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4D details the ecological layout of the NFT-Fi track
Written by: @will Wei Shao @Catherine
Arrangement: @黑羽小斗
NFT overview
background
Every round of the market in the encrypted world is often accompanied by fresh narratives. 2020 is DeFi Summer, 2021 is NFT Summer. After a whole year of silence in 2022, in 2023, NFTFi, which combines NFT and DeFi, will gradually emerge. Various new projects are emerging one after another, and NFTFi has become a new narrative worth looking forward to.
status quo
According to DefiLlama data, since June 2022, compared with the increasingly sluggish NFT Market, the volume of NFT lending has been rising steadily. Lending is the most important track with the most products in NFTFi. This reflects to a certain extent that the NFTFi field has gained More funding concerns.
Currently, the NFTFi track injects liquidity mainly into blue-chip NFTs. Based on the current market value of blue-chip NFTs, we can estimate the size of the NFTFi track. According to the data of NFTgo, the major blue-chips are calculated according to the ETH price on March 25. Market value: CryptoPunks is $1.421 billion, BAYC is $1.318 billion, Otherdeed is $632 million, Azuki is $297 million, etc., with a total valuation of about $5.899 billion.
NFT Market Pain Points
NFT Insufficient Liquidity
Compared with the NFT Summer in 2021, the current NFT transaction volume shows a downward trend year by year. The threshold of NFT is higher than that of homogeneous tokens. Excluding Free Mint, the price of NFT varies from a few dollars to tens of thousands of dollars. Etc. Even similar NFTs have a price gap of several times or dozens of times due to factors such as rarity. After most of the NFTs are purchased, the assets are in an idle state or the capital efficiency is low. Holders can only choose to sell valuable NFTs Gain liquidity to invest in your next NFT or other assets.
The wealth effect is not high
The investment income of NFT is still mainly concentrated in buying low and selling high. Some NFT holders with less price fluctuations basically choose to hold them, leaving valuable cryptocurrencies idle.
The floor price fluctuates greatly
The leading NFT projects have a strong monopoly. Some small NFT projects often have large fluctuations in floor prices due to insufficient market depth or high official control. There are many Wash trading phenomena. There are a lot of untrue data in the NFT market. Blue-chip NFTs with market capitalization are also easily manipulated by prices, let alone NFTs with small market capitalization and low prices.
Existing NFT liquidity solutions are not flexible enough
Existing NFT liquidity solutions, even though they are relatively mature lending projects, only accept some blue-chip NFTs as collateral assets for security and liquidity considerations. NFT coverage is limited, and the products that can be customized by users for NFT lending solutions are relatively small. few.
The NFT segment is immature
It is still a long-only market. Speculators can only make profits through the rise of NFT's Floor Price. When the market falls, there is no way to deal with it except hold and dump. As a result, many NFTs will not return to zero but completely lose their liquidity. After the hot spot subsided, no one placed orders and transactions at all.
HIGH ROYALTY FEES
The royalties of 5–10% and handling fees as high as 2.5% in the NFT market make the already illiquid market even worse. But more 0-royalty NFT trading markets have surfaced, and the emergence of Blur has finally made Opensea compromise 0-royalty, so the current high royalties for NFT transactions have eased.
NFTFi track layout
NFT Trading Market
In the broad NFTFi field, the NFT trading market is still the track that occupies the most funds and attention. The current main trading platforms for NFT include Opensea, LooksRare, X2Y2, aggregators Gem, Blur, Element, and the decentralized trading platform Sudoswap, etc. At the beginning of 2022, the NFT market continued its hot trend in 2021. In January, the market turnover exceeded 5 billion U.S. dollars, setting a new record high. Although the overall transaction volume in 2022 has declined significantly compared with the same period in 2021, the NFT trading market has also continued this year. Some important events happened, X2Y2 announced 0 royalties, Sudoswap, the first NFT trading market that supports AMM, and Blur, which is built for professional traders, released airdrop tokens, etc., which caused the entire NFT trading market to undergo earth-shaking changes. In the NFT market, the most eye-catching rookie is undoubtedly the aggregated trading market Blur.
( source:
Blur
Introduction
Blur, as a new aggregation trading market, officially announced on March 29 that it has completed a seed round of financing of 11 million US dollars, led by Paradigm, and eGirl Capital, Keyboard Monkey and other institutions and angel investors participated in the investment. The strong background and the expectation of airdrop tokens quickly attracted a large number of internal test users and established a certain reputation. After the airdrop tokens were issued, the bid incentive model triggered a liquidity boom in the entire NFT market.
From the figure, we can clearly see the changes in the share of the mainstream trading market. Since Blur was officially launched in October 2022, it has quickly surpassed Gem after 3 days of public beta testing, and quickly occupied 80% of the trading volume of the entire aggregated trading market. On 11.27 , Blur surpassed Opensea's 5300 ETH with a transaction volume of 5500 ETH, becoming a well-deserved dark horse in the trading market and firmly occupying a dominant position.
( source: )
Product Business:
Own NFT marketplace and aggregator
The advantage of an aggregator is that through multi-platform price aggregation, the most advantageous price and the most abundant pending orders can be selected. Currently, all aggregators on the market support the function of one-click scanning, and Blur is no exception. According to Blur, its The transaction speed is ten times that of Gem. For professional Traders, the scanning function + faster speed can well meet the needs of most transaction scenarios. Blur's unique skip pending function also avoids many scenarios of wasting gas.
