dear bankless nation,
Competition on the NFT marketplace may be the hot topic stealing most of the headlines today, but there is plenty of under-the-radar experimentation in the world of NFT DeFi.
This week we look at some young, promising opportunities in the emerging sector.
– Bankless team
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Unbanked Author: William M Peaster
“NFTfi”, the mix of DeFi solutions with NFT use cases, is currently the fastest growing area of the crypto economy.
With so many projects already out there to explore in this scene, it can be dizzying trying to figure out where to start. This bankless tactic curates five under-the-radar opps that are compelling And straightforward for NFTfi newbies.
At the moment, total value locked (TVL) is in DeFi ~$49bnand the market cap of the NFT space is over $15 billion.
This means that DeFi and the NFT ecosystem are practically the largest sectors in the crypto economy today. However, these sectors are increasingly overlapping and blurring, giving rise to the “NFTfi” category – i.e. projects offering services at the intersection of DeFi and NFTs.
Of course, NFTs are unique digital assets that represent ownership of a specific piece of content, while DeFi is about creating decentralized and open financial products. When you combine the two, you get a brave new world of the latest financial opportunities for NFT holders.
These opps come in a variety of forms, from collateralizing NFTs for loans to yield farming with unused NFTs on liquidity logs. Some of the better known NFTfi categories and projects that create these types of opps today are:
But let’s say you’re a newbie to NFTfi and find this all very interesting but don’t know where to start. In that case, you should start with straightforward opps that are relatively easy to use and don’t require you to keep track of a bunch of information all the time.
I keep a close eye on the NFTfi scene as part of my research metaversal, so lately I’ve been curating a list of these types of easier opponents. Today I have a handful of cool ones that I want to share with you.
Of course, treat these as early experiments as most are fairly new. If you Do Try it, Never deposit more crypto or NFTs than you can afford to lose. Taking a “safety first” approach, here are 5 fresh and under-the-radar opps you might want to consider as potential starting points for your first forays into NFTfi.
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Caviar is an NFT-AMM protocol for trading NFTs. It supports NFT fractionation via ERC20s and also provides a unique “desirability classifier” system to organize NFT collections into subpools according to desirability ratings. Therefore, each caviar master pool has multiple independent price curves to account for the liquidity of an entire NFT collection. With this sub-pool system, the protocol aims to increase liquidity for rarer NFTs and incentivize trading activity for Liquidity Providers (LPs).
LPs on Caviar earn a return from a 1% fee charged on each Caviar NFT swap. As more people trade through a given pool, that pool’s LPs earn proportionately more returns. So the strat here is LPing with ETH and NFTs in an active caviar pool to benefit from trading activity over time. For example, as you can see in the screenshot below, Cool Cats LPs on Caviar are currently earning 58% APR based on trading activity over the last 30 days.
apartment | Documents | Twitter | discord | Test
Developed by Backed and inspired by Squeeth, Papr is a new breed of NFT lending protocol that is flexible, resilient, and usable with no lock-up periods. This new approach focuses on Papr (“Perpetual APR”) tokens that can be minted by borrowers when sending NFTs as collateral for a Papr controller smart contract. Borrowers can then sell these tokens to a DEX like Uniswap when needed, and this market activity creates a constant feedback loop between the paper trading price and the protocol’s interest rates.
A Papr token offers holders and LPs a low-maintenance buy-and-hold opportunity to gain access to multiple NFT collections and loans at once, as it offers the potential for interest in the form of its feedback-based price appreciation system. For example, the first such token, $paprMEMEprovides access to loans from 10 collections including Cool Cats, Forgotten Runes Wizard’s Cult and Mfers.
apartment | Documents | Twitter | discord | Test
insrt finance is an NFT protocol for set-and-forget return strategies and its first product category is called ShardVaults. Described as “fractional NFT spot exposure combined with passive yield farming,” these vaults offer low-cost ownership of blue-chip NFTs via shards, which are NFTs that represent fractional ownership of a base ShardVault NFT, e.g. B. a bored monkey. Then the base NFT itself is deployed into NFTfi and generates revenue for the shard holders of that NFT. For example, the first ShardVaults from insrt (for CryptoPunk #9620 And BAYC #1369) both currently generate over 15% APR for their shard holders.
ShardVaults #1, #2And #3 have already been fully minted, so until more vaults are introduced, the only way to gain access to these initial NFT-based yield opps is to purchase shards on a secondary marketplace like OpenSea. When you do this, you automatically start reaping the passive income from providing the underlying NFT.
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MetaStreet is a decentralized interest rate protocol for the Metaverse. Its first flagship products are its Capital Vaults, which allow people to deposit ETH, DAI, and later other cryptos to earn on NFT-based vault strategies. Specifically, the Capital Vaults use these deposited funds to purchase P2P NFT-based promissory notes facilitated by lending projects such as nftfi.com, and these debentures offer yield through interest payments and liquidations. With that in mind, you can think of MetaStreet’s Capital Vaults as an aggregator of NFT credit side liquidity.
The idea here is to deposit into one of MetaStreet’s capital vaults to generate passive income. Because depositors can choose how much of their money is split between senior (higher-risk) and junior (lower-risk) vault positions, your APR will depend on how you mix your exposure. For example, a 30/70 Senior/Junior divides by the General-WETH Vault would generate ~20% APR at the moment.
apartment | Documents | Twitter | discord | Test
Hook is a decentralized NFT derivatives protocol specializing in European-style call options that allow people to speculate on the price of an NFT during a specified time period without having to pay the full asking price for that NFT. To delve deeper into the basic nuances here, take a look I wrote this guide on Hook last year. Put simply, however, Hook allows NFT holders to earn premiums on their NFTs or sell them at optimal prices, while offering traders the opportunity to earn on speculative long or short positions.
Hook’s newest product is Hook Earn, which is powered by the protocol’s call options under the hood. This new service allows NFT owners to earn instant income from their dormant NFTs as long as they agree to list those NFTs at a specified future date at a specified price. If no purchase is made by that target date, you can keep the NFT and deposit it back into the Earn system. If an NFT sells for more than its list price (which is always above a collection’s reserve price), the dealer involved earns the spread. Accordingly, “the merchant pays the NFT holder up front for that future potential revenue,” Hook has explained. Also note that Hook Earn is brand new so there is still a waiting list while liquidity builds. You can Sign up for early access on the project website.
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