Fragmentation of NFT: Using DeFi to Empower NFT Market

This year, NFT suddenly became popular. Basically, we can see relevant news in the news every week. For example, XX’s famous paintings have been auctioned for several million dollars, and traditional auction houses are also auctioning NFTs.

Coin World-Fragmentation of NFT: Using DeFi to Empower NFT Market

This year, NFT suddenly became popular. Basically, we can see relevant news in the news every week. For example, XX’s famous paintings have been auctioned for several million dollars, and traditional auction houses are also auctioning NFTs. But what is being shot? From the technical language point of view, the shot is just a string on the blockchain, which seems meaningless.

So, what exactly is NFT? What do you buy for consumption?

Recently, at the scene of the Lieyun Finance Friends Event, George, the senior product manager of Conflux, brought his wonderful views.


The current state of the NFT market

Status 1: NFT is blooming everywhere

(1) The emergence of NFT artworks

We saw some high-value collections and sold them at very high prices, as if everyone was eager to try. As a result, many people are wondering whether it is possible to create a painting and sell it for $1 million. Or, can you go to art school to find some art students, incubate and package their works on the market, and sell them at a sky-high price to realize the freedom of wealth, but that doesn’t seem to be the case.

(2) Everything can be NFT

The concept of NFT is on fire. So, for hype or to really solve a certain problem, everyone puts forward the concept of NFT for everything. In the process of doing traditional business, many people want to connect the main body of the business with NFT, and use the enthusiasm of NFT to make a stir.

Status 2: Obvious tail effect

(1) High-value NFTs are sold at sky-high prices (2) Ordinary NFTs have no market

We can see that most of the liquidity and circulation of NFTs are gathered in a few mainstream NFT markets , such as OpenSea and Rarible. There are some very small NFT platforms, they are doing some differentiated works, such as NBA Top Shot, is to do pure NBA fan business on an independent chain. Its target customers are fans of NBA stars, and they sell classic scoring videos of some stars. NFTizing these videos is actually a small aspect, but it is quite successful.

With the success of NFTs, various NFTs will appear. Everyone can post pictures, write, and take a video. However, in the process of real transactions, some are similar to the book assets of 50 million in the Chinese property market today. Can you really sell an apartment or villa?

What is the liquidity of this market? In fact, if you link to OpenSea, you will find that most of the NFTs cannot be sold at all, and the liquidity is extremely poor. This is the same as the real estate market under heavy supervision today. Multiple purchase restrictions will cause the liquidity of real estate to be particularly poor. It seems that real estate investment is not a good choice today.

In fact, most of the current NFTs are in a state where there is no market, and you can’t even sell 1 or 0.1 Ethereum.

In short, the entire market is in a state of blooming everywhere, or a state of flurry of demons.


Common problems in the NFT market (financial direction)

Poor trading liquidity

As mentioned earlier, you can’t sell an NFT work if you buy it. Although you look good when you buy it, you can’t actually change hands.

Inefficient asset value

If I buy a famous painting to hang in my office or home, it has at least one attribute, that is, I can appreciate it every day, or I can show it off when my friends come. However, the NFT assets in my wallet have no value. In terms of their financial properties, from the perspective of assets, it did not bring me any positive income. It can only be stored in my wallet. I open the wallet and look at it twice a day. It seems to be meaningless here.

And my real estate can be mortgaged, it has a certain asset value.

Inaccurate market valuation

This is actually an extended question brought about by the first two points. When trading liquidity deteriorates, the deviation of asset valuation is very large.

Based on these three questions, we put forward: How to make your NFT play more value?

In the past year, some applications of DeFi have been very popular. It has solved many real financial problems in the world of blockchain. After all kinds of financial activities are moved to the chain, there will be a decentralized and borderless experience. process.

Under the framework of compliance and supervision, DeFi has the potential to overturn the existing financial system in the future and improve the funding rate or operational efficiency of the entire finance.

In my opinion, DeFi serves NFTs and is a decentralized financial service model that will eventually help all NFTs better integrate into the entire financial market.

