Surely everyone has heard the name NFTFi in the media such as social networks, etc. However, the NFTFi industry is really as potential as people think. In this article, let’s find out the reason. , the birth context and a potential project in the NFTFi field.
Before reading this article, everyone can read the article: Summary of potential projects in the NFTFi industry to have additional information and knowledge to help us understand this article better, but now let’s get started!
NFT Market Overview
NFTs are seen as the next generation of the art market and are one of the catalysts for cryptocurrency adoption as the sector experienced massive growth from September 2021 to April 2022. However, in the context of the Crypto market facing many difficulties, the weekly trading volume of NFTs is also greatly affected by the general market and shows signs of gradually decreasing from the second half of 2022.
In early 2023, the general market shows signs of improvement, the NFT market knows how to create a highlight when Blur – a Marketplace Aggregator issue tokens and conduct Airdrop for users. This creates great Fomo power for all users to love and trade NFTs.
Background of NFTFi
Currently, protocols in the NFTFi industry are primarily aimed at solving some of the major challenges that NFT investors face which are:
Lack of market liquidity: There are many reasons why NFTs often lack liquidity such as:
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Irreplaceability causes each NFT to have different characteristics, thus causing a certain difference in the rarity and price of each NFT.
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Some of the utility in NFT collections is still underdeveloped, making users tend not to want to hold NFTs.
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Affordability: The top Blue Chip NFTs currently have quite high prices, which is also a big barrier for users who want to own these NFTs.
Efficiency in capital use: We can go back to history when Defi’s early development revolved around Swap or Lending protocols. As a result, other Defi protocols can now offer different ways for investors to optimize capital efficiency much easier than before. The NFT field has also begun to appear projects in the Lending segment such as: JPEG’d, BendDAO, NFTfi,… or the Swap segment with SudoSwap, Hadeswap,…
Potential Projects In NFT Finance Industry
ParaSpace – Platform with the second largest TVL in the NFT Lending market
Overview:
ParaSpace is a Lending Protocol platform that allows borrowing and lending with many different types of assets such as NFTs, tokens, LP tokens,…
Mechanism of action: ParaSpace applies the P2Pool Lending model to help users only need to deposit collateral to receive a loan immediately. In addition, ParaSpace also helps users create credit scores by submitting assets to ParaSpace for lending. Users can use these credits to buy prepaid NFTs on major Marketplaces such as: OpenSea, LookRare, …
Evaluate: Why do I include ParaSpace in the list of potential projects in the NFT Finance industry? First, let’s take a look at some on-chain parameters on the platform.
ParaSpace officially went into operation in early December 2022 and since then the number of Active Users and New Users has grown very strongly. Currently, the project also has the second largest amount of TVL in the NFT Lending market, only after BendDAO.
The number of lenders accounts for the majority on the platform with more than 70%. This is understandable when ParaSpace offers many strategies as well as a variety of products such as: Ape Staking, prepaid credit purchases,… applicable to lenders. Or recently, in early February, the project implemented the program No Fees February for Auto-Compound Ape Staking service.
In my opinion, ParaSpace has products that are not too outstanding compared to other NFT Lending projects. However, ParaSpace’s product implementation and the way they diligently learn and accept new things as well as being willing to receive feedback from the community makes me highly appreciate this project.
X2Y2 – A combination of Marketplace and NFT Lending
Overview: X2Y2 is an NFT Marketplace that allows users to simply buy, sell or borrow NFTs on the platform.
Mechanism of action: Users can buy and sell NFTs at the current market price or place MakeOff orders at the price they desire. X2Y2 applies a 0.5% fee to transactions on the platform. In addition, X2Y2 allows users to borrow and lend NFTs with the P2P Lending model, bringing many conveniences to users.
Evaluate: Let’s take a look at some on-chain parameters of the project
The trading volume on the X2Y2 platform has grown well in the last months of 2022 and early 2023, and recently there have also been signs of adjustment. Meanwhile, the number of daily users is showing signs of decline with currently only about 600 daily active users.
