Let’s be honest, crypto jargon is a real thing! Threadooors and gigabrains on Twitter are notorious for throwing complex words into the mix to legitimise their arguments or thesis… Sometimes it’s justified, whilst oftentimes, it isn’t. One such term you may have heard doing the rounds is “NFTfi”.
Throughout this article, I will call out NFTfi, NFT Finance, and NFT Financialisation – note that these terms mean the same thing and are used interchangeably. NFTfi is the amalgamation of NFTs and, well, finance – no points for guessing, it’s pretty evident. However, you may say that the entire NFT ecosystem is already financialised, with certain PFPs trading for six figures. Yes, you’d be right (to a certain extent), however, think of NFTfi as building a layer or stack on top of the existing NFT space and bringing a whole new level of degen financial opportunities to the table.
Fundamentally, NFTs can live without a massive price attached to them. At its core, it’s a tech that allows for tokenising and enables ownership of non-fungible documents, files, images, etc. NFTfi is being built as an independent layer that will power further financial opportunities than simply attaching a $ value to an NFT. Cool, right?
Some of the use cases are:
- Collateralised Loans: NFT holders can use their assets as collateral to secure loans from DeFi lending platforms. This allows NFT holders to access liquidity without having to sell their assets.
- Fractional Ownership: NFTfi enables the division of high-value NFTs into smaller, more affordable fractions. This increases liquidity and broadens the investor base, allowing more users to participate in the ownership of valuable digital assets.
- NFT Staking: Users can stake their NFTs on various decentralised platforms to earn rewards, such as tokens or other incentives. This helps NFT holders generate passive income from their assets. But, be careful, don’t become the yield… and it is collection-specific too.
- NFT Index Funds: NFTfi allows for the creation of NFT index funds, which enable investors to gain exposure to a diversified basket of NFTs, reducing the risk associated with investing in individual NFTs.
- Royalty Payments: NFT creators can embed smart contracts into their NFTs to automatically receive royalties whenever their work is bought, sold, or licensed. This helps artists and content creators to monetise their work more effectively. Enforcing royalty payments at the smart contract level is still in its infancy – till now, most artists have been reliant on marketplaces to enforce royalty payments.
- Insurance for NFTs: NFTfi platforms can provide insurance services to NFT holders, protecting them against risks like theft, loss, or damage to their digital assets.
- NFT Derivatives: Platforms that allow users to bet on the future prices of NFT collections by trading on a platform like nftperp.
As you can gauge, overall, NFTfi promises to offer a wide range of possibilities for the digital asset ecosystem, providing new opportunities for creators, investors, and users alike.
Furthermore, the crypto natives are familiar with the fact that crypto is mostly about narratives and capital flows. Certain narratives catch steam on CT, capital flows to capitalise on the situation, and before you know it – it’s a full-blown sector within the ecosystem.
My incline is that NFTfi isn’t just another buzzword or passing fad, but is a strong potential narrative with staying power. Just imagine, in dire times, wouldn’t the two strongest communities in web3, i.e. the DeFi degens and the NFT connoisseurs, wanna unite? NFTfi lays a strong foundation for such an association to emerge and flourish. Our industry is all about building on the bleeding edge and experimenting with new ideas. Let me tell you, combining NFTs and finance is a damn interesting idea, and trust me – builders are building for that future.
nftperp is at the forefront of innovation when it comes to NFTfi – specifically NFT derivatives. In case you’re unaware, nftperp is a decentralised exchange for speculating on the movement of floor prices of blue chip NFTs. You can trade perpetual futures contracts on different NFT collections using leverage. The protocol is deployed on Arbitrum. Learn more about nftperp in our introductory guide here. Or continue reading as I distil important details!
nftperp: Revolutionising NFT Derivatives Trading
One use case that’s emerging out of the NFTfi space that I’m particularly bullish and optimistic about and want to focus on in this article is that of NFT derivatives trading. Now I can put my money where my mouth is. The idea of longing and shorting certain collections and NFTs is appealing.
nftperp is the shining light in this still niche sector.
Currently, the ability to short NFTs is not available (at scale) in the market. NFT traders are limited to purchasing NFTs at a lower price and aiming to sell them at a higher price for profit. Additionally, those who hold popular NFTs such as Bored Apes or CryptoPunks lack a method to hedge or protect their investment against potential losses.
