If there is any word to describe the revolution that the blockchain world has experienced, it would be “innovation.” Since its introduction, Blockchain has undergone various innovations. A perfect example of the innovation of Blockchain is decentralized finance. Nevertheless, one significant concept that has captivated the blockchain industry besides decentralized finance is Non-fungible tokens (NFTs). And today, we will focus on NFTs and DeFi.
Today, with different applications and features, NFTs have created a solid foundation in the blockchain ecosystem. Throughout 2020, decentralized finance was the hottest topic within the cryptocurrency industry. And remained an element contributing to bitcoin reaching an all-time high.
Ever since the increased adoption of decentralized finance and its potentials to find relevance in different aspects of human life, it has paved the way for other sectors within the cryptocurrency space. In this write-up, we would look at decentralized finance (DeFi). And NFTs. Furthermore, the article will explore the top 5 projects of Defi and NFTs. You are sure going to understand the concept of NFTs and DeFi in a better way. Let’s get things started with NFTs before we talk about DeFi.
Value and its Importance to NFTs
To understand the concept of NFTs, you need to understand the concept of the value and its role. Value is a distinctive quality or feature of a thing. This makes it desirable or wanted to a particular extent. The value of an item relates to several intangible. And tangible characteristics, which is particularly rare. How valuable something is, depends on its scarcity and quality.
NFTs are cryptographic tokens that are not backed by any traditional asset. However, they represent an event, artwork, or digital item. Because of what they represent, many have concluded that they don’t have value like DeFi projects. Alternatively, NFTs are cryptographic tokens used in creating digital scarcities. And verifying ownership. They are not interchangeable but built on blockchain technology like other cryptocurrencies.
NFTs tokens have distinct features that differentiate them from one another. However, unlike cryptocurrencies with similar tokens/coins. NFTs tokens can be any digital artwork, in-game items, real-world assets, collectibles, event tickets, etc.
Indeed, NFTs projects have value since they have a real asset, rare, and secured cryptographically. Each token of NFTs has scarcity, which makes it valuable. It happens following the law of supply and demand. In other words, people are ready to pay whatever the cost might be for a particular and rare NFT.
Besides, NFTs are optimally functional for decentralized applications. And that to enable the creation and ownership of collectibles and unique digital items. Interestingly, you can trade NFTs at exchanges; exchanges connect buyers with sellers. Every NFT traded is unique and has its price on the exchange.
NFTs and Blockchain – The Missing Link
Most people don’t know that NFTs started back in 2016. And during this period, Bitcoin-based trading cards were issued as NFTs. However, in 2017, these NFTs were published on the Ethereum blockchain through CryptoPunks.
CryptoPunks is a platform that offers NFTs artwork. Notwithstanding, the real buildup on NFTs began in December 2017 with the deployment of the blockchain-based gamed called CryptoKitties. CryptoKitties uses NFTs to represent ownership of digital cats on its platform. Currently, over $140 million is invested in these two projects. After the initial hype, we have seen the introduction of different NFTs projects. That counts both successful and failed projects.
Since the introduction of NFTs on the Blockchain, several standards have been created to simplify the issuances of NFTs. However, the most popular is the ERC-721. It is the standard for distributing and trading non-fungible assets on the Ethereum blockchain.
An improved standard ERC-1155 was recently introduced. It allows a single contract to hold both fungible and non-fungible tokens. The standardization of NFTS has enabled a higher level of interoperability. In other words, unique NFTs assets can be transferred between applications without any complications.
Features of NFTs
The first place to start to understand the value of NFTs is to look at the unique features that differentiate them from other cryptocurrency assets.
- Scarcity – What has drawn the attention of many to NFTs is its scarcity. Although developers are free to generate an unlimited supply of these assets. And they also can limit the supply.
- Indivisibility – Interestingly, NFTs can’t be divided or broken down into smaller units. However, you can buy, sell, and use them as one piece. For instance, an NFTs event ticket, which you purchased, can only be used by you. If you decide to sell it to someone else, you can’t use that same ticket again as it doesn’t belong to you.