In addition to the aggregator, Blur has also launched its own trading market with the slogan "find floor on Blur", which encourages users to place orders on Blur through loyalty evaluation. In the S2 point incentive activity, loyalty is The key factor to measure points acquisition, if you place an order in Opensea, the loyalty will be directly reduced to 0, so the iron-blooded method has stabilized the number of pending orders in its own market.
Features:
(1) A trading market for professional traders
The Blur team highlighted four advantages of Blur: fast data update, convenient user query, and investment portfolio recommendations.
The traditional NFT market focuses too much on a single retail experience. For example, Opensea is more like a supermarket, listing a wide range of products for users to choose from, while Blur is more like a trading market. When you open Blur, you can only see rich data Kanban, with its user-friendly functions customized for Trader such as smooth scanning and skipping pending, its slogan: "Blur - an NFT Marketplace for professional traders" quickly spread in the circle.
(2) 0 handling fee and custom royalties
aBlur encourages Traders to indulge in trading, and it has always been 0 fees.
bBlur's royalties can be customized by traders, but Blur encourages traders to pay royalties to protect creators' rights and interests. Those who execute NFT orders with high royalties will get more $BLUR airdrops. Blur defaults to the highest royalties among OpenSea, LooksRare and X2Y2 , and when traders place NFT orders on the Blur market, they can also customize the value of the royalty. Traders who set the royalty above 0.5% will get more airdrops.
For a long time, the setting of royalties has been a difficult problem in the NFT trading market to balance creators, traders, and collectors. Traders want to maximize profits, collectors want to support creators, and creators want more Royalty income, since X2Y2 started the 0-royalty era, has once caused royalty disputes in major trading markets. Blur has cleverly given the right to set royalties to traders and collectors, hoping to encourage traders to respect royalties through their airdrops.
(3) "Fuzzy" airdrop rules
Blur held a total of three rounds of airdrops
This kind of vague incentive rules prevents the platform from becoming a "mining game", and also ensures the interests of loyal users who actively use Blur, and traders will be the ones who get the most tokens and protocol control.
evaluate:
Revisiting Blur's dark horse road, every step has been carefully designed, with a luxurious background and a sincere gift box, with a smooth transaction experience, vague but reasonable airdrop incentives to capture a large number of users, the purpose of "passers-by Everyone knows” is to challenge Opensea’s dominance. The actual results are obvious to all. Blur has become Opensea’s most difficult competitor so far.
However, due to the general environment, the NFT market is already in jeopardy, and the liquidity brought by Blur cannot last long and needs to wait for time to change. The competition between Blur and Opensea also proves that NFTFi is still in the early era of brutal growth. It is still unknown who will win the big cake of the NFT trading market.
NFT Valuation Pricing
The pricing of NFT is the basis of all NFTFi. We use the analogy of blue-chip NFT and real estate in the real world. The price of real estate can be evaluated by multiple dimensions such as location, age, surrounding facilities, etc., and there is a certain consensus on the evaluation standards, which constitutes The same is true for blue-chip NFTs. Without a reasonable valuation system, it is difficult to promote liquidity. Currently this track includes Taker, Upshot, Banksea, Abacus, NFTvalations, Pawnhouse, Pilgrim, etc.
The current pricing methods include two types: game pricing and algorithmic pricing. Simply put, they are subjective pricing by humans and objective pricing by data.
Abacus
Introduction
In terms of artificial pricing, the most prominent product is Abacus. Abacus uses optimistic PoS to create a liquidity pool-based NFT valuation method and provides a new solution for NFT valuation. Abacus's valuation method largely relies on the pricing method of LP's subjective decision-making. The advantage is that it can realize the real-time valuation of NFT, link the transaction value with the real value, and release greater liquidity.
Product Business
(1) Peer Incentive Pricing
All users are allowed to submit their own personal evaluations. After staking $ABC as a deposit, the price approved by the group is weighted to obtain the final price. The evaluation bounty is the highest bid. The bounty will be based on the accuracy of the evaluation and $ABC The distribution of the pledge ratio is a bit like the game of guessing the stock price to win the bonus.
(2) Abacus Spot Pricing
Create a pool around the NFT to be evaluated. This pool is the dynamic price reflection of the value of the NFT. During the valuation period, the holder of the NFT does not need to lose ownership of its NFT, which guarantees its liquidation value for the lender. After the evaluator passes his own evaluation Lock ETH to guarantee the valuation. All traders participating in the liquidity of the pool will be rewarded with epoch credit points. The epoch credit points can be exchanged for $ABC to trade in the market. The reward and pledged amount are positively related to time.
Example: Alice has a CryptoPunk and hopes to get more loans through Punk, so she creates a pool and puts her own Punk with a market price of 50 ETH into the pool. The appraisers Bob and Charlie find that the floor price of Punk is 50 ETH. So they added 21 ETH respectively, and this pool has 42 ETH besides Punk.
For Alice, this pool can be used to borrow more money, and his loan efficiency has been improved through the pool.
For appraisers, they can get the additional issuance of Abacus’s native token ABC tokens, and there is a certain probability that they can get a certain price difference. If the Alice pool closes the pool, the Punk is 50 ETH, which is higher than the pool’s price of 42 ETH. At this time, the price difference of 8 ETH will be shared equally between the two appraisers, and if the floor price of Punk is lower than the pool price, the appraiser needs to bear the corresponding loss, and Alice, the holder of the NFT, will make a profit. Alice can do it back and forth. Band profit, the final appraiser and NFT holders use Abacus to continuously play games, and finally reach a balanced price, that is, the auction price.
