NFTs Are Good For DeFi
The mainstream adoption of NFTs will benefit the DeFi ecosystem in a big way and here’s why
Hey DEFI TIMES community,
Crypto is going mainstream in a totally different way than we would have thought.
It seems like DeFi isn’t the killer app of crypto. At least not for now!
There’s another crypto niche that is seeing significant mainstream adoption right now: NFTs!
NFTs have truly moved beyond the wildest dreams of every single crypto enthusiast out there. They are the first use-case of crypto to ever reach millions and millions of people.
At this point, NFTs have completely left DeFi behind when it comes to the number of people involved.
The Google trends chart says it all:
Another thing to consider: OpenSea, which is the go-to place for every NFT enthusiast, has burned twice as much ETH as Uniswap v2 in the last 30 days.
Uniswap has dominated the Ethereum landscape for a long time now… and then NFTs came along!
And there’s a particular reason for this: NFTs are just way more suitable for the masses than DeFi. Sure, everybody needs financial services but it’s not something your old high school friends like to talk about every day.
NFTs, on the other hand, are currently being promoted by major influencers around the world. We see hot art drops, cool metaverses, and all kinds of awesome stuff that people get excited about! The hype potential is HUGE!
Don’t get me wrong. I love DeFi but right now NFTs are just way more popular at the moment!
You can try and ask your aunt whether she knows NFTs… and she’ll probably say yes!
If you ask her about DeFi however, the chances are not quite high!
NFTs Are Good For DeFi
Considering the rise of NFTs, outsiders might think that NFTs are bad for DeFi in general. They might think that it’s a zero-sum game, where attention towards one niche hurts the other one. But this couldn’t be further from the truth. In fact, NFTs are very good for DeFi!
Maybe the most obvious reason is that economic activity from NFT trading directly benefits ETH holders. Millions of new people entering the industry have to buy ETH in order to participate in the NFT mania. ETH is the fuel of all economic activity on Ethereum. There are very few rules on Ethereum but this one is undebatable: You pay transaction fees in ETH! There’s no way around that.
Anyone who joins the NFT mania will have to buy ETH in the first place. Then the person will pay their transaction fees in ETH. Then ETH gets burned… The NFT mania is rocket fuel for the ETH price!
Another thing to consider is that every single human who wants to buy/sell NFTs has to download Metamask or a similar wallet at first. That’s why the NFT hype is the best marketing for Ethereum and crypto. Millions of people are learning how to download Metamask, buy ETH, and send a transaction on the network. These people would have probably never cared about Ethereum at all. But NFTs have found a way to get them interested in crypto.
Most NFT people are not tech-savvy at all. They are also no finance freaks or libertarian hard-money enthusiasts.
They just want to collect cool art pieces and show them to their friends.
NFTs have turned out to be the gateway drug for ordinary people to enter crypto. And you all know how it ends. You’ve seen it many times in the past… once you are in crypto, you will never get out!
It’s a one-way street!
NFTs are the best marketing for crypto and DeFi!
Merging NFTs with DeFi
Not all humans are finance freaks but everyone loves collectibles and funny memes. Everyone loves NFTs!
The real party starts when NFTs are going to merge with DeFi. Today, NFTs are highly illiquid. They are unique tokens on the blockchain and have to be sold in auctions. When you buy an NFTs, you never know whether you will ever be able to sell it again.
However, we have found a way to actually make NFTs liquid. Yes, you read that right!
We have found a way to make illiquid tokens liquid. That kind of magic is only possible in crypto and DeFi.
You’re probably wondering how that works. Well, the concept is very simple: We take an NFT and cut it into many very small pieces. By fractionalizing NFTs, we turn them into liquid and easily tradable assets allowing for fast price discovery!
The most popular protocol building fractionalized NFTs is Fractional.art.
That’s how NFTs will merge with DeFi. And once that happens… there’s no stopping the bull!
A simple example: CryptoPunks are super expensive and not everyone is able to afford a whole punk! By using Fractional, we can mint many ERC-20 tokens representing the punk. That’s how many different addresses can hold the punk simultaneously… ultimately democratizing access to the punk ecosystem!
All ERC-20 tokens collectively represent the ownership of the punk.
Of course, once the NFT is fractionalized, we can use it in DeFi. There are no limits to what we can do. We can provide liquidity on Uniswap, lend our NFTs on Aave, and so on.
That’s how we will grow together. Right now, the NFT space is completely separate from the DeFi ecosystem. But that is going to change soon.
The DeFi space will profit immensely from the NFT hype… sooner or later.
NFTs are great marketing for DeFi. NFTs force new people to download Metamask and learn how Ethereum works. Once they are in crypto, there is no going back!
Fractional NFTs will merge NFTs with DeFi… and boy that’s a big thing!
Have you tried using your NFTs as collateral once? Well, that’s only possible with fractional NFTs.
We will unlock a new type of money lego:
NFTs x DeFi
And I can’t wait to see this new ecosystem evolving!
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DISCLAIMER: All information presented above is meant for informational purposes only and should not be treated as financial, legal, or tax advice. This article's content solely reflects the opinion of the writer, who is not a financial advisor.
Do your own research before you purchase cryptocurrencies. Any cryptocurrency can go down in value. Holding cryptocurrencies is risky.