NFT the power to DeFi

Nov 15, 2020
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NFT in DeFi

Smoking hot this year that’s meant that almost every DeFi project has seen mad gains. That’s good news if you jumped into DeFi early. However at current valuation levels you can’t be blamed for thinking twice when deciding to allocate funds to the sector. However here’s the big question what is the next hot sector in crypto.

We all know that to maximize those gains you need to identify that hot niche early learn everything you can about it and then find the best opportunities but don’t worry i have you covered my name is guy and in this video. i’ll tell you everything you need to know about non-fungible tokens and why i believe this sector might just be the next big thing in crypto. i’m also going to explain how nfts are already expanding the DeFi ecosystem and why they could be the key to bring tens or even hundreds of millions of people into crypto.

Before i get going there are a few quick things i need to say don’t let the t-shirt fool you i am no financial advisor sorry chaps and chappets that means that this video is for educational purposes only be sure to consult a real financial advisor before making any hasty moves also if you’ve come across my channel for the first time then welcome to this community. i’m constantly working in the trenches to put out top tip crypto content that covers everything.

Know NFTs in depth

I’m just going to give you a bit of an overview of what non-fungible tokens. Non-fungible tokens or nfts for short are essentially digital collectibles. These cryptographic tokens represent something unique and have these four properties: they cannot be replicated, they cannot be counterfeited, you can’t print them on demand and they have the same ownership right. Also, permanence guarantees as bitcoin. However the collectible can be personalized and unique so nfts are very different from something fungible that’s perfectly interchangeable.

An example of this is a US dollar. Now i don’t know about you but a crisp one dollar bill is the same to me as any other one dollar bill. That means they are perfectly interchangeable and are therefore fungible. However non-fungible is basically something that’s not easy to mix with other assets or goods. It also have an emotional attachment too like a collectible.

Porcelain bowl example

A great example of this is antiques. So if you’re the type of person who loves the orient and is insanely wealthy then you could go to sotheby’s and get yourself two Ming porcelain bowls for a cool 56 million hong kong dollars. For those not familiar with the hong kong dollar, that’s about seven million us dollars. The key thing here is that, these special bowls are not interchangeable with any other bowl. This makes it a non-fungible real-world asset.

I mean would you really want to swap those ming porcelain bowls for something from ikea? Well unless you’re a bit of a then. The answer would be a clear no. The bowls are not equal one. It is a mass-produced bowl and the other is a priceless chinese artifact with hundreds of years of history and masterful craftsmanship. So these bowls can be said to be non-fungible.

Crypto Kitties example

The most well-known example of an nft is probably a crypto kitty. Each crypto kitty looks different has different attributes and colors. It’s very much like those antique items. Another thing to know is that ethereum is home to the majority of non-fungible tokens in existence today. There are two main types. Firstly you have erc721 tokens which are non-fungible tokens. Here tokens are not the same. For example, a cryptokitty which has a different design and attribute to others. Then you have erc-1155 tokens.

This ethereum token standard isn’t talked about much. However it’s an improved version of erc721 and erc20 it combines the benefits of both fungible and non-fungible tokens together. What’s meant by that let’s take a computer game like fortnite where you can get mythic weapons that are pretty unique and non-fungible. Then you have v-bucks which is fungible in-game currency.

Fungible & non fungible

The erc-1155 standard basically allows for the issuance of both fungible and non-fungible tokens. Pretty damn useful for computer games. Now you know the ins and outs of nfts. I want to move on to the meat and potatoes of this thing.

That would be why i believe nfts could be the next big sector in crypto alrighty. So the nft market is projected to increase by 50 in 2020 and hit around 315 million dollars in value. Yep that’s pretty solid. However it certainly is not shooting out the lights when you consider that DeFi has rocketed from around 665 million dollars in locked value at the start of this year to 4.2 billion dollars today.

Reality of DeFi

That’s more than a six times increase. So why do i think that nfts could be the next hot crypto sector? Well the truth is that defy has absorbed billions of dollars in value this year by simply providing a few functions that would be giving crypto holders the opportunity to leverage their assets via over clash rise. Loans supplying crypto to earn interest and decentralized trading and derivatives.