Features
(1) Game pricing model
Abacus has created a game pricing model. As an intermediary in the price game between evaluators and owners, it can accurately price while improving capital efficiency and greatly improving liquidity. Generally speaking, the more followers of NFT projects, the more rational , the more reasonable this pricing model is, it is very suitable for the blue-chip NFT model.
(2) Economic model
Abacus’s token economic model is somewhat similar to traditional DeFi, but not quite the same. Abacus's native token is $ABC, which is mainly used to participate in reward weight distribution, pledge mining, voting, etc., but Abacus uses EDC points instead of directly using ABC tokens to motivate evaluators, and obtaining EDC points requires participation in the evaluation process. The protocol income generated by this part guarantees the support of its currency price and is also an important source of its business income.
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Abacus has found the price essence of NFT. The current value of NFT is still in the hands of traders. In the primary market, NFT issued by the project side, if traders are dissatisfied and do not pay, there is only one result: breaking the issue. The Abacus protocol determines the valuation of NFT through rational actors that maximize profits. Compared with other fund pools based on series floor price pricing, it is more humane. It returns to the value of each NFT itself, releasing a large amount of liquidity and improving capital efficiency.
However, the gameplay set by its token economic model has raised the threshold of participation to a certain extent. The senior Trader of NFT is a natural excellent appraiser. Instead of participating in this kind of game pricing, it is better to directly participate in secondary market transactions. How to reduce their entry The threshold or a better incentive model is the next problem that Abacus will face.
Banksea
Introduction
In terms of data objective pricing, the more classic project is the oracle machine Banksea.
Banksea is a decentralized blockchain infrastructure. It combines AI and big data technology under the chain to conduct NFT data analysis, NFT valuation and NFT comprehensive risk assessment. Through Oracle, it provides users on the chain with safe and objective , Real-time NFT valuation.
Banksea consists of data aggregator, AI analysis and client side. The data aggregator collects and processes raw data, AI generates NFT valuation through the model, and finally gives it to the user in two ways (Oracle - Smart Contract /Banksea API). Among them, the AI processing link is the core of their mechanism. By using the time series forecasting method to establish a model, the trend is predicted through a certain time series, that is, the current NFT value is estimated through the historical characteristic data of NFT. After the valuation model is established, it is necessary to evaluate the output of the model. AI nodes use MAPE (Mean Absolute Error Percentage) to comprehensively evaluate model effects with reference to other evaluation indicators. In the end, Banksea synchronizes the NFT collection value (including market floor price, AI floor price, 24h average transaction price, etc.) and NFT valuation (including standard valuation and valuation range) to the contract.
Product Business
(1) Off-chain API service
In order to ensure the accuracy of the valuation, Banksea NFT Oracle analyzed a large amount of data in the process. The results of the analysis are so valuable that we now provide the analysis data through the API.
Market analysis
Collection analysis
NFT analysis
(2) On-chain data service
Banksea NFT Oracle calculates the market base price, AI base price, 24-hour average price and other data of NFT collections in real time based on the transaction and listing records on the chain, and synchronizes these data to the chain. The AI reserve price is the minimum value of the AI valuation of all NFTs in a collection, preventing market reserve price instability and short-term manipulation attacks.
Banksea NFT Oracle comprehensively analyzes NFT basic data, extracts multi-dimensional features, and trains AI models based on time series modeling. The AI model will regularly value an NFT, and the platform will perform regression verification based on the real-time transaction price of the NFT, and continue to optimize the model to ensure accuracy. Valuation results include valuation standards and valuation intervals. Valuation standards refer to the comprehensive evaluation results of AI models, and valuation intervals refer to the valuation boundaries of different models.
Currently Banksea provides 100 Collection-Level free feeding services
Features
The AI algorithm directly generates the NFT valuation to ensure fairness, openness, and objectivity of the valuation, and is not affected by subjective consciousness.
Banksea NFT Oracle collects multi-dimensional data and prevents SPOF (single point of failure). It also applies a valuation aggregation algorithm on-chain to avoid false valuations of nodes.
Banksea NFT Oracle supports minute-level valuation.
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In addition to NFT historical data, Banksea also quoted community, social media data and other indirect related data, which enriched the data dimension, and the valuation supported by data is more objective, but its AI algorithm is not public, and there are certain problems. risk. I tend to prefer Banksea's real-time quotes for data analysis.
Summarize the comparison of the advantages and disadvantages of subjective pricing and data objective pricing.
NFT Lending
It can be understood that NFT lending is based on NFT, coupled with the DeFi gameplay, which can give more liquidity and capital income. The NFT lending track is a relatively mature one among the NFT subdivision tracks, and it is also the most dynamic subdivision track, with new competitors emerging in an endless stream.
Looking at the mainstream lending agreements in the track, there are mainly 4 lending methods:
According to Defillama's data, there are a large number of projects on the NFT lending track, although around November 15, 2022, the drop in floor prices triggered the liquidation auction of many BAYC collaterals. Since the liquidation auction starts with the debt of the borrower, there is a large arbitrage space for the collateral in the BendDAO auction pool, which has attracted many NFT Flippers to participate in the auction. BendDAO's TVL ranking is still the leader, and the TVL is far beyond the second place. However, the rising star Paraspace TVL has grown rapidly. Within 3 months of its launch, Paraspace has surpassed NFTfi and JPEG'g, and now ranks second in the TVL of the lending track (as shown in Figure 1)
(Source: defillama
At the same time, according to the cumulative daily loan volume in Dune Analysis, it can be seen that NFTfi and BendDAO are still the two mainstream lending platforms in the market, but starting from March 2023, the cumulative daily loan volume of Paraspace will increase significantly. The cumulative daily loan volume of Paraspace has shown a fault-like increase (as shown in Figure 2), which may cause a credit crisis in the market with SVB declaring bankruptcy on March 10. More investors are willing to pledge NFT to obtain part of the liquidity first , coupled with a series of publicity activities such as Paraspace’s announcement on March 12 to become the official designated pledge platform of APE Coin, aroused market enthusiasm, and the amount of loans from investors on Paraspace increased significantly. On March 13, the weekly loan amount exceeded BendDAO and NFTfi rank first in weekly loan volume (as shown in Figure 3)
( Data Sources: )
( Data Sources:)
Therefore, in the NFT lending market, this article will start with the top two TVL projects to explain the operating mechanism of the NFT lending market and why Paraspace has sprung up.
