📈NFTs in DEFI

The link between finance & art

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 - Non Fungible token

NFT properties:

1. Unique (ie rarity)

2. Scarce

3. 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

Domains

ENS - Etherium Naming service - .eth

Unstoppable domains - .crypto extensions

NFTs in DEFI

Where do NFTs fit in the DEFI space?

1. Lending

2. Derivatives

3. Underlying asset

4. Governance

Lending

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 $

Derivatives

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

Underlying asset examples:

• Stock

• Bond

• Commodity

• Interest rate

• Currency

• Crypto currancy

Synthetix - synthetic asset which uses crypto as an underlying asset

Synthetics Protocol DHedtch