# NFTs in DEFI

**DEFI 101**

[**https://drive.google.com/file/d/1iFJ2AHgzwzkvW3OVeHtWHI53cpz6MX2X/view**](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. 

![](/files/NHAGxkQe7j904NUTBXMf)

### **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


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