BendDao
Introduction
BendDAO uses blue-chip NFT assets as collateral to borrow ETH as its main business. Other businesses include a built-in trading market on BendDAO, which supports users to borrow and borrow while placing orders for collateral and trading (“pending orders to sell”), and also supports users to pay part of the funds for purchase NFT (“buy it down”). Based on the above business, the main source of income for the agreement is the interest rate difference income generated by mortgage loans, and other income includes transaction fee income (2% rate) and down payment fee income (1% rate) brought by the trading market. At present, the cumulative users of BendDAO have reached 10,016, and the total accumulated NFT loans are $256,282,891. The main business can be divided into the following categories:
Product business
The main business can be divided into the following categories
(1) NFT peer-to-pool lending
NFT pledgers and liquidity providers are involved. NFT pledgers lend ETH in the pool by pledging NFT, and liquidity providers can obtain interest income. When the price of mortgage NFT falls below the health factor, the liquidation mechanism will be triggered. (as shown in Figure 5)
(2) NFT transactions
The seller obtains pre-sale liquidity: As a seller of NFT, the sale of NFT in most cases is not instant. The seller can choose to mortgage the NFT to lend the corresponding proportion of ETH first, and obtain liquidity first. When the NFT is confirmed to be sold, the seller will get the profit That is the selling price - loan amount (principal + interest)
(3) The buyer pays for the purchase
The buyer can pay a % down payment and pledge the NFT on the BendDAO platform. During this period, he will enjoy the full utility of the NFT. After the buyer repays the principal and interest, he can unlock the NFT and obtain full ownership (as shown in Figure 5)
(Source: Mint Venture)
(4) APE Coin pledge
At the end of 2022, BendDAO developed the APE Coin pledge business that was converted to the BAYC community. Some pledge pools of Yuga Labs need to hold both NFT and $APE tokens. $APE has no NFT or only NFT has no $APE. The combination of NFT and $APE in the matching market maximizes the income, and then shares the income with LP.
A paired pledge mining scheme is adopted, even if the user only holds part of the assets required by the mining pool to participate in the pledge, that is to say, if the user only holds ApeCoin or a certain NFT (BAYC\MAYC\BAKC) It's time to mine.
In return for improving the pairing of NFT and ApeCoin holders, BendDAO will charge 4% of user pledge income as a matching service fee.
Features
(1)NFT + DeFi
The agreement pool concentrates NFT collateral and ETH funds. The blue-chip NFT assets held by loan users are mortgaged. The NFT floor price calculated according to the agreement, the fixed mortgage-loan ratio LTV, and the floating rate APR immediately lend ETH funds from the agreement. The borrower of ETH funds Deposit and withdraw funds at any time with a variable APR.
(2) Liquidation protection mechanism and transaction transparency
For borrowers, during the auction period (48-hour liquidation protection period), for the safety of NFT holders, borrowers (users with mortgaged NFT) can still repay the loan within 48 hours after the start of the auction. For bidders, when the health factor of the mortgaged NFT is less than 1, under the Bend auction mechanism, as long as the bid is higher than the floor price, any bidder can obtain the ownership of the NFT. In this way, all NFTs will receive a price discovery mechanism, making transactions transparent.
(3) The best blue-chip NFT liquidity enhancement solution
Through collateral pending orders, NFT holders/sellers can choose to accept instant NFT-backed loans and receive up to 40% of the floor price instantly at the time of placing the order. Users can place collateral orders on BendDAO at any time. Buyers can purchase blue-chip NFTs with a minimum down payment of 60% based on actual prices, while initiating a flash loan from AAVE to cover the remainder. The borrowed amount of the Flash Loan will be repaid through an instant NFT-backed loan on BendDAO. After the down payment, the buyer will automatically become the borrower. Borrowers can also place an order for their mortgaged NFT.
(Source: Bendao official website)
(4) The borrower still has the ownership of NFT
When a borrower deposits an NFT into Bend DAO, a boundNFT will be minted as a debt NFT. boundNFT is designed to provide vault functionality with full security and the same digital self-expression. The boundNFT has the same metadata and token ID as the original NFT owned by the user. Users can still use it for PFP on social media, and still enjoy the rights to receive airdrops. The boundNFT is non-transferable and non-authorizable, so it will not be stolen.
Supported Assets and Clearing Mechanism
(1) NFT Mortgage Ratio
After the community resolution, BendDAO will adjust the redemption period and auction period on August 30, 2022; on December 18, 2022, the collateral ratio of NFT will be adjusted
(2) NFT lending rate
Lending rates will be determined by market supply, and when capital is available, interest rates will be kept low to encourage lending. When capital is scarce, interest rates are high to encourage loan repayments and increased deposits.
