Will NFT plus DeFi lead the DeFi summer2?

On August 12th, XCarnival CMO Vivi was a guest in the live classroom of Lieyun Finance, bringing her thoughts on NFT+DeFi.

DeFi makes finance easier

Hunter Finance: DeFi has been popular since last year, and the popularity has continued. Many people have benefited from this wave, and some have not really used DeFi products. How do you understand this wave of DeFi?

Vivi: The DeFi boom is essentially because it makes finance easier and the barriers to entry are greatly reduced. People can be anywhere in the world, as long as you have the Internet, you can directly use the tools provided by the DeFi platform to manage money or invest, even bank accounts. No need, you can create a trading contract between different assets to conduct transactions. This is a great challenge to traditional finance, and this game and challenge will continue for a long time.

Of course, at the micro level, DeFi has contributed a lot of financial innovation to the empowerment of the crypto field, such as cryptocurrency mortgage lending and POS mining to generate interest, making more institutions and retail investors better understand and recognize the value of cryptocurrency .

On this basis, the DeFi project has developed many new tracks, from the most basic DEX to lending platforms, aggregators, leveraged mining algorithm stablecoins, synthetic assets, etc., making DeFi functions gradually diversified. Coupled with the wealth-making effect formed by the numerous DeFi projects that started on the Ethereum chain last year and the positive halving of BTC, several factors have mutually contributed to each other, making more people inside and outside the circle pay more attention to the DeFi field and are more willing to try DeFi. New platforms and products.

Our XCarnival is also a DeFi product, a synthetic asset agreement for the general public, hoping to bring an interesting, easy-to-operate, and friendly product to the public, improve liquidity for the DeFi and NFT fields, and empower this field. This is also the reason why we named it “Carnival”, and we are committed to creating a fun-filled product gathering place with all kinds of creativity.

NFT itself frees up unlimited development space

Lieyun Finance: I often hear people say that NFT breaks the circle, and the fire of “Everything can be NFT” burns from encryption art to games, combined with finance, why does NFT have the charm of cross-circle?

Vivi: Indeed, NFT’s break this year is very interesting. We need to understand this phenomenon from several different dimensions.

First of all, the macro environment-under the epidemic, the quantitative easing policies of central banks in various countries have made many institutions and individuals look at the encryption field as a hedging tool. We saw the phenomenon that Bitcoin broke through historical highs and the total market value exceeded one trillion years ago, which is a manifestation of this factor.

Under such a wave, the art and game fields in NFT, as the part that is most easily accepted by outsiders, have a natural landing advantage in application. Compared with DeFi, a highly specialized field such as smart contracts is easy to stop many outsiders. NFT has the characteristics of visualization. In the form of non-homogeneous tokens, various forms of image, music, video, etc. The creation is recorded on the chain.

The NFT’s own characteristics help digital assets to confirm their rights and realize an essential revolution. The uniqueness, scarcity and traceability of digital assets are guaranteed, which greatly releases unlimited development space.

For example, the value of digital art assets and game assets that are difficult to define in themselves can be confirmed and traded. Compared with these fields, it is easier for outsiders to understand and accept. We saw the creation of sky-high art works, NBA Top Shot and other big IP collections, top musicians publishing NFT music works, various games using NFT as a carrier to create chain games and “Play to earn” models. All are very helpful for the general public to contact and understand the field of NFT.

With the focus of public attention, the combination of NFT and finance, from NFT financial bills to mining and other innovations, will be easier for everyone to accept. And follow-up we will see more NFT and DeFi closely integrated and innovative products.

Some top NFT projects have high barriers to entry

Lieyun Finance: Although it is cross-sectoral, NFT is still unfamiliar to many people. So what are the challenges for ordinary people to widely accept NFT?

Vivi: Indeed, although more and more people outside the circle may have heard of the concept of NFT, they are often unclear. There is still a big gap between truly accepting and proficiently becoming one of the players.

First, we look at this issue from the user’s point of view. Assuming that a person has never been in contact with the currency circle, it is more cumbersome to simulate the process of purchasing NFT works completely. The first step is to register in a centralized exchange to deposit, then create your own wallet and save the private key mnemonic, connect to the public chain, transfer the assets from the centralized exchange to the on-chain wallet, find the DAPP of the NFT trading platform, and then Find the work you want to buy and pay for gas to trade. With such a set of procedures, it is easy for people who have not been in contact with the currency circle to get stuck in the middle, and even more serious risks such as theft of their wallets occur.

Therefore, this practical process needs to be better simplified. Fortunately, we have seen many top projects that have been working hard on the road to compliance, striving to achieve a balance between centralization and decentralization, so that users can use credit cards to make payments, etc., to better popularize the utilization rate.

The second is that some of the top NFT projects have higher entry barriers . For example, the popular PUNK and Bored Ape have reached thousands of dollars even at the lowest price. Compared with BTC, which can be split into small units, it is for some It is difficult for ordinary people to participate in it with the amount of funds.

Moreover, compared with other assets such as cryptocurrency, NFT has a lower transaction rate and poor liquidity, coupled with an excessively high threshold, which makes most people unwilling to buy NFT for investment.

From the perspective of the industry, we are still in the very early stage of NFT. A lot of infrastructure needs to be built, including storage security, Ethereum’s Rollup reform, etc. This requires the joint efforts of the entire industry. 

