Is NFT-Fi set to be the next big thing?

The NFT space moves so fast that, sometimes, it can be hard to keep up with at all! We saw a very fast-paced evolution of the technology from PFPs to utility tokens of all formats, and now, in a new move, NFTFi.

The financialization of NFTs

NFTFi is the latest buzzword, and it is basically the intersection of decentralized finance (DeFi) and NFTs.

It looks like:

• Taking a loan against your NFT.
• Renting an NFT for a period of social influence.
• Employing a financial option to hedge against the volatility of your NFT assets.
• Appraising the value of your NFT while receiving liquidity for it at the same time.
• Fractionalizing and owning an NFT collectively as a community.

Let’s take a closer look at what NFTFi is all about!

NFTs as an Investment

NFTs, regardless of level of utility or collectibility, have typically always been viewed as an investment. With NFTFi, it is simply DeFi applied to NFTs and enables more efficient forms of NFT trading — from swapping, hedging, fractionalizing, and appraisals to renting.

In large part fueled by the phenomenon of yield-farming, the events of DeFi Summer drove the total value locked (TVL) in DeFi protocols to roughly USD$10B by late-September. With the recent explosions that both the NFT and DeFi markets have undergone, it was only a matter of time before the two technologies would inevitably cross paths.

NFTFi is emerging as one of the most exciting newer innovations within Web3. This industry solves the liquidity problem that NFTs face by opening up them to a wide variety of new financial use cases which are currently enjoyed by other asset classes.

How else might the NFTFi ecosystem develop?

Yang Lan, co-founder at Fiat24, says “I am fascinated by this intersection between finance and NFTs. When we look at the ecosystem right now, in 2023, it is clear to see that utility tokens are moving increasingly towards DeFi and that is going to be very powerful throughout this year and beyond. What we do at Fiat24 is rather different to what we see in the NFTFi space at the moment, as we use an NFT to identify our clients (giving them their account number and avatar). Our NFT gives them a digital identity in our dApp, access to ‘banking’ on the blockchain, and soon a Visa debit card for crypto spending.”

NFTFi projects have not received much attention yet and are still in the finishing stage, which might explain why the explosion of NFTFi until now is still a big unknown to many people, but it is worth keepin an eye on.

Karen Shidlo is a digital marketing native with seven years of experience in traditional advertising agencies before moving into the Web3 space. Passionate about the power of digital currencies and blockchain technology, she works for Fiat24 in Switzerland to bring seamless peer-to-peer payment experiences to the masses.