Strip Finance: Where NFT meets DeFi through the Collateralization of Assets
NFTs revolutionized digital asset ownership — turning virtual art pieces into valuable investments under the security of blockchain technology. The rise in NFTs spread to the rise of terms like mining, P2E, and blockchain making their way into the mainstream market, booming NFT digital art and play-to-earn decentralized games.
However, NFT collateralization is almost unheard of, yet is an emerging opportunity that is putting market value into NFT artworks, financial assets, and other creations. Collateralization is the key to bringing NFTs back to their roots as digital assets instead of collector’s items.
Looking into an upcoming early mover in NFT collateralization, Strip Finance could provide the solution to the problems that surround the NFT market today. Let’s see how this platform is disrupting NFTs, and how they shift digital assets further into the DeFi space!
The Big Problem in NFT
Despite the 2,100% boom in the NFT market, the assets remain a niche market understood mainly by avid collectors. The faces that launched the NFT industry stay hidden from the general public, and small-scale creators are almost non-existent in the eyes of investors.
Going through popular NFT marketplaces such as OpenSea and Rarible, most independent creators manage to accumulate an average of 2–3 bids, if at all, resulting in a major gap in the valuation of NFT assets in the industry. The question remains: Where is NFT art going?
Choosing between NFT and Liquidity
NFTs started off by bringing the art world online, and much like their physical counterpart, the industry was incredibly specialized. Only a handful of crypto investors realized their value. The big problem presents as liquidity was relatively low for the assets, compared to investments in crypto tokens — the major trade at the time.
The value of NFTs is paradoxical, in that while the technology paved the way for digital assets to gain value among investors, the assets continue to be illiquid, suffering from wide disparities in what is deemed to be a fair price for the piece. NFT artworks are simply valued at an individual level, and not at a market level.
Determining Price Discovery
This brings a problem into a lack of price discovery, where the majority of NFTs are subject to fluctuating prices depending on how a buyer values the piece. Even financial NFTs suffer from the lack of price discovery, as assets rely on their values as perceived by an individual buyer.
Additionally, only a handful of NFTs actually stay relevant over time. The majority of NFTs lose their value as the assets are exchanged through different owners, eventually leaving the succeeding holder an illiquid asset that becomes difficult to sell at a profit.
Strip Finance: Putting the Value in NFT Assets
In efforts to bring value and liquidity to the narrow market, Strip Finance provides an innovative solution to the illiquidity and niche of NFTs. Instead of viewing NFT assets as a specialized market, the platform views the NFT market as an untapped financial landscape that has room to grow within the DeFi community!
Simply put, NFTs are the future of digital assets, and Strip Finance is positioning the market to grow beyond the perceived potential of its current valuation. While most upcoming NFT projects focus on DeGaming and the play-to-earn system, Strip Finance is going back to the investment roots of NFTs, putting together a platform that values NFTs as assets.
Valuing Art NFTs: The Collateralization of Digital Art
Of course, the first and major problem to address is the illiquidity of NFT assets. Strip Finance finds opportunities within the problem to create a platform for the collateralization of non-fungible digital assets that would put intrinsic value into the piece.
NFT Assets as Collaterals
Why use NFTs as collateral? For one, NFTs are part of an emerging market of digital assets, linking to a generation that values self-sufficiency and financial independence. Second, NFTs are tradable assets that have the potential to appreciate over time, much like any token or physical art piece.
Strip Finance allows for the use of NFT assets as collaterals in lending. Similarly to how physical artworks are used as collaterals for bank loans, collateralizing NFT works are turning these digital pieces into fully-fledged assets worth their value in tokens.
The platform removes the guesswork and speculative values of NFT assets, putting an intrinsic market value on these assets instead. As collaterals, NFTs become more sought-after and worthwhile investments for collectors and traders alike.
Curating High-value NFTs
Art is subjective by nature, which makes it difficult to figure out the exact value for an artwork, even as an NFT asset. Strip Finance looks into values of both art and financial NFTs, judging by the creator and their history of highly liquid pieces to bring together a curated line of NFT assets that have an intrinsic market value that borrowers and lenders can rely on.
Financial NFTs are the unique prospects of Strip Finance, as most projects tend to focus on gaming and art. Financial NFTs are highlighted in the platform for their ability to mark-to-market the assets to determine a fair market value, as well as a risk assessment, for these pieces.
The Rise of NFTs in Finance
But does art really have an appreciative value in finance? Well, yes and no. While art is subjective to the viewer, NFTs essentially tokenize a digital piece, turning it into an asset that comes with its own value. Strip Finance builds up on this idea through their borrowing and lending platform.
The platform matches lenders and borrowers in an efficient match that addresses two focal points integral to the success of the loan: Valuing the art and financial NFTs, and aggregating & deploying capital.