- Uniqueness – NFTs are designed uniquely in different ways. It is the fundamental reason they cannot be interchanged. Within the metadata of each NFT, there is a permanent and unalterable record. This describes what it represents. It is similar to a certificate of authenticity.
Decentralized Finance (DeFi)
Recently, the cryptocurrency ecosystem has been talking about DeFi. Interestingly, CoinMarketCap also created an impressive list of DeFi projects. This only indicates that DeFi is another expanding aspect of blockchain technology. Remarkably, about 30 out of the top 100 cryptocurrencies with the highest market capitalization started as DeFi projects. Among these, Chainlink is widespread and likely to surpass Bitcoin Cash.
The purpose of DeFi is to recreate our traditional financial institution into a fully decentralized architecture. So that works towards taking away third parties’ involvement, such as governments and companies. With the popularity of DeFi in the cryptocurrency ecosystem, many investors consider which DeFi project to invest in. For others, they are looking for undervalued projects with high potentials in the future.
With the market capitalization of DeFi reaching almost 7 billion from 1 billion within 4 months, investors are contemplating whether it is too late to invest in DeFi projects. Fortunately, there are unlimited DeFi projects that you can invest in as they are still undervalued. Let’s look at the top 5 DeFi projects to consider if you want to invest.
Kava is a lending platform that offers its users flexible cryptocurrency loans. Similar to Chainlink, it is known to have cross-chain capabilities with several arrays of stable coin loans. There is every likelihood that Kava will introduce bitcoin among its supported coins in the future. Currently, Kava is performing excellently well as it has a market cap of $341 million.
To ensure all loans’ collateralization, Kava uses a unique protocol called “collateralized debt position.” The uniqueness of the Kava projects includes the following features;
- Independent system for burning coins to control supply. Thereby increasing demand and leaving the currency deflationary.
- Provides Masternodes and staking opportunities. Furthermore, it provides rewards for the top 100 validators.
- Generous support for cross-chain financial assets.
2. Band Protocol (BAND)
The BAND project aims to create a secured and scalable platform. It collects real-world data putting it through on-chain applications. While creating links for exchanging information between off-chain and on-chain data sources.
The protocol serves as a gateway for developers/users to get real-world data such as weather, sports results, insurance, etc. Its features include;
- Compatibility with several blockchains
- Simple, smart contract integration
- Efficiency and speed
- Oracle creation without the permission
When writing this article, the market capitalization is $271,593,571 with a daily volume of $108,500,731. Indeed, it’s one of the DeFi projects to keep your eyes on.
3. REN Protocol (REN)
It is another top-ranked DeFi project with a market capitalization of $1,082,548,330. And a circulating supply of 996,163,051. The project was initiated to provide interoperability between several blockchain platforms. It uses the native REN token, which operates mainly as a bond for the people running the power RenVM darknodes.
The REN protocol removes the challenges of cross-blockchain liquidity and interoperability. Here are a few features of the REN protocol.
- Enable users to take cross-chain assets to their decentralized exchanges.
- Allows cross-chain over-the-counter trading.
- Multi-collateral lending allows users to use their existing non-custodial smart contracts.
UMA is a DeFi project with a ground-breaking protocol designed to build artificial assets by allowing users to write self-enforcing smart contracts. It has economic guarantees. The priority of UMA is to improve the financial solutions actualized by public blockchains. UMA’s uniqueness is that the smart contract has economic incentives. And they are universally accessible and self-enforcing.
Through UMA Open-Source Protocol, two different people can develop and create their financial contracts. UMA has every potential to revolutionize the cryptocurrency ecosystem. And despite being in its development stage, it remains a reputable project to watch in 2021. And that with its market capitalization increasing daily. According to CoinMarketCap, UMA has a market capitalization of $1,361,384,127 with a circulation supply of 57,286,316 UMA against the total supply of 101,172,570 UMA.