That’s been enough to essentially push the entire DeFi market to over 4 billion in locked value. It’s also been enough to see some truly crazy returns from DeFi projects. I mean rv has done it 20 times this yet. While carver has done a more modest nine and a half times in case you didn’t know. Carver is all about providing cross-chain lending services and their platform has actually just launched with just bnb as collateral. I’ve recently done a video on that so be sure to check that out right here whatever way you slice and dice the numbers.

Why i thing NFTs is big

There’s no denying that DeFi has been growing at an astonishing rate and that DeFi projects have been on a tear when it comes to valuation. However there is a point when people like you and me start thinking what is next or are mainstream? DeFi plays overvalued and it’s time to search out for alternative DeFi plays that segues me into my first reason. Why i think nfts could be the next big sector in crypto. Yes, the defy space has seen tremendous progress in 2020.

However right now DeFi is kind of contained within the current crypto ecosystem. After all we are essentially taking out over collateralized loans to get stable coins to either leverage our position in crypto by buying more cryptocurrency with that loan on an exchange. Or we’re using those stable coins to convert to fiat and buying that lambo.

DeFi loans

We’ve always wanted what that means is that almost all these DeFi loans are secured against cryptocurrency. However the question we should be asking ourselves is how can you take the current defy ecosystem to the next level. It is being able to lend against real-world assets and earn interest that would bring real-world assets into DeFi.

So to speak and open up the ecosystem to non-crypto businesses looking to tap into this new source of capital. That’s a completely new audience. That we can onboard into DeFi which can be leveraged to fuel even more growth. It just so happens that there’s a platform doing just that. They are using nfts to make it happen that mystery platform would be tin lake. These guys have actually got their platform up and running and it’s honestly gone under the radar of many in the crypto space.

Tinlake

So what is tinlake all about? Well it’s a securitization dap on ethereum which allows investors and borrowers to finance their own asset pools. All that is done via open source smart contracts. Which easily integrate into the current define ecosystem in a nutshell companies seeking finances or cash flow in the real world can offer up assets as collateral. Tinlake then tokenizes these assets and brings them on chain as non-fungible tokens on the other side of the market.

Investors can lend against the tokenized collateral assets and redeem their crypto. Plus an attractive yield for doing so seriously. People, this is the evolution of DeFi in my book and it’s happening right now. So what is really going on under the hood well tin lake is built upon the centrifuge protocol this allows for on-chain borrowing against these real world collateralized assets.

It’s all completely managed by smart contracts all that enables asset originators or borrowers to access the liquidity in the defi ecosystem. The borrower basically puts up assets like invoices mortgages auto loans or royalties and these are tokenized by issuing nfts.

 

pool

 

In real world with Tinlake

Investors like you and me bumble onto tin lake and we can lend against the nft tokenized real world asset by supplying stable coins. And earn high yield income in return. One cool thing about this is that, it actually opens up the door for stable coin providers to use these types of nfts banked by real world assets to back their stable coins with collateralized asset pools.

It create real savings rates for stablecoin holders that’s a pretty interesting offshoot of all this. Another thing to know about tin lake is that it will become a full decentralized financing protocol.

That is interoperable with different blockchains and can plug into a variety of funding sources and stable coins in a way it’s a little like carver taken to the next level after that brief overview of tin lake. I now want to get into the nitty gritty at a zoomed in level tin lakes set of smart contracts. Basically pool nfts that represent those non-fungible real-world assets and then use them as collateral to raise financing in the form of a stablecoin like dye.

How it is done

This is done by issuing fungible interest-bearing tokens that represent a claim on a fraction of the proceeds of the entire pool. Those fungible tokens can then be locked into crypto protocols. Or transferred to investors to draw funding. Oh yes, another thing to know is that asset pools on tin lake are ring fenced and can be configured individually. With different interest and collateralization rates.