(3) Liquidation
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advantage:
(1) The project started in March 2022. It started a peer-to-pool lending method in the peer-to-peer NFT lending market. The product logic is simple and easy to understand, saving users the trouble of setting parameters. It is extremely friendly to junior NFT players. NFT Summer has already accumulated a certain amount of users. Currently, as the leading project of NFT lending, it has strong user stickiness.
(2) Wide coverage of demand. BendDAO is targeting the blue-chip NFT market with large market capitalization and active transactions, as well as ETH, the main pricing unit of PFP. BendDAO can currently meet the needs of "important" users in the market.
(3) The liquidation mechanism is relatively complete. The blue-chip NFT's loan ratio setting is better than that of peer-to-peer lending agreements such as NFTfi, and it has a 48-hour liquidation protection period.
(4) DAO's decentralized governance and teamwork to advance projects together. Pledging the platform currency $BEND can get $veBEND to participate in community governance, and the loan ratio of blue-chip NFT is also continuously optimized under the promotion of DAO proposal.
risk point:
(1) The liquidation mechanism is risky. BendDAO adopts the oracle mechanism of Chainlink, mainly targeting the NFT quotations on Opensea and Looksrare to determine the NFT price. The blue-chip NFT price is the main factor in determining the liquidation. In November 2022, the floor price drop triggered a liquidation auction for many BAYC collateral. Since the liquidation auction starts with the debt of the lender, there is a large arbitrage space for the collateral in the BendDAO auction pool, which has attracted many NFT Flippers to participate in the auction. However, since there is a certain price space between the floor price and the debt of the lender (such as the large price difference between the Floor Price and Latest Bid of BAYC collateral), Flippers' arbitrage behavior may further lower the floor price, resulting in more mortgages. In the liquidation auction, the risk of blue-chip NFT is magnified under the liquidation mechanism of the agreement.
(2) The change of the collateral ratio is entirely driven by the community. The change of the mortgage ratio often lags behind, and the determination of the ratio is not scientific. It is not as good as Aave, Compound and other lending agreements that use third-party institutions to evaluate the risk model, and also lacks the assessment of the quality of NFT collateral assets.
Paraspace
Introduction
ParaSpace is an innovative NFT lending platform based on the Ethereum ecosystem, a peer-to-pool NFT lending protocol that allows users to mortgage and lend NFT and homogeneous tokens. Its sister project, Parallel Finance, the largest lending agreement in the Polkadot ecosystem, is certainly familiar to everyone, and the development team is also Para Labs.
Simply put, ParaSpace supports 8 ERC-20 assets including APE, cAPE, ETH, DAI, WETH, stETH, USDC, and USDT, and innovatively supports 12 groups of UNISWAP V3 LP (specified rate) composed of the above ERC20 as collateral Users can mortgage the packaged assets for loans, improving the problem of low asset capital efficiency on the chain.
Compared with BendDAO, its model is a cross-margin cross-margin leverage model, and Para Labs behind ParaSpace has received an investment of 29 million US dollars, including Polychain Capital, Slow Ventures, Coinbase, StarkWare and other star investment institutions, and the future is also potential Very full.
Product business
(1) Peer-to-pool lending
(2) APE Coin pledge
The currency price of APE tokens has a relatively strong correlation with the floor price of Ape NFT itself, so the liquidation risk itself is lower than the NFT mortgage loan ETH model. At the same time, in extreme cases, when the liquidation process is about to start, ParaSpace will automatically redeem the pledged Ape NFT, but will deduct the necessary part from its staking rewards to ensure the repayment of APE token loans, and at the same time, Ape NFT itself will not Really enter the liquidation auction process.
Features
(1) Packed collateral and cross margin
Users are allowed to mortgage NFT, ERC-20 Token, Uniswap V3 LP positions or any combination of the three at the same time to calculate the maximum amount that can be borrowed according to the proportion of the platform, and generate a credit line. Users can choose NFT with negative correlation to form an NFT investment portfolio , to resist liquidation caused by large changes in the price of a single NFT.
(2) Cross margin credit system
Users are allowed to mortgage NFT, ERC-20 Token, Uniswap V3 LP positions or any combination of the three to generate a credit line at the same time. The generated credit line can directly purchase NFT from the main NFT trading market in the NFT market embedded in Paraspace. Repay the loan later to improve the efficiency of the use of funds.
(3) Leverage to buy NFT
In addition to the mortgaged assets of the user can be used to generate points, the NFT to be purchased can also generate new credit points for the purchase of the next NFT, and the user needs to keep the health factor above 1.
(4) ChainLInk NFT oracle
Parespace is the first to use ChainLink's NFT oracle machine as the core of the loan quotation mechanism, making Parespace's NFT quotation more accurate than BendDao.
(5) Liquidation protection
When the health coefficient is lower than 1, the user's mortgage assets will face the risk of being liquidated. Users can choose to inject NFT, ERC-20 Token, and Uniswap V3 LP positions approved by the platform into the mortgage assets in a timely manner. If the user's health coefficient is still low At 1, ERC-20 Token and ETH will be liquidated preferentially during liquidation. Paraspace has a unique liquidation mechanism for NFT. NFT liquidation will adopt a mixed Dutch auction to ensure that NFT gets the maximum value.
Supporting Assets and Clearing Mechanism
Currently there are 9 types of NFT: Bored Ape Yacht Club, Mutant Ape Yacht Club, BoredApeKennelClub, CryptoPunks, Doodles, otherdeed, CloneX, Azuki, MoonBirds, Meebits, PudgyPenguins, SeWer Pass.