Highly sought-after NFT collections, such as Bored Apes Yacht Club and CryptoPunks, have become prohibitively expensive for the average retail investor to participate in. The steep prices of these blue-chip NFTs create a barrier to entry, making it difficult for retail investors to get involved in owning and trading these valuable digital assets.
nftperp is a perpetual futures exchange for NFTs that allows tracking and trading the floor price of NFT collections. Essentially, nftperp is hitting 2 birds with 1 stone in that it serves as a fully-functional NFT derivatives trading platform but also somewhat helps with fractional ownership of NFTs. Sure, you’re still trading futures and never own the underlying asset. But you gain exposure to price volatility. That’s all that matters, right?… right?
nftperp enables NFT holders to hedge their downside risk and allows web3 newbies to gain exposure to the price of blue chip NFTs. This means that nftperp allows NFT holders to protect themselves from potential losses in case the value of their NFTs drops. For example, if someone owns a BAYC NFT and expects the floor price to go down, they can short BAYC on nftperp and earn profits from the price decline. This way, they can offset some of their losses from holding the NFT.
On the other hand, nftperp also allows web3 newbies to participate in the NFT market without needing to purchase or possess NFTs themselves – especially helpful when it comes to blue chips. For example, if someone is bullish on BAYC but cannot afford to buy one, they can long BAYC on nftperp and earn profits from the price increase. This way, they can gain exposure to the NFT collection and benefit from its growth.
To further the cause of the NFTfi sector and bring mainstream adoption, nftperp continue to develop some innovative and unique solutions. Some of them have really piqued my interest.
NFT Odeshi: A Retroactive Airdrop Campaign for NFT Perpetual Traders
To reward its early adopters and loyal traders, nftperp has launched nftperp Odeshi, a retroactive airdrop campaign for nftperp traders. All users that trade on nftperp will be eligible to qualify for $vNFTP rewards, which is the governance token of nftperpDAO.
nftperpDAO is the decentralized autonomous organization that will govern the future development and direction of nftperp. $vNFTP holders will have voting rights and influence over various aspects of the protocol, such as fees, rewards, trading pairs, risk parameters, and more.
nftperp Odeshi consists of two types of rewards: volume rewards and converger rewards. Volume rewards are distributed based on the volume traded by a user during a month relative to the total volume in that month. Converger rewards are distributed based on the notional value of converging trades by a user during a month relative to the total notional value of converging trades in that month.
The monthly rewards allocation for volume rewards is 0.15% of the total supply of $vNFTP (1,500,000 tokens), while the monthly rewards allocation for converger rewards is 0.05% of the total supply (500,000 tokens). The rewards are processed daily and distributed monthly.
nftperp Odeshi is an ongoing campaign that will last indefinitely until the governance of nftperpDAO decides to change it. The campaign aims to incentivise active and consistent trading on nftperp, as well as to align the interests of traders and protocol stakeholders.
New Listing & Mini Trading Competition
nftperp recently added a new trading pair for Pudgy Penguins, a popular NFT collection of cute penguin avatars. To celebrate the launch, nftperp hosted a mini-trading competition for two weeks (now over) – sorry frens, where the top three traders with the highest volume across all pairs got a full refund on their trading fees. Stay on the lookout for the next trading competition though – these chads always have something cooking!
As we continue to build towards a decentralised, open, and transparent future – I do not doubt that NFTfi as a sector within the overall ecosystem will be significant. Within this sector, nftperp is making serious moves, and I am really optimistic about the future outlook. nftperp has opened the doors to new and interesting financial primitives within the NFT ecosystem, and I believe this is just the beginning. Watch this space!
Moreover, once a platform has distribution i.e. access to users, additional products can be built and integrated to enhance the user experience. I’m curious to see what these gigabrains come up with.
It doesn’t take a scientist to realise that the chads at nftperp have the best interest of their users and traders at the centre of their minds. Seems like they genuinely want to provide value to the community – as is evident from the monthly airdrop event and the mini-trading competition. That is, as you’d know, very aligned with the entire web3 ethos and culture.
Going forward, I am keen on seeing support for new NFT collections. This will attract members from these communities and help with the growth of the platform.
Importantly, I’m excited to see how (if they decide) nftperp potentially integrates with some other NFTfi use cases. As I mentioned, NFT fractionalisation is somewhat achieved with the current offering, however, once they attract and onboard a substantial user base, there are a lot of supplementary use cases that can be built. For instance, collateralised NFT-backed loans on the platform could be an interesting value proposition for existing users. Again, no guarantees here gents… I’m just theory-crafting and thinking out loud.
Well, that’ll do it for today! I hope you found something worthwhile reading the piece. Until next time!
This article was written by Shaurya – Shaurya is working full-time in crypto and has been involved in the space for over 2 years now. He’s passionate most about DeFi in the web3 industry. In his writing, he is a master at breaking down complex topics in an easy-to-understand language. Go give this legend a follow on Twitter.