity.
In Aavegotchi's documentation, the channels of value flow are listed:
Aavegotchi as a side of the game
The Aavegotchi project has several main factors: Portal, GHST token, AavegotchiDAO.
The user purchases Portal (Portal) via GHST token. Portal in the game is set as Portal of Aavegotchi void world and human etherworld.
After obtaining the Portal, the user can open the Portal and choose from 10 different Aavegotchas. Not only that, you'll need to have an aToken to get an Aavegotchi, which is like connecting to the void via a portal to get an Aavegotchi. When the collateral is retrieved, the Aavegotchi is destroyed. Aavegotchi is the NFT obtained by using DeFi assets as collateral. In this way, the project side gives Aavegotchi intrinsic value.
Aavegotchi as the NFT side, its value will be determined by its characteristics and the scarcity of game equipment. The greater the scarcity, the greater the value. Aavegotchi can be traded through NFT platforms such as OpenSea.
More details on GHST tokens
GHST can be used to buy game equipment and consumables to increase the scarcity of Aavegotchi. GHST is also a governance token, because the threshold of community governance vote requires participants to have 1 Aavegotchi and GHST token. In addition, in AavegotchiDAO 2.0, users can vote and get GHST rewards.
In addition to the platform mechanism design itself, some special factors were introduced into the GHST token issuance process: Bond Curve issuance and DAICO mechanism.
The so-called DAICO, first proposed by Vitalik, can be understood as a phased fundraising. In Aavegotchi's case, the first phase raised $250,000 from community members. Most GHST tokens, on the other hand, are offered in stages two and three, accepting DAI as payment tokens.
The private round is for a specific group (with KYC requirement), 5,000,000 GHST token, the price is 0.05 DAI/GHST. The threshold for participation is 20,000 DAI, and the lock-up period is 1 year. Pre-sale round, 500,000 GHST token, price 0.1 DAI/GHST, KYC requirement, lock-up period of one year; Token Bonding Curve (TBC) is available for sale, as required by KYC, and is in progress. It has no lock-in period, and can be issued as soon as it is bought, destroyed as soon as it is sold, with no issuance limit.
The project offers an innovative way to combine Aave's DeFi platform and generate NFT assets using interest-bearing scrip as collateral. Combining DeFi and NFT in a novel way can be expected to attract a number of mobile miners from Aave. The platform plans to test the web at the end of October.
NFT dig
Yfamily.finance is a decentralised insurance platform set up by Andre Cronje, the founder of YFI (popularly known as the great uncle). Currently providing insurance for DeFi platforms including Balancer Labs, Compound, Curve Finance, Synthetix and iEarn Finance. The underlying support for this is Nexus Mutual.
Yinsure. Finance, in particular, USES the NFT format to coinize the policy, known as yInsureNFT. Such NFT policies, in addition to being self-owned, can trade in the NFT market or participate in mining.
The NFT market for policies is traded
Rarible, an NFT trading platform, announced support for NFT policies in September. It's on shelves now.
Decentralized policies can be traded directly through NFT, which is also listed on OpenSea platform.
Insurance to mine again: SAFE
On the Platform Yieldfarming. Insure for two TYPES of NFT assets: yNFT(ETH) and yNFT(DAI), insurance policies for the ETH and DAI, respectively.
In a nutshell, yInsurance is insured with Nexus Mutual, NFT the policy in ERC721 format, and the generated assets are called yNFT. In addition to buying and selling in OpenSea, Rarible and other NFT trading markets, yNFT can also pledge to dig mines on third-party platforms to obtain SAFE token rewards. However, it should be reminded here that, just like the traditional insurance policy, if the insurance fails to be reported for reimbursement once the insurance expires, then the corresponding yNFT asset value is 0 and becomes an invalid insurance policy.
Managing DeFi's decentralized insurance in NFT fashion, and then mining the policies, adds a big incentive, I have to say: big uncle community, will have a lot of fun.
Other forms of NFT + DeFi
In addition to projects that already have actual products running, there are several interesting product directions for NFT + DeFi that are mentioned briefly here.
NFT + Leasing transactions: Examples of Chintai and Yiedl
Chintai is one of the earliest DeFi projects on the EOS blockchain. Prior to the launch of EOS REX, Chintai provided a way to rent resources on THE EOS common chain (CPU/NET) by creating a P2P leasing platform, allowing EOS holders to rent their CPU resources through Chintai.
Programmers or DApp players, on the other hand, can rent resources like CPU/NET without having to buy additional resources. Especially in late 2018, when CPU/NET resources on the EOS blockchain were expensive, Chintai acted as a buffer.
The reason why Chintai is mentioned here is that in the first half of 2019, Chintai proposed a design idea of NFT: separate the ownership and use right of NFT, and add the leasing function of NFT in the NFT standard agreement, so that NFT leasing can be realized by using these standards, and NFT leasing can be supported native.
For example, if an ASSET in an RPG USES the NFT standard to implement its heroes or items, then the player can rent out the NFT to someone else. Because the NFT standard native supports leasing, the owner of an NFT asset can still retain ownership and simply lease the use to someone else for a profit. In the game through the clearance, the group battle or the dungeon open battle, the player can through the temporary rental hero way, enhance their combat ability, win the game.
In this way, the gameplay of NFT + Rental DeFi is combined to increase revenue opportunities for players. In addition to separating ownership and usage rights, Tokyo-based encryption startup Yiedl has announced that it will create a PEER-TO-PEER marketplace for NFT lending services based on the ERC721 standard. However, no specific product implementations have been seen yet, although similar ones should be available soon as the NFT + DeFi space evolves.
The NFT is used as collateral for the loan
Unlike P2P lending by NFT itself, one possible idea is to use NFT as collateral to borrow assets from DeFi.
WHALE does something similar, except that the NFT is then used to issue social tokens. And the same idea can be extended: mortgage NFT to issue stability COINS, or vice versa, mortgage stability COINS for liquidity mining, to acquire the NFT collectibles or collectibles.
By thinking of the NFT as merely a special kind of tradable token, one can see that there is still considerable scope to explore in the current DeFi space. Of course, how NFT would be priced if NFT were used as collateral would itself be a perennial topic of discussion.
summary
DeFi is on the rise, NFT is getting hot, and some are even calling it the hidden investment line of 2020. And what new ideas can NFT encounter DeFi inspire? This article analyzes and explores the current five directions and seven projects in the NFT + DeFi domain for readers' reference.
When the HEAT of DeFi comes to NFT, with the explorers of NFT + DeFi arriving, the field is bound to be exciting, and with it, the risks.
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