Unleashing NFT Liquidity with DeFi Current State of NFTFi Translation

Tianyi Zhang ()
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Tianyi Zhang: Jilin University, College of Communication Engineering

A chapter in Proceedings of the 2024 2nd International Conference on Digital Economy and Management Science (CDEMS 2024), 2024, pp 86-92 from Springer

Abstract: Abstract Non-fungible tokens (NFTs) and decentralized finance (DeFi) have emerged as emerging technologies in the blockchain and crypto space, particularly influencing the art sector and driving the transformation of finance and art into the digital realm. However, the NFT market, after a short-lived boom, faces challenges such as high investment barriers, low capital efficiency, and difficulties in value discovery. To address NFT liquidity issues, leveraging DeFi technology to financialize NFTs (NFTFi) becomes an effective approach. This paper delves into four tracks of NFTFi, including NFT lending, derivatives, fractionalization, and leasing, and analyzes the design principles of the successful NFTFi protocol Blend. Through an analysis of NFT market and NFTFi platform data, the study reveals that NFTFi experienced a turning point in May 2023, especially with the notable success achieved through the Blend protocol. In summary, the openness of DeFi provides new avenues for addressing liquidity issues in the NFT space, enabling digital assets to better realize their value in the market.

Keywords: Non-fungible tokens (NFT); Decentralized finance (DeFi); NFT liquidity; NFT financialization (NFTFi); Blend protocol (search for similar items in EconPapers)
Date: 2024
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DOI: 10.2991/978-94-6463-488-4_9

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