5. Augur (REP)
Finally, another promising top project to keep track of is Augur. The project aims to disrupt the online betting system by using a blockchain-based prediction market. It seems to capitalize on the lack of transparency issue by building a fully transparent exchange. An exchange without any limitation as to the maximum limit someone can bet. Furthermore, it removes the problem of no rollover. And other challenges the online betting industry is facing.
The platform is a peer-to-peer platform that attracts online betting enthusiasts by providing low fees. And it also allows everyone to keep their winnings. Another exciting feature of the Augur platform is the creation of an application that would counter fake news. It offers a blockchain-based solution to counterattack the spread of fake news on social media by providing users financial incentives to differentiate misinformation from the truth.
Currently, Augur has a market capitalization of $322,173,211. And is among the top 40 DeFi projects to watch in 2021.
Top 5 NFTs Projects
Like cryptocurrencies, NFTs have been in existence for a while, even though many haven’t heard about it. Today, they have become the latest boom in the industry. We have seen some short movies or images sold for millions using ETH as a payment token.
Undoubtedly, you can’t talk about the boom without mentioning CryptoKitties. It sets the stage for other NFTs. Today, the growing group of crypto artists displaying their works or arts on cryptocurrency communities has contributed to its boom. Initially, attempting to sell tokens and coins associated with artworks only yield little value. That until the recent boom. One famous artwork in crypto was the large-scale street murals in Paris done by French artist Pascal Boyart. Besides this, several NFTs projects have been seen to captivate many. Today, we will focus on the top 5 NFTs projects in the crypto industry.
1. Art Tokens – Pascal Boyart
Unquestionably one of the best NFTs projects, the OpenSea storefront is an artwork by Pascal Boyart. Its selling worth has exceeded 400 ETH. Boyart is a successful artist who previously has sold his paintings in a tokenized form. However, the new mural pictures are wrapped in newly minted NFTs. And are sold at an auction.
We can see that the art market can be a big shot in the crypto space within few months. As well as attracting people to invest in art. Interestingly, the murals of Boyart are featured in the digital Museum of Crypto Art.
When it comes to NFTs, CryptoPunks are the most simplified art forms. The popularity of CryptoPunk is a case study for many NFTs fanatic. Although it is a simplified art, it has become a leading collection in the crypto industry after being promoted by prominent crypto personalities.
Due to its growing popularity and scarcity, Punk has enjoyed a healthy resale market. With its price reaching $57,000 from a slow start, which began with a free airdrop, there is no stopping this NFT. Indeed, CryptoPunks doesn’t have a ceiling to its price – nothing like resistance as it is posed to shoot higher.
Another recognizable project within the NFT industry is Hashmasks. It is a collectible NFT, which features a postmodern esthetic, combining robotic figures with backgrounds. It has over 16,000 images paved together; the image is becoming a focal point in the crypto industry.
It is hard to predict how the artwork will end; currently, the image has been used in several social media games and visual identities. So far, we have seen the most expensive hashmask reaching the price of 420 ETH while others are around 2-5 ETH. Interestingly, this came after a week it was released to the public.
After getting their Hashmasks, users can add their name to it to make it more unique. For instance, Mozart demand 250 ETH for another person to own it. However, the hashmark name is subjective, and users must verify its number.
4. Art by Beeple
Beeple is a famous and active artist on Instagram who has seen his project achieved peak performance. The top curio is a 10-second animation with “mutation” features that hinge on the result of the 2020 US presidential elections. The item was resold for $6.6m, which was one of the prominent NFTs projects that drive the popularity of NFTs.
The art has several NFT actions with unique numbers; the asking price closed at 300 ETH. The issuance of the new token continuous with buyers making bets on price appreciation in future auctions. However, this project’s drawback is that the artist resells the same artwork. And resellers try to make profits on the serial number.
The Beeple’s art is a very competitive project like the art of Pascal Boyart. Nevertheless, the NFT market appreciates a more algorithmic approach, which combines art and technology.