Supported Tokens: APE, cAPE, ETH, DAI, WETH, stETH, USDC, USDT, a total of 8 ERC-20 assets.
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advantage:
(1) Development team
The development team behind Paraspace is Para Lab, which has developed Parallel Finance -- the largest lending agreement in the Polkadot ecosystem. The team has a strong technical background.
(2) Strong endorsement from investors
Polychain Capital、Lightspeed Venture Partners、Slow Ventures、Coinbase、Blockchain Capital、Pantera、gumi cryptos、starkware、continue capital。
(3) Product design
The current product limit is only 2 months, TVL is the second in the NFT lending track, and Paraspace has made a series of innovations on the basis of BendDao's point-to-pool lending, such as cross credit system, NFT oracle, hybrid Dutch auction and Automatic re-investment will further stimulate the vitality of NFT, and the product has great potential and deserves attention.
risk point:
(1) NFT itself lacks liquidity and the number of users is limited. BendDao, which ranks first in TVL, has less than 1,000 users. It can be predicted that the number of users of Paraspace is less than 1,000.
(2) Paraspace has only been online for three months at present, and there may be potential risk points that have not been discovered, but it has already made a major breakthrough in the existing NFT lending agreement.
(3) Internal conflicts within the team: The recent exposure of Parasapce’s internal conflicts has resulted in user pumping and a large loss of assets.
Ubilo
Introduction
Ubiloan is a decentralized peer-to-pool lending protocol, focusing on NFTs on the GameFi track, providing instant loans and liquidity for NFTs in games and metaverses. Ubiloan has a unique NFT evaluation framework designed to solve the special problems in Web3 games through machine learning and algorithms. Ubiloan's vision is to connect the metaverse and the physical world. The practicality endowed by closed-loop systems such as games or the metaverse is the future direction of NFT, allowing the top 100 million gamers or NFT holders to benefit from their digital assets obtain economic benefits.
Product business
Game NFT:
PFP has the largest NFT market share, but NFT application scenarios for pure avatars or art collections are very limited, and the narrative of PFP in the current NFT market has lost its freshness. Top blue-chip NFTs (such as BAYC and Azuki) have already planned to develop their own Games and ecosystems, laying a solid foundation for the next round of narrative.
The NFT of the game and metaverse represents the future of NFT. In traditional games, players spend more than 100 billion U.S. dollars on the game every year to buy character skins, props, or unlock exclusive content, and such unique and tradable All content is worthy of being made into an NFT on the blockchain, thus endowing it with higher value.
In the future, these assets will no longer be a line of code in the game company's server, but in the player's wallet. NFT is a necessary factor to realize the integration of virtual and physical objects. It is Ubiloan's mission to build gaming and metaverse financial infrastructure. Ubiloan aims to become an NFT bank in the field of games and the metaverse, starting in the loan business, and continuing to provide various digital asset solutions, such as "buy now, pay later", "User credit record" and digital asset evaluation, etc.
PFP has the largest NFT market share, but the pure avatar/art collection NFT has limited application scenarios, and the market narrative has lost its freshness. Top blue chips (such as BAYC and Azuki) have long planned to develop their own games/ecosystems to build the foundation for the next round of market narratives.
Peer-to-pool lending:
NFT holders (borrowers) can get loans immediately after staking their NFTs in the Ubiloan protocol. Liquidity providers (lenders) deposit specific cryptocurrencies into Ubiloan's liquidity pools to earn interest.
Through the Peer-to-Pool model, both borrowers and lenders can use Ubiloan automatically and decentralized without trusting any humans. The lending model allows instant access to loans once the collateral is agreed upon by the protocol, and is allocated automatically without any human intervention. Unlike traditional ones, Ubiloan also supports non-custodial lending and has enabled the new EIP-5604 to enable this. The scheme allows borrowers to keep their assets and borrow money from Ubiloan at the same time.
Features
(1) Ubiloan has a unique health factor evaluation system, which is the biggest innovation in the lending agreement. It conducts qualitative analysis of the project team’s background and investment institutions, and quantitative analysis of transaction speed, depth, and price difference. Through this evaluation system, the The quantitative assessment of the risk dimension of NFT itself can predict the risk more scientifically. It is conceivable that when some NFTs have systemic risks, Ubiloan can timely avoid risks according to changes in health factors, so as to avoid "serial liquidation situation" .
(2) Unlike other lending agreements, Ubiloan focuses on NFTs that focus on the GameFi track, betting on the future GameFi track, Ubiloan will gain a preconceived advantage as a leading lending leader.
(3) Ubiloan's multi-channel liquidation can be liquidated through auctions, AMMs, and game guilds, with a high safety factor.
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Ubiloan has taken a different approach, giving up competing with other platforms for the blue-chip NFT sector, and betting on the blue ocean of GameFi’s NFT. The recent explosion of game NFT such as Matr1x also indicates that if it seizes the opportunity of GameFi’s new narrative, Ubiloan is likely to become GameFi’s new narrative. BendDAO in the world. Ubiloan's health factor assessment system, multi-channel liquidation and 48h liquidation protection form its three axes of hedging, which can protect the safety of NFT holders to the greatest extent.
NFT Fragmentation
Fragmented NFT is not a new issue. The purpose of fragmentation is to greatly reduce the threshold for a single transaction, so that ordinary players in the NFT circle can participate normally. The more common fragmentation mechanism in the market is to divide NFT into a series of homogeneous tokens. The total amount of fragments is first stipulated by the seller or project side of NFT. Fragmentation can be carried out according to the idea of FT (homogeneous tokens). Borrowing, liquidity pools, etc. enhance liquidity and enhance the price discovery function of the market.
