What is NFTFi? What are the projects worth following in NFTFi?

1. What is NFTFi?

NFTFi (NFT and DeFi) is the practice of offering NFTs as collateral in DeFi applications and protocols , thereby providing liquidity and utility to NFTs. Simply put, instead of with the traditional financial model, users can trade, leverage, borrow/loan with tokens, with NFTFi applications, users can do those activities with your NFT.

This is a breakthrough in the field of decentralized finance (DeFi), especially in the context of NFTs becoming increasingly popular and attracting attention from the community.

In short, NFTFi applications will enable buying/selling, lending/borrowing and trading of NFTs/NFT-related derivatives, solving the liquidity and utility issues for NFTs in the market.

So what pieces is NFTFi made up of?

2. 6 pieces that make up NFTFi

Overall, the NFTFi ecosystem includes the following 6 main pieces:

NFT Marketplace: This is a platform - where users buy, sell, exchange and trade NFTs. NFT Marketplace can be understood as an NFT trading marketplace, allowing users to search, view detailed information and participate in the NFT market.
NFT Lending/Borrowing: Provides a borrowing and lending mechanism based on NFT. Users can use NFTs as collateral to borrow money/tokens.
NFT AMM/DEX: NFT AMM/DEX stands for "Automated Market Maker" (AMM) and "Decentralized Exchange" (DEX) as it applies to NFTs. NFT AMM is an automated system on the blockchain that provides liquidity for NFTs. Instead of relying on order matching between buyers and sellers, AMMs use asset pairs and supply rates (liquidity) to determine the value of the asset. NFT DEX is a trading platform for NFTs. The platform allows users to exchange NFTs directly with each other without the need for intermediaries, ensuring decentralization to exchanges and adding liquidity to NFTs, helping users find and participate in NFT transactions easily. effectively.
Derivatives/ Perpetual Trading: Provides derivative financial products based on NFT. This allows users to participate in NFT futures contracts and seamlessly trade in the decentralized financial market.
Staking/Yield Farming: Provides staking and yield farming mechanisms for NFTs. Users can stake their NFTs into staking protocols to receive rewards in other tokens or engage in yield farming to profit from providing liquidity.
NFT Analytics: Provides data analytics tools and services for NFTs. This helps users better understand the NFT market, price trends, and other important information to support investment and trading decisions.

NFTFi generation system — *The pieces that make up NFTFi*

Overall, all 6 pieces of the puzzle above are quite important to the NFTFi ecosystem . In the next section, we will learn more about each piece of the puzzle and the projects worth following in the 6 pieces mentioned above.

3. Projects worth tracking in 6 pieces

3.1. NFT Marketplace

Serving as a place to exchange and trade NFTs, NFT Marketplaces are considered an important part of NFTFi .

Below are some prominent marketplaces in each system that you can follow:

Ethereum: OpenSea, Blur, LooksRare, Gem (OpenSea Pro), X2Y2, CryptoPunks,…
Polygon: Dew, Element, Magic Eden, Rarible,…
Solana: Tensor, Magic Eden, Solanart,…
Aptos: Souffl3, Topaz,….
Sui: Hyperspace, Clutchy, Bluemove, Dragonsui, Somis,…
Arbitrum: Trasesure, ToFu, OpenSea, Element,….
Art: Zora, Super rare, Foundation

3.2. NFT Lending/Borrowing

NFTFi has quite similar features to DeFi. For users holding tokens, they can lock tokens to receive profits according to APY. As for NFTs, users can lock NFTs to receive tokens.

Currently, in the Lending and Borrowing niche, there are 3 top projects that you can follow, which are:

TheBlock101 has a comprehensive article about these 3 projects, you can refer to the link below:

Top 3 NFT Lending and Borrowing projects in 2023

In addition to the three projects mentioned above, we can mention projects such as: NftFi, X2Y2, Jpeg...

3.3. NFT AMM/ DEX

A notable project in the NFT AMM/DEX segment is SudoSwap.

SudoSwap is an automated market maker (AMM) protocol for NFTs. SudoSwap supports swapping ERC721 NFTs into assets such as ETH and ERC20 tokens or making instant NFT purchases based on the liquidity pool. Every user has the ability to create pools on SudoSwap.

In the AMM/DEX puzzle we can mention a solution called NFT Fractionalization. This is a form of fragmentation of an NFT into smaller parts, often called "fractional NFTs." The idea behind NFT sharding is to make an irreplaceable digital asset shareable and investable by more people.

Currently, projects that can be tracked in this aspect are: Fractional art, LIQNFT, NFTX and a project that Theblock101 recently updated is Flooring Protocol.

3.4. Derivatives/Perpetual Trading

NFT Derivatives are derivative trading tools that allow users to predict the future value of NFTs and make purchases based on this prediction.

Currently, in this puzzle, there are two NFTFi projects that are attracting attention, they are:

NFTperp: NFTperp is a prominent NFT derivatives project, allowing users to experience the "Paper Trading" version to test their prediction ability or join the private beta version to experience trading with real assets .
NiftyOption: NiftyOption is another project in the NFT derivatives space, providing NFT derivatives trading tools.

In addition to the above two projects, we can mention SynFutures, a derivatives platform supported by big names in the industry such as Polychain, Dragonfly, Framework and Pantera. SynFutures has launched the NFtures project, a derivatives platform dedicated to NFTs.

These projects provide users with the opportunity to participate in the NFT derivatives market, predicting and trading on the future value of NFTs, opening up a series of new opportunities and experiences in the NFTFi space.

3.5. Staking/Yield Farming

Yield Farming is one of the popular concepts in the NFTFi ecosystem , and plays an important role in the explosion of the DeFi trend.

Yield Farming for NFTs is a method of incentivizing users to provide liquidity on protocols and receive returns and rewards in the form of tokens or LP tokens.

Currently in this niche, there are two projects that can be followed and paid attention to: Baton Finance and Revest Finance. For users interested in Yield Farming for NFTs, these projects may provide an opportunity to participate and take advantage of the profit potential in the NFTFi space.

3.6. NFT Analytics

Finally, an indispensable aspect in NFTFi is tools to aggregate and analyze statistics for NFT collectibles on the market.

Similar to DeFi aggregator platforms like DappRadar or Defilama, the NFT market also needs such tools to assist users in understanding information about NFT collectibles trending in the market.

These tools help users track and update the latest information about NFTs, including price, market capitalization, trading volume, and number of owners in each collection. This information helps users make smarter and more informed NFT investment decisions.

In the field of NFT Analytics, there are several projects worth following, including Nansen, Upshot, DeBank, NFTGo, NFTBank... These projects provide NFT analytics tools and data to help users understand more about the NFT market and specific collectibles.

4. Conclusion

NFTFi, which combines NFT and decentralized finance (DeFi) has opened up a series of new opportunities in the NFT sector. NFTFi allows users to buy/sell, borrow/lend, trade NFTs, provide liquidity for NFTs, and participate in NFT-related financial activities.

The 6 pieces that make up the NFTFi ecosystem have quite a few projects worth following and exploring. Although the NFT market is not currently very active, NFTFi has and will continue to play a role in promoting the development of the NFT space, bringing many attractive opportunities to participants and marking the intersection between NFT and decentralized finance.

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