NFT Use Cases in DeFi
What is NFT?
Whether you know what exactly NFTs are or not; you probably have heard it many times. That’s because we have been on peak of the NFT hype era. During the last year, $5.4 billion has been generated in profits by NFT sales. Many investors have jumped in, and many artists have started their own NFT projects.
But what exactly is NFT and why is it getting so much attention?
An NFT is a special type of cryptographic token that represents something unique. Unlike cryptocurrencies like Bitcoin or other utility tokens, NFTs are not mutually interchangeable and thus are not fungible.
What problems is NFT solving?
We are still at the early stages, and you might see unrealistic crazy things going on in the NFT world which makes you wonder if NFTs are adding anything positive to the industries; but once the society realises that this can be a solution to many problems; it will become clear that NFTs are way beyond the ownerships of artworks. Once the technology matures and the hype comes to a balance, the real value of the NFTs will emerge and it will be a part of the huge revolution that comes with DeFi.
Issues regarding NFTs
There are still some complications and regulation issues which makes it complicated for everyone to utilize it in the right way. But just like all the other paradigm shifts and emergence of new technologies we have to be patient and let it grow.
For example, your favourite artist might have created a viral song, but he doesn’t have the ownership of the song since it has been produced as a teamwork with many people. He cannot create an NFT and might face legal problems if he does so without discussing it with the other partners.
What is DeFi?
DeFi has become a collective term for financial services and products not managed by a central institution but by rules written in program code executed decentrally. Nevertheless, most DeFi products are offered and developed by companies or other organizations. with most of the products, the user can always control and access his investments without any assistance from the organizations.
DeFi is a new financial technology and is still under development. At the moment, it is possible to achieve high interest rates with DeFi to generate a passive income. This is also because the DeFi protocols distribute a large part of the generated user fees to investors.
The DeFi market can be seen as a second decentralized banking and finance system that can disrupt the current centralized finance sector in ways that cannot yet be estimated. The clear benefit of DeFi is that small and agile teams can create solutions that scale very well, and they don’t have to pay for an entire workforce, branch offices, and a board of directors as does a bank. That is one reason that DeFi protocols can operate at lower costs and provide more returns for the users and investors. In the future, DeFi could make finance and banking a fair place for almost everyone. However, it can be assumed that both financial systems will coexist for a very long time.
Use cases of NFT in DeFi
Both DeFi and NFT are new concepts which are not tangible for newcomers. As the technology is maturing, these two are getting intertwined and create new ways of dealing with everyday problems and NFT is becoming one of the most important applications in DeFi.
Since NFTs can store value, many DeFi companies are minting their own NFTs. DeFi makes it possible to perform operations on the assets and unlock the values which are stored in NFTs.
NFTs can play the role of a bank that secure the loans which are collateralised.
DeFi platforms can offer NFT loans by which the user can mortgage their collections in exchange for cryptocurrency. Moreover, CeDeFi can make it possible to exchange it into fiat.
Some NFTs are too expensive for one person to own. Partially owning NFTs will increase liquidity. And this fractional ownership can be possible using the DeFi platforms.
If someone owes you money with a collateral NFT, the smart contracts will make it possible for you to get the NFT automatically instead of going through the complicated process of suing that person in the court of law for not paying your money back.
Utility NFTs are becoming more and more important in the NFT industry. It’s no longer just about scarcity and value; utility NFTs provide intrinsic value to a token holder as well, such as investment opportunities, exclusive experiences, access to events and special platform features etc. There can be Community-, Fantasy Sports-, Gambling-, In-game-, Social-NFTs and more.
There are also many different NFT standards and new standards being created. Every new standard comes with its own possibilities that can create totally different and new use-cases.
NFTs can emerge in the Metaverse in the form of virtual credit cards, items, online bank accounts, collaterals, options and so much more. In that way NFT technology will play a major role in the upcoming MetaFi.
Based in Gartner’s Hype cycle, every innovation goes through a series of phases until it matures and get to the slope of enlightenment as well as the plateau of productivity. The first stages will be the technology trigger, peak of inflated expectations and trough of disillusionment.
DeFi and NFT both have a long journey ahead of them and everyone in the industry is contributing to make the improvements happen faster. It is necessary for the pioneers of the field to analyse and examine the mutual applications of DeFi and NFT to shape the future of finance.
While NFT and DeFi are being a standalone offering on its own at the moment, it is very likely that we will see both blending into one offering in the future. Combined with centralized and traditional finance (TradFi) DeFi and NFT can both make its way into the mainstream.
Paycer’s goal is to aggregate DeFi investments multi-chain and make them available to users without the need for their own wallet nor the expertise. This should allow anyone to generate a passive income in a world where banks no longer pay interest. Hence the Paycer team is developing a bridge protocol for DeFi and TradFi to combine the best of both worlds and make it available for retail clients #CeDeFi. Apart from the technical matters and the creation of a super easy to use final product. The goal is also to create a regulatory framework that allows the legal operation of a DeFi platform within the EU first and subsequently in other regions.
Currently, a DeFi platform is already available on paycer.finance on which Paycer tokens PCR can be claimed and staked. More features will go live soon. At the moment on Polygon but other blockchains will be integrated in the near future. Paycer is also working on a banking partnership to be able to combine DeFi with a traditional bank account. In addition to the development of the DeFi platform, the development of the final consumer product is also in progress.
Be sure to follow Paycer on social media for all the latest updates on product development. We have further exciting announcements to share very soon.