These sharding protocols would require each shard to be listed at all times, so anyone can buy a shard by matching prices to express future price predictions. Then, the price of the NFT is the sum of the value of all circulating fragments - investors can acquire the entire NFT at any time at this price.
The current market size of NFT fragmentation is small and the scope of application is narrow, mainly because the fragmented NFT objects have large limitations and have not broken out of the dead cycle of poor NFT liquidity. At the same time, it increases the risk of reorganization. The liquidity problem needs to attract more of user participation. The realization of the reorganization is risky. In order to remove the entire NFT from the vault, all holders must sell their shares, which means that all parts must be put back together. If a certain part is missing, the NFT cannot be restored.
There are many projects on the fragmented track that have received more attention.
Tessera (formerly: Fractional)
Introduction
Fractional is a pure NFT fragmentation protocol built on Ethereum. NFT holders can lock one or more NFTs into smart contracts to create fragmented homogeneous tokens. The number of tokens issued and symbols are set by the creator. In addition, the creator also sets the starting price and buyout price for the locked NFT, so that other NFT collectors can bid.
Fractional received a $7.9 million seed round of financing led by Paradigm in 2021; in 2022, Fractional’s A round of financing totaled $2,000, led by Paradigm, Uniswap Labs Ventures, Focus Labs, eGirl Capital, Yunt Capital and more than 50 individuals Angel investors followed suit.
While announcing the A round of financing, Fractional announced that it will change its name to Tessera, and announced that it will retain the original fragmentation. Users can still purchase NFT fragments, buy out NFT, and PartyBid collective bidding, etc., but the new agreement will adopt Hyperstructures. The concept, and "RICKS" NFT fragmentation scheme, ensures that fragments are always converted back to their underlying NFTs, while avoiding the liquidity and coordination problems of all-or-nothing buyout auctions.
Product business
(1) Fragmentation of blue chip NFT
Maintain the original NFT fragmentation service. When NFT is transferred to the platform's Vault, an auction will be launched and minted into a specified number of Raes. Users can purchase fragmented NFT (Raes) through the first auction or the secondary market; if the user If you want to buy out the NFT in valut, you can choose to submit a buyout agreement; or you can choose to sell the fragment by giving up Raes on the Tessera platform. Holding Raes will get Tessera's PFP version of Raes for demonstration purposes.
(2) New NFT aggregation service
In the future, Tessera will focus on cooperating with the GameFi project to carry out NFT fragmentation of its GameFi project. Tessera is currently actively deploying GameFi's NFT fragmentation platform, and currently supports Parallel (another GameFi project led by Paradigm) to carry out NFT on Tessera Tessera will draw a part of the fee as platform revenue.
Features
(1) Fragmentation solutions endow NFT with new liquidity and realize the possibility of holding blue-chip NFT at low prices.
(2) For the fragmented platform of the GameFi project, lower the entry threshold for players, obtain NFT at a low price to unlock game levels and get more rewards, and further stimulate NFT liquidity and player participation.
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advantage:
(1) Leading projects in the fragmentation industry. It was launched earlier, has a wider audience, and has greater influence. It has top investors as endorsers, and actively cooperates with artists to expand the popularity and sales of its NFT.
(2) Rich business lines. Not limited to the fragmentation of blue-chip NFTs, an NFT portfolio strategy supporting the GameFi project has been developed to stimulate NFT transactions in both directions, increasing platform recognition and revenue.
risk point:
(1) Fragmented NFT objects are limited, limited to blue-chip PFP and well-known GameFi projects, but currently both NFT and GameFi tracks are in a bear market, and liquidity is obviously insufficient.
(2) The problem of how to restore the fragmented blue-chip NFT has not yet been resolved.
(3) Changes in team goals: On May 12, 2023, Andy Chorlian, founder of Tessera (formerly Fractional), tweeted that the profit goals (compared with the time and resource costs of scaling up there) did not make good business sense , announced that Tessera, founded by him, and its NFT marketplace "Escher" will close all operations in the next few weeks. The time for the currency circle to generate electricity for love is always limited, and the narrative is too grand, which may also be another risk point of the project.
Furion
Introduction
Integrating three major solutions for NFT liquidity: fragmentation + AMM + peer-to-pool lending, the one-stop NF liquidity enhancement platform further stimulates the vitality of NFT. Furion has launched the first phase of the test network on December 14. Before the deadline, more than 30,000 Addresses participating in testnet activities.
Product business
(1) Single asset pool
Different from conventional fragmented NFTs, users can choose whether to retain the ownership of NFTs, or not, they can use all FX tokens for lending or other operations, and use FX tokens to redeem any NFT in a single asset pool within a specified time , when redeeming NFT, the platform will charge a fixed fee of 100$FUR as part of the platform revenue; retaining the NFT holding right requires locking a part of the FX token in a single pool, and using the rest of the FX token for other liquidity operations.
Example:
Alice has a DOODLE#7753, rather than keeping it, she prefers better utilization and liquidity, then she deposits this DOODLE into the Furion Doodle Pool and gets 1000 F-DOODLE tokens.
With F-DOODLE, she can sell it through the AMM pool to get other assets, or deposit to lend;
Additionally, she can return 1000 F-DOODLE tokens (plus 100 $FUR) to the Furion Doodle Pool to redeem for any DOODLE#7753 or any other in it.
