One problem with NFTs is that they’re so illiquid. This maybe shouldn’t be a big deal, after all, you never hear art collectors complaining about how illiquid their favorite paintings are.
But then on the other hand, NFTs are crypto as well as art (and not all are art anyway), a large part of crypto is all about spinning up profits, and so it makes sense that developers are looking at NFTs and finding ways to release capital and increase liquidity. These attempts can all broadly be called NFT finance, and it’s an expanding field.
What we’re basically seeing is a crossover between NFTs and DeFi, as it turns out that non-fungible tokens are actually–sometimes–a little bit fungible. This is particularly true when you’re looking at NFTs at or around the floor price in a collection. Basically, these can be treated–from a trading point of view–as interchangeable with one another, or in other words: fungible. So we end up with some fungible non-fungible tokens.
Loans
If you’re looking to unlock NFT capital, then there are platforms allowing you to take out loans against your NFTs, but they operate in a variety of ways. Peer to peer platforms are very straightforward and exactly as they sound, with borrowers and lenders interacting securely.
Two major platforms for this purpose are Arcade and NFTfi, both of which are reliable and operate smoothly.
Away from peer to peer options, there are platforms that operate through lending pools and protocols, which is getting closer to DeFi. In these cases, JPEG’d and Unlockd Finance have been leading the way, and there are plenty of competitors building out alternatives, including BendDAO (which looks like it is pulling through bear market difficulties) and Pine Protocol.
AMMs
Image credits: NFTX
Up to now, most NFT traders have stuck with OpenSea, simply for the amount of volume it does as the market leader. However, any alternatives that offer increased liquidity and reduced fees should be able to hoover up users, and that’s already happening, as AMM style marketplaces begin to appear.
Sudoswap and NFTX have set this trend in motion, and then there are protocols including FloorDAO, GumBall Protocol and Protecc taking NFTs further into DeFi territory.
Where this all leads remains to be seen, but it’s plausible that there could be a split between simple, shop-front marketplaces such as OpenSea, and AMM, trade-enhancing platforms such as Sudoswap, each catering to different needs.
Derivatives
Image credits: NFT Perp
If you’ve ever thought it might be profitable to trade exotic NFT derivatives, then you’ll be happy to find that you’re not alone, and there are several platforms building out ways to do exactly that.
Among the frontrunners are NFT Perp, which runs on Arbitrum and offers leverage and futures trading, and Putty, which allows a wide variety of customizable trade options, selling itself, as its name suggests, on being flexible in its utility.
For further upcoming protocols, it’s worth keeping an eye on Hook Protocol and Gradient, both of which are building out platforms allowing users to trade around NFTs in ways that go beyond simply flipping the base items.
Other interesting projects
Blur
Image credits: Blur
Forthcoming NFT trading platform Blur is currently in beta, but is generating a lot of attention and positive comments. It’s marketing itself as an option for pro traders, and is backed by the crypto investment firm, Paradigm.
Blur acts as an aggregator to access NFT trading across marketplaces, and the aim is to facilitate smooth bulk trading in real time, with detailed portfolio analytics. Taking a broad view of the market, NFT trading volume is currently greatly reduced from its highs, but if you believe that will turn around when crypto/economic conditions improve, then Blur could become a key platform.
PartyBid
Image credits: PartyBid
This product, developed by PartyDAO, has a straightforward premise: individuals can pool their ETH and then buy NFTs as a unified group. When an NFT is purchased, PartyBid then fractionalizes it and members of the group receive tokens based on how much they each contributed.
PartyBid doesn’t work with all NFT marketplaces, but it’s integrated with OpenSea, which will be good enough for most people, although it’s restricted to Ethereum NFTs only. The platform also operates as a social hub, and some groups (or parties) may set entry requirements such as needing to hold an NFT from a particular collection. Don’t worry though, if you can’t find what you’re looking for, then you can always start your own party.
Cyan
Image credits: Cyan
Bringing a buy now, pay later approach to the NFT space, there is a platform called Cyan. It’s straight-to-the-point and exactly as it sounds: the terms offered are that you pay 25% up front (that’s for the NFT you’re buying plus interest), and then pay the rest in installments later.
Cyan also offers loans against NFTs, and ETH staking to earn yield (while staked ETH is used to fund loans and credit). This is the kind of product that makes obvious sense in a number go up bull market, but it’s actively building now for the long term future.
Uniswap
Image credits: Uniswap
Ok, so Uniswap is obviously a huge name in crypto, but it’s mentioned here because it looks like it’s getting heavily involved in NFT finance. Uniswap is in talks with several NFT lending protocols, has already announced that it will integrate Sudoswap, and clearly has the know-how and existing user base to make a big impact.
