A non-fungible token, or NFT, is a unique token that can’t be replaced by other tokens. In general, NFTs represent digital assets or tokenized assets from the real world.
CryptoKitties, an early version of NFT, caused a stir in the market when they occupied part of the Ethereum network in late 2017. With more than 3 years of growth, the NFT ecosystem has gradually improved with a variety of components.
Since the beginning of 2022, the number of NFT transactions has tripled, and this trend has not declined even during major market downturns.
According to DappRadar, the average number of NFT transactions has risen nearly 300% from 21,815 per day in January 2021 to 82,373 per day in May 2021. Even when the prices of cryptocurrencies plummeted in May last year, this number spiked even higher, with sales reaching nearly 94,000 NFT daily.
The arts industry has gradually come to realize the value of NFTs. In the industry’s first year of NFT art, sales grew by $120 million.
A few celebrities have also tried to cash in on the NFT craze, including Lindsay Lohan, who sold a Daft Punk-themed NFT for $15,000. The NBA and other large corporations are also paying attention to it.
Top Shot’s secondary market saw 71,000 users trade in April 2022, generating more than $25.7 million in transactions.
Due to the drop in Bitcoin price, more than 1 million leveraged transactions were liquidated, resulting in severe network congestion and rising Ethereum transaction fees.
Although transaction fees have risen so much, NFT transactions still continued. Many users have instead turned to other blockchain-based platforms.
As a result of the general market correction, the number of transactions in the NFT market has increased but the value per transaction has decreased.
Nevertheless, the field continues to attract attention from companies like Outlier Ventures, Digital Finance Group, Morningstar, Blockhype, Spark Digital Capital, etc.
With Binance’s launch of the NFT Marketplace last June, NFT still remained popular in the near future, and not just the latest trend.
What is DeFi?
DeFi stands for Decentralized Finance, which is a blockchain-based system for managing finances.
The system enables its users to conduct financial operations like payments, margin trading, lending, yield aggregation, and currency exchange. The main advantage of it is the exclusion of a third intermediary such as banks or other financial institutions.
DeFi services are operational thanks to “dApps,” decentralized applications which mostly run on the Ethereum platform.
So, how can Decentralized Finance benefit from NFTs?
Traditionally, government authorities controlled centralized financing by supervising transactions and investments. In order to avoid the engagement of those authorities, DeFi came as a solution to the problem. The majority of DeFi projects have adopted NFTs due to their ability to store value and proof of ownership. In return, with DeFi, their value can be unlocked, and several types of transactions can be performed with these tokenized assets. Both technologies have brought benefits to one another and have opened new possibilities in the world of finance.