(2) Aggregate asset pool: users can choose to mint FTT tokens with FX tokens of the same origin (such as F-BAYC, F-MAYC) to form index tokens and enjoy the rising income of similar NFTs.
(3) AMM: Adopt automatic market maker system to trade Furion's FX token, FFT token and FUR token.
Features
(1) The loan asset pool is stratified according to risk
(2) AMM exchange for FT, FFT, FUR
Furion Swap also combines every two Tokens to form a trading pair, and then follows the formula of x*y=k to have general traders and LP providers. Swap charges 0.3% of the transaction volume as a transaction fee, 99% of which is used as LP rewards, and 1% is used as platform income. In addition, in addition to transaction fees, LP providers can also use LP for liquidity mining to obtain platform token FUR rewards.
(3) ve-token distributes governance rights
Users can pledge FUR to obtain veFUR to enjoy governance, platform fee income, and increase loan utilization.
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advantage:
(1) The product line design is rich, and the FT gameplay is introduced into NFT to revitalize the liquidity of NFT.
(2) Different from the fragmented NFT objects of other fragmented projects, Furion's NFT participation points include blue-chip NFT, growth NFT and Penny NFT (liquidity cross, lower price).
(3) ve token participates in project governance and improves user participation.
risk point:
(1) The project is currently in its early stages, with limited team information and no financing information disclosed.
(2) The nesting of gameplay is more dependent on user participation, and the current NFT fragmentation market has a small capacity, and it is necessary to wait for the outbreak of NFT to drive the fragmentation market.
Summarize
NFT fragmentation can directly reduce users' holding costs, but the original community reward distribution and recovery after blue-chip NFT fragmentation is still a major problem. Tessera chooses to provide fragmentation platforms for other projects to expand product usage. Furion uses fragmentation + The combination of AMM+ peer-to-pool lending provides more ways to play. NFT fragmentation is still in the early stages of development, and more narratives are needed to stimulate liquidity from a new perspective.
NFT Perpetual
In traditional finance, the derivatives market is always larger than the spot market, and the NFT derivatives industry currently has few mature products, but it is also a segmented industry that best fits the financial attributes of NFTs. Perpetual contracts mainly allow users to short NFTs and leverage Hold NFT, but because the entire Web3 derivative project is not mature enough, NFT derivatives are also in their infancy.
In the perpetual contract track, there are currently few projects, mainly including the NFT perpetual contract trading platform nftperp.
nftperp
Introduction
A perpetual contract trading protocol that tracks the floor price of NFT series, nftperp has launched the Beta mainnet on Arbitrum One, allowing users to mortgage WETH instead of NFT to go long or short blue-chip NFT, with a leverage of up to 10 times
nftperp recently completed a US$1.7 million seed round of financing, with participation from Dialectic, Maven 11, Flow Ventures, DCV Capital, Gagra Ventures, AscendEX Ventures, Perridon Ventures, Caballeros Capital, Cogitent Ventures, Nothing Research, Apollo Capital, Tykhe Block Ventures, OP Crypto, etc. cast.
Product business
The transaction adopts the vAMM design, and both sides of the opening position have slippage. Protocol dynamically adjusts the depth of the virtual pool by adjusting the k value, so as to avoid excessive slippage caused by extreme price fluctuations. For the profit of one party, all profits and losses are settled in the guarantee vault; the price feed adopts the True Floor Price model, obtains transaction data from NFTX, eliminates transactions that are too high/low in price according to its own average price algorithm, and calculates the floor price through TWAP.
Features
(1) The nftperp trading mechanism uses a virtual automatic market maker (vAMM) model, which does not require a real liquidity provider and has no order book. The trader's mortgage assets will be stored in a smart contract vault, and all losses and gains of the trader will be processed in the vault.
(2) Provide hedging methods for NFT prices to achieve long and short positions. The contract supports the use of ETH to trade 5 NFT series such as AZUKI / BAYC / MAYC / PUNK / Milady.
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advantage:
(1) The vAMM design is not zero slippage opening position, which avoids the risk of price manipulation and arbitrage similar to GMX design.
(2) Change the long-only situation in the NFT market, and realize long and short while satisfying leveraged transactions.
risk:
(1) There is a possibility of price manipulation. The NFT market is relatively small, and the spot price is relatively easy to be manipulated. When spot price manipulation occurs, violent price fluctuations may lead to a large number of liquidation events in the derivatives market, and the agreement's insurance fund may not be sufficient to repay bad debts, and the agreement will face systemic risks.
(2) In the early stage, market makers need to enter to increase liquidity.
(3) The project is still in its early stages, and the True Floor Price Oracle algorithm has not been made public, so there are potential risks.
in conclusion
There are many and complex subdivision tracks of NFT, and this article lists only some of them. Although the current main focus of NFT is Marketplace and aggregator, we cannot deny that NFTFi is a necessary place for the development of NFT, and NFT lending is an important part of NFT Outside of transactions, it is one of the tracks with the least difficulty for users to enter and the most closely linked with NFT transactions, and the NFT lending market is no longer limited to NFT itself, and has begun to develop in combination with other DeFi, GameFi tracks, and other tokens. We It is expected that NFT lending will be the next gathering place for NFT traffic. At the same time, we will continue to pay attention to how lending project parties can help users increase passive income and reduce liquidation risks.
The bull market relies on traffic, and the bear market engages in construction. The NFTFi projects that survive the bear market have their own unique advantages, and the projects that can achieve development and stable growth in the bear market stage must be worthy of more research and learning. Future NFTFi products will bring more ownership innovations and liquidity creation, and we will wait and see.
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