📈NFTs in DEFI
The link between finance & art
Last updated
The link between finance & art
Last updated
DEFI 101
https://drive.google.com/file/d/1iFJ2AHgzwzkvW3OVeHtWHI53cpz6MX2X/view
Decentralized finance (DeFi) - an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies.
NFT properties:
Unique (ie rarity)
Scarce
Indivisibility - cannot fractionalize
ERC-20 Standard Standard for creating Fungible tokens on the Etherium/Solana chain Tokens: USDT, Lent, SNX, UNI, SPL token ect Used for creating fungible tokens
ERC-721 Standard Standard for creating Non-fungible tokens on the Etherium/Solana chain
ERC-1155 Standard Contract that supports fungible & non-fungible tokens
ENS - Etherium Naming service - .eth
Unstoppable domains - .crypto extensions
Where do NFTs fit in the DEFI space?
Lending
Derivatives
Underlying asset
Governance
NFTs can be used as collateral when lending from a protocol
Issue: art to determine the value of NFTs, markets are also illiquid so it is hard to determine its value
LTV - loan to value, this is the ratio of the assets value to borrowing $
Derivative - An assets that derives its value from another underlying asset
Derivative examples:
Forwards
Futures
Hedging - selling an asset in the future for a value that is determined now. (Ie I will sell you Bitcoin in 2023 for $120) This may return a gain or a loss (- is a short position)
Options
Swaps
Why use derivatives? - It reduces gas fees (ie trading a derivative token instead of actual currency) making it more scalable
Underlying asset examples:
Stock
Bond
Commodity
Interest rate
Currency
Crypto currancy
Synthetix - synthetic asset which uses crypto as an underlying asset
Synthetics Protocol DHedtch