NFTFi is a new type of decentralized finance (DeFi) ecosystem that was designed for NFT traders. NFTFi combines the NFT market’s liquidity, technology and tokenization with DeFi protocols to create an innovative trading environment. With NFTFi, NFT traders become market makers. NFTFi can be a complex space, so we made a comprehensive guide of what you need to know to get started.
Collateralized Loans
NFTFi offers NFT traders the ability to take out collateralized loans using NFTs as collateral while gaining access to immediate liquidity and capital for trading. Borrowers can offer up NFTs as collateral and lenders can choose which NFT they are willing to accept before initializing a loan. NFTfi is a company that allows you to unlock value from your NFT by giving you liquidity while holding your NFT in escrow until a user’s loan is paid back. Lenders on NFTfi’s platform get a 5% interest rate with no service fee to borrow. Arcade, another lender in the space, offers NFT backed loans that can be distributed with or without terms.
NFT Liquidity Mining
Protocols like Unicly allow NFT traders to farm yields by contributing to NFT liquidity, receiving Unicly’s governance token UNIC! in return, that can be traded for other tokens such as stablecoins. While liquidity mining has had it’s bull run in DeFi, it’s just getting started with its crossover to NFTs. Like many LP’s, this strategy has potential risk for impermanent loss, smart contract exploits, and regulation — so participate at your own risk.
NFT Staking
To shield against impermanent loss that occurs on LPs, NFTX launched Inventory staking that allows users to simply deposit NFTs straight into NFTX vaults rather than the traditional LPing method of supplying NFT + ETH liquidity, earning users 20% of vault trading fees.
Liquidity pools for NFTs
SudoSwap, an AMM, allows traders to provide liquidity in NFTs. This allows traders to buy and sell NFTs through liquidity pools instead of peer to peer or OTC, leveraging the upside of these liquidity pools via a bonding curve, which can be used to purchase more NFTs or other assets.
NFT Derivatives
NFT derivatives are NFTs which derive their value from underlying NFT assets. These NFTs can be used to speculate on price movements of the NFT asset and also to hedge against risk. Although still in beta, NFTures is a platform to price speculate by longing or shorting notable NFTs. NFT Derivatives gives you possibilities that were unavailable before, including trading high-value NFTs and using leverage to do so.
Conditional Order Types for NFTs and ERC Tokens
Brink allows you to create an automated conditional limit and stop/loss order on your favorite NFTs with any ERC20 token, all while having an aggregated view of bids and asks across marketplaces to help users seamlessly plan their next trade. If you’re a web3 developer, Brink also has API keys for integrating new order types and aggregated collection data or order book data into DApps.
If you’re looking for an entry point into NFTFi, start by searching your top NFT collections at app.brink.trade and automate your first limit order! Got a feature request? Come chat with us in Discord.
