Merging DeFi with NFTs and the Metaverse: C.R.E.A.M. Finance launches Phase 1 of its DeFi Bridge Strategy
On 8 September 2021 (UTC+8), C.R.E.A.M. Finance announced the launch of borrowing/lending services for the following NFT / Metaverse tokens: AXS, YGG, SAND, MANA, OGN, and RARI. This is the first time AXS and YGG have been supported by any decentralized (DeFi) borrowing/lending protocol. However, there is a larger strategy in which the launch of these markets is just the first step.
The purpose of this article is to share the opportunity we see — the problem we’re solving — what we’re doing about it and why it matters.
What is the opportunity?
The explosive growth of NFTs is creating an on-ramp for cryptocurrency mass adoption in ways not previously seen. New opportunities have been created for many new parties:
- Play-2-Earn income opportunities for unbanked communities globally.
- Artists participate in a globally democratic market with access to collectors and recurring revenue streams that the traditional art market previously controlled and/or prevented.
- The Metaverse is providing new ways for people to connect and engage that is agnostic to users’ real-life geographical location.
- The expansion of the NFT use case to represent key real world assets where friction exists within traditional markets; real estate, automobiles, patents, etc…
- NFTs as to digitally represent credentials, loyalty programmes and access to events/experiences.
What problem are we solving?
Broadly speaking there are 3 user types within the NFT/Metaverse ecosystem, each with their own specific needs:
- Token Holders: Increased capital efficiency of NFT/Metaverse governance/utility tokens.
- Participants: Unlocking the stored value in their NFT assets to fund future growth without selling the underlying asset.
- Projects/DAOs: Expansion of financing opportunities to drive roadmap growth in a capital and tax efficient manner.
The problem that threads across all of these users is a lack of opportunity across the broader cryptocurrency ecosystem in general, and decentralised finance (DeFi) more specifically.
What are we doing about it?
C.R.E.A.M. Finance is excited to announce today the first step in building the infrastructure that solve the problems these users face. Specifically addressing the needs of Token Holders, we have integrated the largest basket of NFT/Metaverse governance/utility tokens to date within the DeFi ecosystem.
One of the first challenges was access to secure and reliable price feed for these assets, which did not previously exist for AXS and YGG. Price feed oracles, for those who may be new to DeFi, are a critical piece of infrastructure powered by decentralized oracle networks that act as a bridge between the “outside world” and the network; providing accurate price information on-chain to enable the execution of hybrid smart contracts. We shared our vision with our friends at Chainlink, who also saw the same benefits and opportunities that we did. It wasn’t long before AXS and YGG price feeds were deployed on mainnet.
Today marks the first time AXS and YGG have been listed on a DeFi borrowing/lending platform and the launch of SAND and MANA to the C.R.E.A.M. Finance V1 Ethereum markets. Together with OGN and RARI, C.R.E.A.M. Finance now supports a total of 6 NFT/Metaverse tokens.
Why does this matter?
On a tactical/short term level, having the above assets listed allows users to:
- Earn interest income by lending the above assets in their respective markets.
- Borrow against these assets, to further their own investment goals in a tax efficient manner.
- Hedge against price movements with these assets by borrowing against deposits
- Borrow these assets to further their own growth needs.
These use cases are familiar already to those using DeFi, but it’s also a necessary first step in building for the future. Looking at the longer term view, there are two key areas where we see NFTs expanding.
The Play-2-Earn ecosystem
- To grow a cryptocurrency first ecosystem, users need to be able to easily Acquire, safely Store, and conveniently spend their cryptocurrency. All three of these pillars need to be activated to enable a self-sustaining ecosystem using cryptocurrency as it’s base form of payment.
- We are beginning to see this within the Play-2-Earn space, specifically the Philippines. Axie Infinity has directly created new opportunities for unbanked communities, allowing its users to earn meaningful incomes which is now spilling over into the wider community.
- DeFi has the potential to provide products and services that are similar, if not identical, to the traditional finance industry for unbanked populations. The lending market from C.R.E.A.M. Finance is an obvious example, lending their tokens to earn an interest income; analogous to a savings account in the traditional finance world, albeit with more attractive APY opportunities. Loans immediately become more accessible to this population as well, and we see a near future where the DeFi loan structure will be applied to more real world asset purchases, backstopped by cryptocurrency as a collateral.
- As a cryptocurrency first ecosystem matures further — we see C.R.E.A.M. Finance playing an integral role: Integrating natively behind the popular wallets and Play-2-Earn games as a core piece of infrastructure, and leveraging the UX provided for mainstream users through these portals.
Future potential with real world assets and experiences
- Several asset classes today experience friction when it comes to the buying and selling of those assets. This limits the potential market size (i.e. local vs regional or global) as well as the speed in which those transactions can be settled. While the opportunities are wide ranging, the most obvious examples are assets such as real estate, automobile titles/ownership and patents.
- In the future, the combination of DeFi and NFTs will enable users access to financial products for which they don’t qualify in the traditional finance market: Home equity loans, for example. Taken further, and this opportunity expands when considering the financial product opportunities within the Metaverse. Digital identities and experiences will become as relevant and important as “real-life” ones.
- In the traditional world, experiential access is already granted to users based on membership, often with different tiers. NFTs are increasingly becoming more experiential, granting access to private website pages, early NFT mint opportunities and the participation in future sales & raffles. Expanding into the traditional world, an immediate example is event ticketing. Already there’s a market for the buying and selling, but often comes at a cost to users due the ease of counterfeiting, duplication of tickets and the friction that comes from having to transfer physical pieces of paper. NFTs offer a solution to this in a way that solves these problems, and DeFi provides the opportunity for users to further leverage those assets in a way that unlocks new opportunities for the user through borrowing and lending.
At C.R.E.A.M. Finance we see an exciting future for the integration of NFT/Metaverse assets not only into the daily life of users globally, but the additional opportunities that are available with improved composability across the DeFi ecosystem to increase the capital efficiency of those assets.
We have launched this first step today and we will continue to expand upon this first step while building out the additional infrastructure to bridge the NFT/Metaverse with DeFi.
As the saying goes, you ain’t seen nothing yet…..stay tuned for more!