NFT asset prices have a certain bubble

Lieyun Finance: With the development of NFT and DeFi, the market has begun to combine these two gameplays. So which combination of directions do you think is promising and valuable?

Vivi: Both NFT and DeFi are still at a very early stage. Just like the development of the western region, everything is full of opportunities, and there are also many irregularities and uncertainties. This means that things that we never expect will always happen.

If we extend the example of the “gold rush” of the Western Development, we know that only a few people in the gold rush at that time dug gold, but the merchants who provided tools for the gold rush, such as selling jeans and shovel, made money. In the same way, for DeFi and NFT, DeFi mining through NFT, turning NFT into a shovel or interest-bearing asset, is a very important enabling means for NFT.

For example, Gamefi, a gameplay represented by NFT mining represented by AXS, may derive more diverse forms beyond Gamefi in the future through NFT mining. Similarly, by staking DeFi tokens as a shovel, to mine NFT, in order to empower DeFi tokens. It also empowers the mined NFT, improves mining efficiency, and participates in NFT activity qualifications to increase the value of NFT, so that DeFi tokens and NFT can mutually empower and promote. This kind of gameplay deserves attention.

Compared with NFT artwork focusing on the collection value of NFT, in the future, through the combination of DeFi and NFT, NFT will not only be a digital artwork or collection, but an artwork that includes artistry, functionality, identity, and community affiliation. Multi-dimensional and integrated high-quality investment products. At present, the liquidity of NFT assets is poor, the transaction rate is low, the pricing is difficult, and there is a certain bubble in the price. It is an established fact that limits the room for continued development. Therefore, the track where products dedicated to solving these problems are located will also It is a good development direction in the future.

DeFi has the highest financial efficiency

Hunter Finance: As leading DeFi projects such as aave, comp, uni, etc. gradually move closer to institutions and provide institutions with DeFi products, what innovative functions do you think DeFi can provide for the traditional financial service industry?

Vivi: Due to its unique decentralization and openness, DeFi has no KYC requirements and is global. Compared with traditional finance, it has irreplaceable advantages. First of all, it has a wider audience. DeFi users do not need a bank account to participate, and there are many unbanked people worldwide.

In the Middle East and Africa, 50% of the population does not have access to banking and financial services, including the poor and women, 20% in China, and more than 60% in countries such as Vietnam and Mexico are unbanked. However, the penetration rate of the Internet is low. To a large extent is higher than this number, which means that DeFi can serve more people who are abandoned by the traditional financial system.

From another perspective, DeFi has the highest financial efficiency. If traditional financial institutions access DeFi, they have direct access to the global market. Even if they cannot directly do business with users due to compliance issues in the short term, they can obtain far higher than normal rates of return by investing in fixed-income products.

On the other hand, DeFi’s major innovation in traditional finance is to greatly reduce the friction in the operation of the financial system through the blockchain. Uniswap, an exchange with a market value of 15 billion U.S. dollars and a trading volume close to 1 billion, has a total of only 30 employees. Can you imagine? NASDAQ has thousands of employees. Therefore, DeFi will force traditional financial companies to begin to accept innovation, because companies that do not accept it will face the huge advantage of accepting operational efficiency and profit.

In terms of function, in addition to functions that extend on the basis of traditional finance, such as decentralized exchanges and decentralized lending, there has also been a track for decentralized synthetic assets, which is also a major innovative feature. In the past, Wall Street needed millions of dollars to synthesize assets. DeFi greatly reduces the threshold and can synthesize assets other than financial assets.

Fund safety always comes first

Lieyun Finance: How do we judge whether the project (combination of NFT+DeFi) is suitable for investment? What are the dimensions for reference

Vivi: First of all, I need to declare that I am not a financial consultant, and all sharing is for academic and educational purposes only, not as investment advice.

We talked a lot about the exciting advantages and innovations of DeFi and NFT before, and I need to “pour cold water” on everyone. It is understandable that many users are excited about DeFi applications, such as high income through “Yield Farming” (liquid mining), but the problem is that many high interest rates are actually unsustainable.

For example, Compound has high returns because it incentivizes both borrowers and lenders to enter the token pool. By borrowing or lending assets, users will be rewarded with Compound tokens, which means that Compound will pay people to use their products. Vitalik, the founder of Ethereum, had a share before. I very much agree with his point. He said, “In the long run, I can’t find the reason why the DeFi interest rate is higher than the traditional financial interest rate. Therefore, this is not sustainable, just focus on It’s not the right way to get high returns.”

This is not to say that DeFi is not worthy of long-term attention, but that we should abandon the speculative mentality, but to see opportunities for real problem-solving in this field, more stable and stable projects.

From an investment perspective, I think the most important perspective is security. Excellent DeFi must put the safety of user funds as the first. This can be reflected in the fact that they usually pass the audit of top auditing companies, and some even have various insurances, making big funds dare to pledge on the project. It’s not that it is absolutely safe to have these, but this is the most basic approach. For example, XCarnival’s XBroker has passed the audit of the international security audit company Certik, and Megabox is also waiting in line for the audit.

On the other hand, you can also see which projects have innovative features, not just as imitations of existing projects . For example, uniswap is the first AMM DEX. Even if there are countless DEXs with similar functions, they still can’t be shaken. It has a leading position in the DEX circuit.


Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/will-nft-plus-defi-lead-the-defi-summer2/
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