Let's talk about NFT: Review of ChainBreaker Podcast Episode 3

This article is sourced from ChainBreaker Podcast.

Below is a summary of the viewpoints from this live event.

Background Introduction

CryptoPunks have gradually become popular recently, with #2140 and #5217 selling for 1600 ETH and 2200 ETH respectively, pushing the story of NFT to a climax. The frenzy around Punks has had a huge impact on other NFTs, with many NFT floor prices experiencing significant increases. The booming NFT market has sparked discussions and reflections on the underlying logic of NFTs.

Block Mr. Chris

In terms of addresses, the trading volume of NFTs this week has reached historic levels, exceeding 400,000 Ether, with about 80,000 Ether in trading volume for Crypto Punks alone. The numbers for offers are even more astonishing, with an anonymous bid of up to 90 million dollars for Punk #3100.

Punks are like real estate in the Crypto world; there are only 10,000 such houses in this world, and every DeFi participant, every Crypto enthusiast, needs to own one, which may lead to ever-increasing prices.

Once DeFi took off, users were willing to spend time learning how to use smart contracts, how to mine with DeFi, and how to generate value with coins, starting to move coins from centralized exchanges to decentralized exchanges, at which point everyone could explore new functionalities. Many of the features we see now were discussed previously, but only recently have they been able to be realized.

NFTs will combine with DeFi to generate derivative products through collateralization, create stablecoins through collateralization, or facilitate lending through collateralization.

Art NFTs serve as a great entry point into Crypto, being the first thing that brings people into the Crypto world. Artists with massive fan bases can enter the Crypto space by promoting art NFTs. If you follow Instagram, you'll notice that many artists have recently changed their profile pictures to NFT images.

We are still in a very early stage, and there will definitely be many opportunities in the future.

Chain News Pan Zhixiong

NFT-related projects are being launched at a very fast pace, especially those related to non-crypto. For example, Burberry, Porsche, Coca-Cola, Messi, Louis Vuitton, and others are collaborating with service providers to launch NFTs and conduct auction activities.

In China, Tencent has also launched its own NFT platform "Huanhe" based on alliance chain technology, and various NFT products are expected to be introduced in the future.

Zora has launched a dedicated auction house called Punk House for Crypto Punks, which indirectly indicates the success of the Crypto Punks project.

Although Punks are iconic, the participation threshold is very high for the vast majority of users. Most users engage in various games or participate in other art-related NFT projects to join the NFT craze.

Regarding how to make money from NFTs, on one hand, some KOLs and institutions have significant traffic and attention, which can influence users; on the other hand, they have a keen eye for discovering the unique qualities of NFTs and can acquire them early. However, these two advantages are lacking for most people.

The future of NFTs certainly has many paths to explore, but the most direct and better integration with Crypto Native will definitely be in the DeFi sector.

NFTs still have underlying logic, such as whether there is a strong story background or worldview that can provide certain things. If a broad perspective can be provided, many users can join in.

NFTs are gradually developing into two extremes, with explorations happening at both ends. One extreme consists of high-quality NFTs created by professional gaming teams, strong designers, and professional artists, while the other extreme includes geeky, low-quality ones, such as pixelated Crypto Punks.

User Questions

1. Regarding NFT lending, if we purely use a P2P model, the capital efficiency will be very low. Are there better methods? For example, similar to NFT index funds, they promise to lend or provide some guarantees at Full Price, with a minimum amount to buy.

Block Mr. Chris: Most NFTs currently cannot discuss annual capital efficiency because there is no place to collateralize any money. NFTX has its own limitations; Apes were included in NFTX early on, but NFTX is based on rarity, and some ultra-rare items do not sell as well as lower rarity items, which may look better. This is a very subjective market. After NFTX was established, some people would put their items in, but those who really want to find attractive monkeys or Punks will explore value in a more P2P manner.

2. 8848Monkey: Regarding staking and lending, how to assess the value of NFTs? How much can be lent out? How to handle the issue of flipping NFTs back and forth? What can be done in the future to make NFTs more valuable? For example, if I flip an NFT back and forth for 1000 ETH, and I can collateralize it for 500 ETH, then I have achieved my goal. How to improve this system?

Block Mr. Chris: Using monkeys as an example, if you have a monkey that you believe is worth 100,000 dollars and you want to borrow 20,000 dollars, but all the Open Offers for monkeys on OpenSea are full and below the actual Buy Offer. In other words, the owner of this monkey wants to sell for 10 ETH, but the Open Offer is 2 ETH, which means that this person can get 2 ETH no matter what, but they just don’t want to sell for 2 ETH because they believe the monkey is worth 10 ETH.

At this point, capital efficiency is poor because those 2 ETH are sitting there unused, and the monkey owner cannot take those 2 ETH.

So, at this point, the lending market can do something similar to AAVE, where you can set an interest rate for, say, 30 days. If you borrow 20,000 dollars, you might have to pay back 22,000 dollars. If you don’t pay back, the monkey will enter a new phase, and if the monkey's owner does not come to redeem it within 10 to 15 days, the lender can take the monkey. The person who initially offered 20,000 dollars can take it back, which is also good for the monkey owner because they received 20,000 dollars from the lender. In this way, all NFTs will enter a basic capital efficiency market, somewhat like a pawn shop.