5. Lil Moon Rockets
Another top NFTs project is Lil Moon Rockets. It is distributing unique artworks through a smart contract. The Lil Moon Rockets project combines vector art algorithmic genealogy. Once the initial sale is complete, users get amazing Moon Rocket images. To stop early entrants and project owners from purchasing the most expensive artwork first, it uses “blind sale” mode. It is to ensure there is transparency in the process. With this, only when the smart contract ends will the artwork be revealed.
Lil Moon Rockets is different from other NFTs. Since it uses Binance Chain to issue NFTs, unlike others built on the Ethereum blockchain. The Binance Chain provides an easier way to buy artworks with low fees. The image packages are to be sold in phases or stages with price rising. The offering for these image packages in the market is pegged at 0.5 BNB. While the next stage’s price at 1 BNB. However, the last stage will see the image packages price at 111 BNB.
Interestingly, after the completion of the token sales, the pictures will be revealed to users. And they will be able to market and name them for their rarity and uniqueness. The total number of images available is 13,337 images. The users can view these images for comparison purposes only. However, you can resell and prove ownership if you own the NFT and naming token.
Note: We don’t provide financial advice to anyone. We only look for promising projects for you to consider. It is essential to conduct your research before investing in any DeFi or NFTs project.
The Possibilities of Combining NFTs with DeFi
The partnership between DeFi and NFTs is a significant collaboration that will be instrumental to adopting both cryptocurrencies and DeFi. In the DeFi industry, tokenization has numerous potentials, which has attracted many.
Here are several areas where we think NFTs will thrive in DeFi.
Displaying, protecting, and managing art through a digital platform is a nightmare for most artists. Today, digital artists face several challenges in handling their works. And validating their authenticity. Nevertheless, with the revolutionary NFTs, people can easily buy and display their artifacts digitally. As of 11 January 2021, the art segment in NFTs has seen over $13 million in volume. It is promising for digital arts.
The rise of NFTs is attributed to the fame of CryptoKitties in 2017. The CryptoKitties hype contributed to its rise with different assets sold for a high price on its platform. Today, people have taken the initiative to digitalized their traditional collectibles. And that including historical documents, coins, etc.
3. Virtual Assets
There have been revolutions in the procurement method of different virtual assets through certain crypto platforms. For instance, “Ethereum Name Service” sells its “.ETH” domains through NFTs, like Unstoppable Domains that sells its “.crypto”
Through NFTs, gamers can transfer their items to others if the game is built through the blockchain network. However, all off-crypto games are prohibited. NFTs and gaming is one fantastic collaboration of the decade. Adding value to game assets through NFTs has created massive liquidity within the gaming ecosystem that many haven’t thought of in years to come.
5. Real-world assets
The world is growing digital every day. And NFTs are the optimal solution for tokenizing a property or a real-world asset. Remarkably, it has the capability of revolutionizing the legality, ownership, and security of an asset. Though these might be the early execution stage the potentials of NFTs are unlimited.
An integral function of NFTs is their uniqueness. NFTs have the potential of digitizing the identity industry from personal identity documents to medical history, educational qualification, etc. NFTs provide an avenue for better control over data.
Drawbacks of NFTs
While NFTs are incredibly new on the blockchain network. They have accommodated several cryptocurrency market applications. Nevertheless, it has certain drawbacks, which many have considered. These areas require further improvement if it wants to live beyond the hyping. Here are a few flaws to NFTs:
- Mainstream users cannot access NFTs.
- The whole process requires simplification for its mass acceptance.
- Building a decentralized application using NFT is extremely tedious and hard.
- It comes with the “hot potato” effect, which means once the market collapse, you incur huge losses.
Final Remarks About NFTs and DeFi
So that’s all about NFTs and DeFi. Undoubtedly, NFTs are an innovative technology that will evolve in the future. After the recent COVID-19, NFTs has every potential to revolutionize art in a new dimension with everything going digital. Furthermore, it can deal with the issue of ownership.
Indeed, the future of DeFi looks promising. However, NFTs remain the catalyst for that future by accelerating the mass adoption of DeFi and blockchain-based applications. The combination of DeFi and NFTs looks unlimited, with more interesting projects set to appear in the cryptocurrency industry.
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