Investors risk and yield is shared for each individual pool invested in and not across all pools on tin lake when liquidity is pumped into an asset pool. On tinlake, its risk and yield tokens drop and tin are minted accordingly when funding is paid out. These tokens are burned so what are these drop and tin tokens. Well, tin is the risk token that takes the risk of defaults first.

However holders receive a higher interest rate as compensation for this risk drop tokens are the yield token that is protected against defaults by the tin token.

In depth to this

It receives stable returns but they are usually lower. Now i need to be honest and let you know that last time i checked all the pools were full at tin lake. However you can check out examples like console freight which is using the platform to tokenize their invoices and bring those cash flows forward to today. With all that being said, it must be noted that tinlake is still at a very early stage. There are only three ongoing pools right now similarly the total outstanding volume is only 1.1 million die and the volume repaid sit at just 530 000 die.

However, i really do think that tinlake illustrates how DeFi can be further extended by using real world assets as collateral in the DeFi space. Indeed that potential market is numerous times bigger than the whole market cap of every single cryptocurrency combined. It also goes to show how nfts could play a key role in onboarding more people into DeFi. And how that explosive growth could be further fueled now before i move on from DeFi.

I should mention the likes of rocket nft which are offering loans of up to five thousand dollars in stable coins against nft collateral. That means if you own a plot of land in decentraland, you can use that to get a loan. Makes a lot of sense if you ask me and talking about decentraland that brings me on to the second reason. Why i think nfts could be the crypto sector to watch the truth is that the main use case of nfts right now is as collectibles within blockchain based games.

Rarity of NFTs projects

Indeed, seven of the top 10 nft projects are games currently so rare is the most popular blockchain game using nft. These guys have put global fantasy football cards on the blockchain now. I don’t know about you, but i used to collect football stickers when i was a kid honestly you could complete the collection or trade them and that was about it.

However, i personally loved that kids these days don’t know how lucky they have things. So rare cards can be traded can be used to play five aside football in a fantasy matchup and ranks of your cards are based on the performance of your players in real matches.

Then you have the sandbox which is a virtual world definitely check that out if you want to start your digital real estate empire and hoard those land nfts. Third is decentraland which is a very similar concept to the sandbox. Next we have a game called axi infinity which is a kind of hybrid between digimon and tamagotchis.

 

crypto in virtual world

All on digital pets

Basically you battle collect and raise digital pets that you own via nfts. Now i’m going to skip cryptokitties as i imagine most of you have heard of that another popular game is cryptovoxels. It is yet another virtual world and then finally to round off the last game in the top 10 we have league of kingdoms. I’m not going to lie it looks bloody awesome to me. The reason why is that i spent my childhood playing a little game called settlers. This game seems to be just an advanced version of that while combining it with blockchain. What’s not to love when it comes to those nfts.

You can buy in-game land. You can even monetize that land as more kingdoms flourish on it and raise your property level that translates into higher land value for you. So if you’re like me and have always wanted to be a landlord in the real world, then this is a pretty damn cool alternative.

Oh yes, you can form alliances in-game and vote for leaders using blockchain. Even get limited edition skins so that other players know just how bally you are. Yes i know many of these games look raw. However here’s the deal there are around 2.5 billion gamers out there in the world that’s a heck of a lot of people.

NFTs in games, what so unique?

What nfts allow you to do is to actually own items in games. It give you the power to trade them with other people. Even better many years down the line blockchain-based games would enable players to still access those items earned in-game. This means you don’t have to ask the permission of the owner of a walled garden to access those items. Something else that’s pretty sweet is that this opens the door for people to build applications and communities around these items. Then directly interface with them using apis.

And the blockchain so you can build whole systems outside of games like marketplaces or apps which show all the details of an item for any game on the blockchain for game developers. nfts open up new ways to fund game development. Monetize market design games and potentially unlock new in-game mechanics.

Blockchain game to go mainstream

So if blockchain gaming becomes even marginally successful then there’s the possibility of onboarding tens or even hundreds of millions of people into crypto through the use of nfts. All we need to achieve this is one blockchain game to go mainstream that brings me on to the third reason why i think nfts could be the next big thing in crypto.

