What happened to NFT finance?
Why does the NFTFi field have a growth potential of 50 to 100 times?
The NFT financial sector is booming. While some protocols already have active users, dozens of startups are still in the construction phase and will launch their products in the coming months.
(Infographic courtesy of @0xMinion and @alexgedevani )
According to NFTfi 's research in February 2022, the market size of NFT finance is estimated to be about 200 million US dollars.
If we consider that the NFT market will expand beyond $40 billion, NFT finance will grow to nearly 1/3 of the total market. It's easy to see how big the growth opportunity is.
Regarding NFT lending, there are currently two main methods: peer-to-peer and peer-to-pool. While peer-to-peer lending is now dominant, the peer-to-pool lending model is also gaining traction.
There is only one driver for peer-to-pool lending: efficiency. Bend DAO has the most liquidity among current peer-to-pool protocols, with a total locked value of over $90 million.
The peer-to-pool NFT lending model has not yet been verified and is still in the experimental stage. Compared to peer-to-peer lending, it introduces additional risk for borrowers and lenders because more counterparties are involved, often including the protocol itself.
Two significant hurdles to designing a robust peer-to-pool NFT lending protocol are the lack of good liquidation/instant liquidity options and the lack of accurate NFT valuation.
What startups are currently solving these problems?
Regarding peer-to-peer NFT lending, NFTfi is the oldest and most famous protocol in this space today. The protocol’s monthly loan volume peaked at $50 million in April and has recently stabilized at $10-20 million per month.
I expect that NFT finance will gradually develop through a lot of rapid innovation. Composability is king. Each new basic building block paves the way for even more exciting things to be built.
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