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Future NFTs Crypto Asian Biz Giants SK, Bandai, Line Bolster Metaverse, NFT Operations


There is so much hype about the Art and Collectibles (A&C) in the NFT space that you would be forgiven for thinking that NFTs begin and end. Certainly, the vast majority - though not all - NFT projects to date have been concentrated in A&C. The quarterly study released by NonFungible Paint paints an interesting picture: by volume, A&C had a 91% market share in the first quarter of 2021, down from 85% in Q3. This simultaneously reflects the dominance of A&C, while also pointing to an expanded presence of other NFT verticals. As NFT use cases expand and diversify, the market grows (over $40 billion in 2021, per Chainalysis), and the benefits of the technology are increasingly recognized, therefore, two questions remain: What is stopping mass adoption of NFTs and how can we get there?

In a recent article for on this topic, Kirill Nikolov suggested that the holdup is partly due to the low level of global crypto adoption (only an estimated 106 million people hold crypto), but mainly due to utility and services. lack of what NFTs can make up. Accessible and useful in people's daily life. One of the major services that Nikolov mentioned is the development of financial instruments.

Inspired by the importance of developing this new range, this article proposes that such financial instruments can be defined and grouped under the term 'NFT Finance'. In the following sections, I will break down NFT finance, suggest a framework for understanding current and future financial products, and demonstrate how it can enhance an incredibly diverse range of global industries. Most importantly, I would argue that NFT finance is the key to mainstreaming NFTs and expanding the liquidity and growth of NFT markets within and outside A&C.

What is NFT Finance and why does it matter?

First and foremost, let us see what is included in NFT Finance. In the first article published in a collaborative research series between CadLabs and NFTfi titled 'The Advent of NFT Finance', NFT finance was defined as 'the Web3 infrastructure and set of markets for NFT-based financial products and services' . To understand what it is. In practice, it is helpful to make comparisons with the traditional finance (TradFi), A&C, and real estate industries.

In TradeFi, services that take place outside the main banking system, or that service niche asset, are called specialty finance. In the world of A&C, financial services are considered a form of specialized finance, having evolved in recent decades from state-of-the-art investment vehicles to loan providers and securitization platforms. The existence of these financial products enables greater activity in the A&C market as players free up capital, conduct more complex transactions and participate in new ways beyond a direct artwork purchase or sale, particularly in the secondary market. . Similarly, the financialization of real estate in the 1990s, along with the creation of mortgage-based products and derivatives, and the securitization of loans, was crucial to that industry's boom.

These comparisons help us to envisage the NFT finance offering for NFTs by creating liquidity and new markets based on NFTs, which will broaden the opportunities and scope of investment, value creation, trading and other forms of market participation .

At this early stage of growth and innovation, it is important to think as broadly as possible and, crucially, to consider how NFTs can facilitate and enhance the use of NFTs in industries beyond finance A&C. However, in order to do so, we first need to establish the suitability and potential of such widespread NFT adoption.

Suitability of NFTs for Wider Adoption

NFT can be anything. Therefore any economic activity built around individual entities can benefit from these entities present on the blockchain in the form of NFTs. These benefits include, to name a few, greater transparency, accountability, traceability, efficiency, reliability and compatibility. Which industries particularly benefit? To begin with, at the core of which are irreplaceable objects. Here are a few examples:

Supply Chain Management: Can certify NFT products and ensure quality standards. Thanks to the traceability of NFTs, the origin of products can be verified and their movements can be tracked at each stage of transportation and production. This will be a huge advantage for any business that depends on supply chains, from food to fashion and pharmaceuticals. The potential impact of enhanced supply chain management around the world cannot be underestimated.

Patents and Intellectual Property: NFTs can be used to transfer ownership. Records of patent owners can be kept on the blockchain and tokens with self-executing contracts can transfer the legal rights associated with the patent upon token transfer. A notable development in this area is a partnership between IBM and IPWay to create the infrastructure for a global patent market where tokenized patents can be traded via NFTs. The usefulness of this platform will extend beyond simple sales transactions, allowing participants to license, finance, research and even commercialize patents. This is a leading indicator of how NFT integration into the existing industry can be enhanced by the creation of additional financial products and systems (NFT Finance) that bring flexibility, liquidity and efficiency. Expanding on the topic, IPwe CEO Erich Spangenberg said,

“Using NFTs to represent patents will help create entirely new ways to interact with IP. This is expected to benefit not only large enterprises that own significant intellectual property, but also smaller and smaller ones. will bring new opportunities for medium enterprises and even individual IP owners. We believe this will usher in new offerings by financial services firms and corporations to fuel the growth of a new patented asset class."