X2Y2 is an NFT Marketplace that incorporates Lending functionality on the platform. This is an interesting point when users can both buy and sell NFTs and use NFTs to borrow/lend on the platform itself. Recently, X2Y2 also announced the creation of a separate module for loans/loans on X2Y2 with the name X2Y2 Fi, this shows that in addition to developing NFT Marketplace, X2Y2 is paying great attention to developing the Lending segment for its ecosystem. X2Y2 could also be the flagship for other NFT Marketplaces to apply the lending model to their platforms.
Double Protocol – New NFT rental platform on the market
Overview: Double Protocol is a platform that allows users to rent or lease NFTs in Gamefi or Metaverse platforms.
Mechanism of action: When the tenant accepts the rental offer from the lessor. The renter’s NFT will be locked on the platform, Double Protocol mints an NFT called doNFT and the renter can use this doNFT on game platforms such as: Decentraland,… just like using the original NFT. At the end of the lease period, the doNFT is burned and Double Protocol unlocks the NFT for the renter.
Evaluate: Take a look at some on-chain parameters on the platform.
The majority of rental volume or rental activity in the past 30 days has come from the Deathly Hallow NFT collection. The remaining collections account for a small and insignificant proportion.
The rental volume on the platform only reached 3,000 USD, which is quite a low number. It may also be due to the fact that the GameFi market at the present time is not well received by everyone.
Double Protocol is one of the projects working on NFT rentals. Applying the NFT rental model in GameFi or Metaverse platforms offers great potential when it comes to solving the problem of cost barriers to purchasing NFTs or converting user needs within a certain period of time. Therefore, I want to include this project in this list so that everyone has more perspective on the NFT Finance field.
OpenSky Finance – Lending platform with a combination of P2P and P2Pool models
Overview: OpenSky Finance is a Lending platform for NFTs built on the Aave ecosystem with a unique combination of P2P and P2Pool models
Mechanism of action: Lenders who submit their assets to the platform will be transferred directly to Aave by OpenSky. When applying for a loan on OpenSky Finance, deposits on Aave are withdrawn to the borrower at a more attractive interest rate.
Evaluate: Some on-chain parameters on the OpenSky Finance platform
The volume of borrowing and lending on the OpenSky Finance platform has been increasing well recently. But in terms of volume, it is not really large, showing that OpenSky Finance has not received the attention of the community, which is understandable as the project only started product development in the last months of 2022. There are 2 points that I Highly appreciated at OpenSky Finance are:
- OpenSky Finance is a unique Lending platform that combines two Lending models P2P and P2Pool, creating many choices for borrowers. On the other hand, the lender’s deposit is transferred directly to Aave by OpenSky because the lender will receive optimal interest from OpenSky and Aave as well.
- Receiving support from a giant like Aave gives OpenSky Finance a huge advantage compared to other projects in the industry.
Spice Finance – One of the first NFT Lending Aggregator platforms
Overview: Spice Finance is an NFT Lending Aggreagator platform that helps lenders deploy passive capital into NFT lending markets to earn profits easily.
Mechanism of action: Spice Finance deploys Vaults with different strategies to help users earn profits without facing difficulties in the lending process like on current NFT Lending platforms. Recently, the project also launched the feature Leverage helps users use leverage to increase deposits, thereby receiving more interest.
Evaluate: Spice Finance is in the process of completing the product, so I don’t have many reviews about the project’s products yet. However, Spice Finance is one of the first projects to develop the NFT Lending Aggregator segment and continuously updates and adds new features, showing that they have great ambitions to become the leading projects in the NFT Lending Aggregator segment. There are still quite a few development projects at the present time.
summary
NFT Finance was born with the purpose of adding utilities (Defi) to NFT. Without the combination with Defi, it is difficult for NFT to go further and apply to real-world practical industries. However, the protocols in the NFT Finance industry at the present time are still quite new and still need to be improved a lot to be able to attract a large number of users and create a new trend in the future.