Honestly i was shocked to discover that art on the blockchain has kind of take off in 2020. Basically what platforms like super rare and maker’s place allow you to do is to collect create and sell rare digital art from artists all around the world that artwork is represented by an nft. This allows artists to release limited edition artwork tracked on the blockchain making it rare and collectible.

This is a kind of cool way for artists to monetize and for those art aficionados to get some cool and unique art piece without running the risk of catching covid in some stuffy art gallery. My final reason why i think nfts could be the next hottest thing actually ties in with one of my favorite blockchain assets right now that would be blockchain domains. Right now there are two main things you can do with these domains.

Other uses in NFTs

Firstly, the domain name can be used as a payment gateway. That means you can attach all your cryptocurrency addresses to a single domain. This replaces complicated crypto addresses that you cannot easily convey to people with human readable names. So instead of trying to tell my mate to send ETH to a random string of letters and numbers. Much easier right?

The second use case is that you can use that domain to build censorship resistant websites. What that means is that no one apart from the domain owner can take a website down. Imagine how useful that is if you’re a journalist living under an authoritarian regime. Basically you can store these blockchain domains in your crypto wallet and that’s done by using nfts. So with all those use cases put to the side, people like me are actively buying up blockchain domains to use for their business. Or to sell them on for a profit later. There’s actually a very good track record for this.

let me briefly take you back to the early 1990s where a lot of top domains could be bought for a handful of dollars. So what are some of these domains worth today? Well let’s just say if you had managed to get your hands on carinsurance.com held and sold years later, you would have bagged yourself about 50 million dollars.

10 million plus domains are actually more common than you think. As many sales are private take crypto.com for example which reportedly sold for over 10 million. Blockchain domain extensions like dot eth already have proven value too with exchange.eth selling for around 6600 now.

An example of ETH

Last time i checked ETH was valued at around 390. So that means that this domain was sold for about two and a half million dollars at today’s. Ethereum prices, personally i think that the dot crypto domain extension is the most versatile out there. I frankly do own quite a lot of hot domains with this extension.

if you want to just get involved in this nft sub sector straight away then you’ll want to create an unstoppable domains account to get access to those hot dot crypto domains. You can find the link for that in the description below okay.

So it’s probably time to share my closing thoughts on nfts. Honestly i’m shocked no one is really talking about the potential of non-fungible tokens right now and the value they can bring to the wider crypto ecosystem. I’m particularly excited about how nfts have the potential to further fuel the growth of DeFi. i think it makes a ton of sense to bring real world assets into that ecosystem.

What’s incredible is that the tech to do that has already been built and that platforms like tin lake are already up and running.

Conclusion of this NFTs revolution

i have a feeling that this is the natural evolution of defy and can see how it could bring many new people and businesses into the crypto ecosystem. Gaming is yet another area that has the potential to onboard a huge number of people into crypto exceptionally quickly. It’s a massive market with players already having a firm grasp of digital currencies. The truth is that we all we need is one blockchain game to be popular in the mainstream. That could be enough to open the floodgates to millions of new crypto users.

Now i’m going to level with you i’m not the biggest fan of art on the blockchain. However what’s already been validated this year is that some people are willing to spend big money on limited edition artwork. So i’ll certainly be keeping close tabs on how this nft sub-niche evolves. Also finally blockchain domains have already proven value and are increasingly growing in popularity as a payment gateway.

Yes quite a few people are speculating on these domains with the intention of flipping them. However if our experience with dot com and more exotic domain extensions is anything to go by then that’s probably a fair bet.

Let us know..

Yes DeFi is the topic on everyone’s lips right now. However i’m sure you are like me and want to keep ahead of the curve and in my humble opinion, the nft sector is certainly one that all crypto fans should have on their radar. That’s it for today folks i’ve been jibber jabbering for long enough. So now it’s time to hear what you lot have to say what do you think about nfts any other crypto niches?

 


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