The essence of DeFi is the fragmentation of NFT, which breaks up NFT into assets with financial attributes like tokens. Under this premise, DeFi can fully empower NFT. Therefore, the biggest foundation of DeFi+NFT is to fragment NFT.

After NFT fragmentation, how can DeFi empower the NFT market? How to make the NFT transaction liquidity better and have more asset value?

In the digital world, there is no entity segmentation. The most common form of NFT fragmentation is to pledge NFT issuance into a pool, and then issue the corresponding ERC20 token.

For example, if a picture corresponds to 10,000 tokens, then these 10,000 tokens are divisible. It can be applied to all the DeFi model gameplays today. You can use these 10,000 tokens to trade or borrow these 10,000 tokens. It is no longer restricted by the indivisible property of NFT itself.

Therefore, the fragmented NFT improves the liquidity of transactions and will also give play to the value of asset liquidity. In addition, it also clarifies the market pricing. For example, if a bottle of water consists of 10 water tokens, the market price of that bottle of water is determined by 10 water tokens. The market price of a bottle of water after NFT is very fair. 


NFT fragmentation application scenarios

Given the NFT with DeFi gameplay, we can use the token to trade in each swap, and the transaction liquidity is naturally very abundant.

At the same time, we can also share ownership. For example, there are 10 tokens for a bottle of water, 6 for you and 4 for me. In fact, the two of us are sharing the ownership of a bottle of water. If this bottle of water generates profits in the future, we can distribute dividends in accordance with the proportion of token holdings.

Among the DeFi gameplay, the most popular is pledge mining. Through pledge mining, some tokens will be dug out. One bottle of water may be exchanged for 10 bottles, which means that PoS/PoW income can be produced.

Finally, it can also be borrowed as collateral. After a bottle of water is fragmented, it becomes a token of a pile of water, and the token has a clear market value, and it can run in the existing DeFi lending agreement.


Application case of NFT fragmentation

The first case Metapurse foundation

The split of high-value NFT assets began with Metapurse, who were buyers of Beeple’s Everydays 5000 (NFT worth US$69.3 million). Metapurse group divided the works and created B20 tokens, which were sold in two phases. 

The current NFT asset segmentation platform (NFT fragmentation) can convert ERC721 or ERC1155 into tradable homogenized ERC20 tokens. This innovation brings unprecedented liquidity to NFT and other collectibles.

The second case NFTfi

Borrowers can pledge any ERC-721 tokens (NFT assets), and other users can provide loans on demand. If the borrower accepts this loan, he will receive the wETH and DAI from the lender. At the same time, the NFT assets are locked in the NFTfi smart contract until the borrower pays off the loan. If the borrower does not pay off the loan before the due date, the NFT assets will be transferred to the lender.

For lenders, they can provide loans for any NFT assets they like, and set the loan amount, loan period, and the total amount that the borrower wants to repay after maturity. The loan period ranges from 7 days, 14 days, 30 days and 90 days.


What kind of NFT deserves to be broken?

The first category is high-value art collections. One person can’t eat it, or in order to increase liquidity, attract more people to participate in the transaction of art.

The second category is similar products with the same value. Some products with the same value are thrown into the same pool, and they are fragmented for capital use.

The third category is special products with a high degree of flexibility. Because this NFT has a high degree of particularity, we have no way to make it a homogeneous replacement, we can only launch it in the form of non-homogeneous tokens. In order to reflect the special value of non-homogeneous tokens, we can fragment it and reflect its value in a decentralized financial game. For example, tickets for Jay Chou’s concert are fragmented, and tickets are the token behind the fragmentation of tickets.


How to break up NFT

The NFT body is fragmented  , for example, a valuable painting.

NFT rights and interests can also be fragmented . The rights and interests can be either pledged rights, work rights, or liquidity dividend rights.

Third, you can link NFT and broken tokens like a game .

I firmly believe that the future belongs to the era of DeFi and NFT.

Posted by:CoinYuppie,Reprinted with attribution to:
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