It is an undisputed fact that the COVID-19 pandemic facilitated high unemployment rates all over the globe — as a result, many people lost their jobs. This made many people look into other ways of making an income. While the pandemic gave rise to many new opportunities such as remote working and so on, blockchain provided DeFi and NFTs.
NFT Sales and DeFi Functionality
According to research, it was reported that there were up to $2 billion in total sales of NFTs in just the first quarter of 2021. Sales are consistently increasing throughout the year too as more people are becoming aware of NFTs benefits.
DeFi is a disruptive force in the digital world and beyond. Services range from trading financial activities, social media platforms, or even entire economic markets. DeFi could even replace traditional finance and control how daily transactions take place. Currently there has been a big uptake in institutional DeFi investment.
NFT represents a unique asset since you cannot replicate it. You can trade the assets using DeFi platforms and together they are reshaping how we can make money. Here’s some of the ways that NFTs and DeFi platforms are linking up to give better financial functionality.
Lending and Borrowing platforms
Many DeFi protocols use non-fungible tokens to represent specific contract terms. NFT is acting as collateral. Its practical implementation is still quite a challenge because of the decentralized ecosystem.
The responsible companies are still finding ways to integrate KYC and credit checks. Many decentralized platforms rely on collateral loans. If the borrower defaults on payment, the collateral pays for the debt. Using art as collateral is gaining popularity with time, and Bank of America is on the forefront in doing that.
For those who use NFT as collateral, they track the transaction history of the creation. You calculate the interest rates based on the performance of the asset to cut risks. Since there are no set laws on creating a collectible, issuing loans against NFT is a challenge. If the lending platforms use NFTs, the lender’s funds will be at risk.
To deal with such challenges, new mechanisms for NFT price prediction are being developed and used. Alongside this, new measures are being integrated for credit scoring. With fractional ownership, there is an expected rise in the use of NFTs as collaterals in DeFi.
New creative economy
NFT’s have enabled DeFi to create a new economy for creators. They can have complete ownership of their creation and distribution. They can take advantage of abstract concepts like reputation that are non-fungible. NFTs can join with DeFi to build applications that give abstract concepts a value.
There will be more opportunities for creativity in the monetization of the creations. This will create endless opportunities for artists. Artists will have the zeal to create more creations that can transform into tokens and trade in the DeFi.
Gamification and Conflux Network
Gamification of finance is a new trend that retail users in DeFi transactions use. DeFi-staked NFT collectibles get value from both the intrinsic value and Rarity score.
Through the conflux network, users enjoy high throughput rates and low transaction fees. This helps in creating the dApp ecosystem as a base for DeFi and NFT markets. An example is Mainnet, where there have been more than 3.1 million transactions and a small gas fee of $11.
The Conflux network will help the crypto ecosystem achieve scalability. It will also have better financial ecosystems, all built on the distributed web. There are already some NFT products that are live on the conflux network. Another example is moon gaming, a gaming platform. It provides a base for selling mining and trading entities.