One article to understand the combination of NFT and liquidity mining

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The origin and concept of NFT

At the time, the most popular token issuance standard on Ethereum was ERC-20. According to Dieter, in the summer of 2017, ERC20 and ICO were particularly popular. Many users asked how CryptoKitties and ERC20 interact. In fact, CryptoKitties and ERC20 cannot be compatible, because CryptoKitties are non-homogeneous tokens, while ERC20 is a homogeneous token. standardized tokens. In order to find a fixed and simple answer to this complex question, Dieter and his team proposed the concept of non-homogeneous tokens after defining and open-sourcing the ERC-721 protocol. The popularity of CryptoKitties once caused a big congestion in Ethereum, which triggered the first wave of NFT.

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What is Yield Farming?

Liquidity mining refers to the practice of staking or lending encrypted assets to generate additional high returns or rewards in the form of cryptocurrencies. Due to further innovations such as liquidity mining, this high-yielding but risky and unstable decentralized DeFi applications have skyrocketed in popularity recently. Liquidity mining is currently the biggest growth driver in the DeFi space, helping it swell from a $500 million market cap to $10 billion by 2020.

Most liquidity mining protocols now reward liquidity providers with governance tokens, which are usually tradable on centralized exchanges such as Binance and decentralized exchanges such as Uniswap.

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Several popular liquidity mining protocols

1. Compound: It is a decentralized money market protocol on Ethereum, that is, the borrowing and lending of user assets and the setting of interest rates are completely implemented through algorithms, transparent and open, without the participation of intermediaries. Compound is the first protocol to initiate liquidity mining. Users can obtain the Compound governance token COMP by participating in mortgage lending on the platform. After the launch of "liquidity mining", the total locked positions of Compound skyrocketed. Within a week, its total lock-up volume rose from less than 100 million US dollars to more than 600 million US dollars, an increase of more than 6 times.

2. MakerDAO: It is an automated mortgage loan platform on Ethereum. Users can mortgage the cryptocurrency to borrow the stable currency DAI linked to the US dollar, and the interest is paid in the form of a "stability fee".

3. Aave: is a decentralized lending protocol for creating a money market where users can borrow assets in the form of AAVE (formerly LEND) tokens and earn compound interest on lending. Aave is also known for facilitating flash loans and credit delegation .

5. Yearn.financial: It is an automated, decentralized aggregation protocol that uses algorithms to find the most profitable liquidity mining protocol. Users can use various lending protocols such as Aave and Compound to obtain the highest returns. In 2020, its governance token YFI once climbed to more than 40,000 US dollars.

Don't buy $MEME

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Now DeFi liquidity mining projects are emerging one after another, and one project after another using Emoji as Logo has been difficult to create new value, and is even accelerating the erosion of the DeFi ecosystem. Because of this, some people ridiculed that DeFi is no longer Decentralized Finance, but Degenerate Finance.

Whether DeFi is depraved is not discussed, but the new token distribution model of liquidity mining does have some new ways of playing, such as combining with NFT. NFT and liquid mining seem to have nothing to do with each other, but in fact, NFT mining projects are already in full swing.

Jordan Lyall, head of DeFi products at ConsenSys, once satirized DeFi as degenerate finance on Twitter, ridiculing that the core content of the smart contracts of DeFi liquidity mining is copied, and there is no need to worry about smart contract audits, because all the changes made are irrelevant , Logo is just a random Emoji.

This outright air coin was only traded aimlessly on Uniswap at the beginning. Later, Jordan Lyall cooperated with the community to introduce NFT into liquidity mining. The price of MEME also rose from the initial US$11 to a maximum of US$233. The skyrocketing price of tokens has made the market sentiment high, and various imitation disks and tokens have also made NFT completely popular. The project also introduces a liquid mining design: users who pledge MEME tokens can obtain pineapple points to exchange for NFT collection cards. This collection card can be directly linked to OpenSea for sale.

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Several projects combining NFT and liquidity mining

On Aavegotchi, users can obtain a little ghost image by staking atoken (equity token on Aave), and each little ghost is an NFT token. What is special about Aavegotchi is that the collateral atoken behind the little ghost is an interest-bearing token, and the value of the collateral will increase over time.

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Aavegotchi little ghost figure

After the popularity of DeFi liquidity mining cooled down, we saw that industry participants took the initiative to graft NFT to the liquidity mining method. Affected by this, the indicators of NFT increased, and NFT continued the trend of DeFi liquidity mining. heat. On the NFT trading platform OpenSea, there are NFT-related auctions, castings, listings and other activities happening every few seconds on average; some popular NFT projects have witnessed dozens to hundreds of times of growth in transaction volume; RARI (trading platform Rarible's tokens), NFT tokens such as MEME have increased by more than 5 times.

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