Real Estate: NFTs are not only fundamental to virtual real estate in the metaverse, but are already being used to facilitate physical transactions. In February 2022, the first NFT-linked house sale took place in the US through Propy, a startup combining real estate with NFT lending. In this case, the NFT was not linked to the housing deed but to the ownership of the LLC that owns the physical asset. This is just the beginning of experimentation in this industry, with many potential applications of NFTs now being recognized and development of DeFi staking is underway which will undoubtedly encourage more NFT-based transactions in the space.

The above examples clearly demonstrate how NFT finance products are evolving systematically as NFT use accelerates in non-A&C related industries, and the huge potential for NFT finance to facilitate broader NFT integration. Is. However, this highlights the need for further research and development into the possibilities of NFT finance broadly, not on an industry-by-industry basis.

To do this, we need a framework to classify the main types of NFT finance infrastructure that can be implemented across all industries.

A framework for NFT finance

In a recently published article series 'The Advent of NFT Finance', a framework for classifying NFT finance products, based on the infrastructure of the TradeFi market, was proposed by Giulio Trichillo and Jonathan Gabler. This classification is not only useful for understanding the mechanisms of NFT finance, but it also provides a comprehensive framework to understand and further develop the space. With that in mind, let's break these down and see how each category holds up by exploring the many innovative platforms that are already in operation.

Kind of loan: Manufacture of fixed income instruments that result in cash flow based on NFT eg. A peer-to-peer loan where an NFT is used as collateral.

Equity-Like: Manufacture of any device enabling the ownership of fungicidal items backed by non-fungus e.g. Partial tokenization of NFTs via ERC20s.

Kind of aggregation: Creation of investment vehicles, aggregators or market-making utilities that enable individuals to become market participants without any technical knowledge based solely on upfront capital – such as index tracker funds or NFT automated market makers.

Most of the loan-like products in existence are lending platforms. Borrowers benefit from liquidity without having to sell their assets, while lenders benefit from a profitable APR (Annual Percentage Rate). Transactions are executed via smart contracts and if the borrower defaults, the lender automatically receives the collateralized NFTs – the most commonly listed collections include Cryptopunks, BoredApps, ArtBlox and WeFriends, to name a few. Huh!

In a category like equities, we have seen the rise of NFT-based securitization products that enable partial-ownership of non-fungible commodities. For example, particle collection is leading the way in collective ownership of traditional blue-chip art – by acquiring images, which are then subdivided into 10,000 individual NFTs (or particles), which can be collected and traded. Is. The first artwork to be particled was Banksy's 'Love in the Air', which was bought for US$12.9 million at auction in 2021. The physical work, as with all future acquisitions, will be installed at the upcoming non-profit Particle Foundation – both physically and in a Metaverse museum.

When it comes to tools like aggregations, DAO-managed indexes are a thriving example. Index Cooperative, a DAO (Decentralized Autonomous Organization) currently has over USD 400 million in assets under its management, offering a wide variety of investment opportunities for individuals and institutions associated with the crypto space. These investment vehicles are being met with rapidly increasing demand, with the number of index holders in Index Coop alone increasing from 5,000 to over 30,000 during 2021.

Value of NFT Finance

NFT finance is not an adjunct to the NFT space, but will prove fundamental to mass adoption of NFTs beyond the limited sector of art and collectibles. As explained in this article, NFTs have the potential to span industries from supply chain management to real estate – unlocking new opportunities for individuals and institutions to participate and profit with NFT Finance. Due to the nature of DeFi composability which is unique to blockchain infrastructures (as are NFTs), there is an unprecedented level of interoperability between NFT markets and NFT finance compared to traditional markets and their respective financializations.

The potential user base for NFT finance products is therefore far wider than for traditional specialty finance, with the generally decentralized nature of these new products removing further barriers to entry. If NFTs are at the beginning of mass integration and mass participation, then NFT finance will be a deciding factor.

Crypto Investors Gains Up 400 Percent In 2021

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