Lithium Finance: First Decentralized NFT Valuation Protocol
TL;DR. Watch how we redefine NFT valuation: https://youtu.be/Y7bP_p2UUkQ
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Lithium Finance is the first decentralized NFT valuation protocol powered by collective intelligence and machine learning. The protocol aims to redefine how NFTs are being valued through incentivizing the community to provide honest assessment and reveal market sentiments
What problem is Lithium Finance solving?
A common practice before anyone sets a price of a non-fungible token (NFT) is to browse NFT marketplaces and get a gauge of the average asking price. But here’s the question — how do you know the prices listed are accurate, especially for rare NFTs that change hands infrequently?
The problem with estimating NFT prices is that they are difficult to determine without a large sample of transaction history. Each NFT is inherently unique even if they are from the same series as each asset may have a unique trait that defines them.
This begs the next question, which is how are NFT prices evaluated? Let’s look at three common approaches — floor price benchmarking, Machine Learning or centralized authorities consulting. What are the issues with these 3 approaches?
- Floor Price
The floor price for any NFT series takes the listing value of the lowest-priced NFT in a collection or series. However, it usually means other items in the same collections might be undervalued especially for rare NFTs. In addition, marketplaces often show gaps in floor prices and best collection offers
- Machine Learning
Most of the rare NFTs are only traded a handful of times, and limited edition NFTs are lucky to see any trades at all since they rarely change hands between buyers and sellers. Machine learning heavily relies on trade history to provide value estimation, and a lack of trade history for rare NFTs means the estimated value of these items could be unreliable.
- Centralized Authorities
It’s common practice to gauge the floor price of a collection or series by referencing the lowest asking price across NFT marketplaces. But what about rare NFTs that are put up as collateral?
With financialization of NFTs, many are looking to unlock value and liquidity in NFTs through financial services such as lending against NFTs as collateral. Very often, valuation of these NFT collateral is left to the appraisal by these lenders or centralized authorities which could be opaque in their process.
Lithium Finance produces reliable, accurate, and efficient value insights
To create reliable, accurate, and efficient value insights, we bring 2 essential features together.
A community-powered decentralized intelligence
- The decentralized intelligence should be able to bring together the inputs of a collective community to fill in the information gaps of rare NFTs where historical transaction data is absent.
- The protocol sources and aggregates genuine, high quality assessment of market sentiments from the community through distributing appropriate rewards and incentives.
A fast and accurate machine-learning algorithm
- Time is of the essence when pricing NFT assets, and a machine-learning algorithm should ideally supercharge the valuation process by providing real-time predictions for common NFT assets with ample transaction history data. When valuing rare NFTs, the algorithm should also be able to complement human intelligence from the community to create an accurate estimate.
Hybrid pricing model
At Lithium Finance, our proprietary algorithm combines the two features to price NFT assets. Our hybrid pricing model incorporates both traditional machine learning based on historical sales data and human-based community inputs to provide fast, accurate valuations for any NFTs in real-time, even when there is a lack of historical sales data.
Rather than attempting to source and aggregate the true private value from each community member, the algorithm incentivizes assessment of market sentiment to reveal the anticipated market price.
One of the most influential economists, John Maynard Keynes, theorized that behavior in trading is not about considering an asset’s fundamental value or the true private value to be placed by other investors. Rather, Keynes conceptualized trading as an intricate guessing game, where traders devote their intelligence to anticipating what fellow investors anticipate of others.
Lithium Finance is designed with this principle in mind to incentivize and aggregate opinion from the community to reveal the market’s anticipation. We will be doing a deep dive into the different components of the protocol with our upcoming article series, so stay tuned to our page and subscribe for the latest updates!
Lithium Finance is the first decentralized NFT valuation protocol powered by collective intelligence and machine learning. Redefining NFT valuation approach through incentivizing honest assessment from community to reveal market sentiments.