Valuing NFT Assets
To provide an intrinsic value to NFTs, the platform introduces an innovative solution that decides for the valuation of both art and financial NFTs to be used as collateral in loans. For art NFTs where the value lies in the human eye, there is no better option than to determine the value via crowd aggregation: specific pools set with significant liquidity.
Financial NFTs are quantitative in nature, making them straightforward in assessing their values via parameters like debt duration, project age, doxx, partnership quality, and perceived platform fees. These factors align to provide a fair market value to financial NFTs in terms of loans.
Aggregating and Deploying Capital
In aggregating and deploying capital, the platform offers two types of lending schemes that work to protect the lenders the most: P2P Informed Lending, and Collated Pool Lending.
DECENTRALIZED P2P LENDING: This method is mostly to mitigate risks on behalf of the lender, as the platform provides the necessary details of the NFT collateral for the lender to make a decision. The borrower can choose to accept or reject the deal in this truly decentralized lending mechanic!
CENTRALIZED POOL LENDING: The alternative capital deployment is through capital pools, were the platform undertakes the risks of loan offerings by collating capital from different parties within the platform. Less risk, and less hassles for the lender.
Debt Financing Projects through NFT Valuation
Now, if you’re part of a team looking to fund your upcoming project, then you may want to look into the Strip Finance debt financing option for projects and teams. In a massive opportunity for Strip Finance, the platform offers an optimal mix of equity fundraising, and financing through debt to produce a lower cost of capital, or fundraising cost.
Strip Finance is catering to an untapped market to widen the reach for potential projects that could grow the DeFi landscape. They provide pooling, payments, and maturity to early-stage projects that have the opportunity to bring their visions to life with the proper funding platform!
Mitigating the Potential Risks
Of course, with every loan comes a risk and the Strip team is well-aware of the risks under penalties and liquidation. The NFTs used as collateral automatically transfer over to lenders upon failure to pay on the part of the borrower. Other risk mitigation mechanics include:
PRICE VOLATILITY: Early-stage NFTs are capped at 40–55% LTV for major creators, while moderate creators are capped 10–35% LTV.
BORROWER DEFAULT: The key to reducing the risk for lenders is through informed decisions. The platform may not filter out honest borrowers from unscrupulous ones, but lenders are provided with full details of the NFT collateral so they can make an informed decision.
These ensure that the lender minimizes their risks as much as possible, while penalties put in place will encourage the borrower to pay off their loans as soon as possible: 10% of the total for non-payment, 20% of the total for 2 consecutive non-payments. In case of liquidation, the payments paid to the capital pool will be evenly distributed to lenders.
Accessing Opportunities with the $STRIP Token
As with any decentralized platform, Strip Finance abides by their native token, $STRIP. The backbone of platform activity, $STRIP provides utilities that make the lending process easier and less risky for parties involved. The token is also used for governance, bringing decentralization into the community through voting rights.
LEVERAGE: The borrower would have to extend their leverage position using $STRIP to avoid getting liquidated when the NFT price falls below the risk threshold.
PLATFORM CHARGES: Borrower’s fee, interest, penalties, commission payments, and more are paid for in the platform’s native token.
LIQUIDITY: In the pool, LP are given rewards in $STRIP to incentivize users into participating in liquidity pools.
GOVERNANCE: In true decentralized fashion, the token is used for governance and voting rights during major decisions around the platform.
Token Metrics
Competition
Strip Finance is not without its competitors. While other NFT collateralization platforms exist, two have been on the top news in the recent months for their innovations in the NFT and DeFi space.
NFTfi
Best case scenario, you earn attractive returns through small short-term loans to other people. Worst case: the borrower defaults and you get the asset. — These are the focus of South Africa-based NFT collateralization platform NFTfi in a straightforward lending process.
The platform focuses on short-term loans on a small scale, which Strip Finance extends through as the latter offers loans at different levels to provide an all-around platform for NFT collateral lending.
ETNA Network
ENTA aims to create a tangible use-case for NFTs, by providing a platform for NFT collateral lending at zero interest. However, the network focuses more on bridging art creators and collectors together, as well as expanding the projects under decentralized NFT gaming.
When the focus is divided on several features, the lending arm could get lost in the process. Strip Finance centralizes on their lending mechanics, continuously improving on the platform as they go. The result is a specialized platform that handles and executes lending flawlessly!
The Future of NFTs in DeFi
Beyond the artistic roots of NFTs, the tokenization of these digital assets are responsible for integrating financial opportunities for these pieces. Strip Finance is building on the NFT landscape not through gaming or art, but back to its financial makeup. The collateralization of NFTs presents a revolutionary system where these assets are treated as they are: assets.
With strong partnership behind them, like LD Capital, Kryptos Research, and various big investors in the crypto space, it’s interesting to see how this multi-chain and futuristic platform is shifting the NFT market to provide concrete use cases for the digital assets.
Website | Medium | Twitter | Telegram | Telegram ANN
