Original title: "Original title: "》
Original author: @0xminion
Compilation of the original text: Kyle
Compilation of the original text: Kyle
NFTFi summer is upon us. Based on previous work @alexgedevani has done, I created a map for the NFTFi ecosystem, collecting over 300 projects across different L1/L2 and NFT verticals, and of course many more that I didn't cover. I am very optimistic about the future NFTFi industry.
First, describe with some numbers. Within the sample size, NFT markets and liquidity agreements accounted for 26% (including fragmentation agreements). Followed by NFT data analysis and insight projects accounted for ~14.5%, followed by NFT lending projects ~14% (including buy now pay later BNPL), NFTFi/derivatives projects accounted for ~7.1%.
Other verticals like #NFT portfolio management & wallets, aggregators, NFT hardware/IRL display, NFT pricing, infrastructure (storage, search, indexing), NFT curation/gallery, content creation, NFT collecting/multiplayer constitutes the rest.
Liquidity is fragmented with many different implementations, but the current TAM of the NFT market is still relatively small, but growing rapidly.
#NFT lending is a completely meaningful development, but the current TAM is relatively small, because from a liquidity/trading perspective, they can be regarded as ordinary long-tail tokens, rather than a completely new asset class. But fundamentally, NFTs are different from tokens.
We had a #DeFi summer where we saw how degens whales used long tail asset lending protocols to exit positions with better exit pricing and potential market exit intent.
But how to unlock capital and create #NFT money market LEGO? Of course it is necessary, however, I am more interested in seeing the composability of NFT lending protocol extensions with other protocols, rather than aiming to release capital.
At the end of the day, incentives are still needed in order to channel liquidity, especially for long tail assets, and I do expect to see us possibly resuming yield farming (or liquidity mining) activities on NFT lending protocols.
Onchain BNPL is having a hard time surviving as a standalone protocol, and the target market is a bit too niche, especially without a comprehensive credit rating infrastructure, but I do think it could be an interesting one Value-added cases, such as soul-bound tokens.
However, some of the spammy posts I saw on Linkedin today, "launches a new startup called Afterafterpay to solve BNPL debt where you can buy now and pay later" does offer something about BNPL's plans in general related aspects.
There are some PMF mismatches, Degens need on-chain BNPL, otherwise it will be used for arbitrage/liquidation or treated as a call option on the NFT. The non-crypto crowd first needs to join DeFi/NFTFi; the cost is generally too high.
However, it may make sense to have a centralized BNPL or BNPL as part of a larger product offering. For example, @Shopify has integrated NFT gating; what's stopping them from integrating NFT BNPL schemes and making them available to non-crypto natives?
In order for the lending protocol to work well, we also need a well-functioning oracle. We’ve seen liquidity protocols such as NFTX and sudoswap leverage AMM bonding curve designs to drive more efficient pricing in the ecosystem.
Or, I've recently seen AI/statistical/ML analytics pricing models on the rise. I can certainly see, for example, Opensea and Magic Eden and auction houses being integrated for analysis and to provide some reference points for market participants.
These can help improve price estimates for blue-chip NFTs, however, as the NFT market is still rapidly evolving, backend algorithms need to be constantly tweaked to find better model fits.
I would be wary of using an AI/statistics/ML analytics pricing model as one of the primary oracles. Estimated output can easily be distorted by future yield farming activities and liquidation as an exit strategy. Adequate NFT spot liquidity > accurate long-tail pricing.
I think the way NFTs are fragmented is that it does have its place; however quite niche. In general, if you channel liquidity through fragmentation, this can lead to inflated FDV for that particular collectible/item. This is a circulation + lock game.
There are also builders building NFT derivatives, such as perpetual or option products. However, I generally take a wait-and-see attitude towards on-chain derivatives, not saying we don’t need these, but for it to work well, we first need to have sufficient spot liquidity.
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