Nearly ten thousand words interpretation: The rise of NFT finance and the over-the-counter trading track

***Original Title: ** The Rise of NFT Finance (NFTfi) and OTC trading*

***Author: ** Alastair (Researcher of OFR), Old Fashion Research*

***Translation: ** Roger Zhu, Joejoe, jianan, 石志远; 996fubao.eth, Web3Caff Joint Translation*

Last year, the NFT space gained popularity, with many innovative projects emerging and the NFT community further expanding. We witnessed the number of active NFT collectibles grow from 193 in early March 2021 to over 3,000 by the end of the year. Over the past year, NFT markets like OpenSea, LooksRare, and X2Y2 experienced record trading volumes and transaction amounts. However, with the growth and maturation of the market, we are also beginning to see more innovative projects, such as the emergence of NFT over-the-counter (OTC) trading platforms, which are revolutionizing the way collectors exchange and trade NFT assets.

OTC trading of NFTs has become increasingly popular within the NFT collector community. Collectors privately exchange NFTs for other NFTs or sell their NFTs at extremely low or even no transaction fees on platforms like SudoSwap, trader.xyz, and X2Y2.

With the rise of OTC trading for NFTs, other NFT financial protocols (staking, lending, leasing, etc.) have also become more popular. According to an article on NFTfi.com, NFT finance is "a combination of infrastructure and NFT-based financial products and services in the Web3 vertical." These financial activities based on the NFT economy create more value for NFTs, and NFT finance has the potential to create a broader range of NFT applications.

Since the entire market infrastructure is built on blockchain, the value of these derivatives is unparalleled in terms of integration, market acceptance, and value creation.

So, what attracts collectors to engage in this new type of trading, and what is its significance? Additionally, what impact does the eventual emergence of NFT finance, namely lending, borrowing, and leasing agreements, have on such fervently sought-after digital assets like NFTs? This article will explore these aspects, along with their advantages, risks, and share personal insights.

What is OTC Trading

Over-the-counter (OTC) trading refers to the direct exchange or trading between two parties without the involvement of a third party (such as a trading platform or market). In the NFT space, most transactions occur on trading platforms like OpenSea, Coinbase NFT, and LooksRare.

The concept is simple; on most NFT OTC trading platforms, users can:

1. Create a trade request, whether for exchange/sale/purchase, and then wait for other users to accept the trade request or negotiate.
2. Create a trade directly with a pre-communicated party, which can only be accessed through a specific wallet address.

All communication is conducted privately, meaning there is no risk of outsiders hijacking your trade; the transaction either occurs 100% or not at all. Once both parties agree to the trade, they need to send their digital assets to an escrow contract, which will automatically execute the transaction without any intermediaries/third parties involved.

Despite the many advantages of OTC trading platforms, they also have their own risks, just like other applications. The most typical risk is scams targeting your most valuable small images (e.g., through social engineering, fake websites, counterfeit collectibles, etc.). There have already been several scams targeting NFT OTC trading platforms, mainly involving trading partners inviting you to use unknown/fake sites, draining your wallet using malicious contracts. Some victims have also encountered situations where they exchanged their valuable NFTs for counterfeit collectibles.

X2Y2

X2Y2 is a decentralized NFT exchange that addresses issues with OpenSea, offering the following innovative features to optimize the user experience:

• Batch listing: Sellers can list multiple NFTs at once.
• Batch purchasing: Buyers can purchase multiple NFTs at once.
• Built-in rarity viewing: Users can view rare traits within NFT collections without relying on third-party plugins.
• Private sales (OTC trading): 0% transaction and royalty fees, only available for sale to pre-specified wallet addresses.

Their development direction/next steps:

• NFT publishing tools: X2Y2 provides creators with a complete set of tools to help set up NFT whitelist minting and royalty settings; royalties will be paid in real-time once the collectibles are sold.
• Roadmap: Focus on exchange functionality rather than OTC trading.

Summary:

• Meets the basic requirements of an OTC trading platform, P2P (Peer-to-peer) trading.

• Compared to competitors, there are no particularly standout features.
• It is recommended to provide a chat function within the platform to facilitate trading and negotiation;

• This would also allow multiple trading counterparts to bid on the same NFT.
• Additionally, this could enhance trading security, especially if customers are negotiating on Twitter or other platforms, reducing the likelihood of phishing.
• Recently, activity has been good, with daily active users between 1,300 and 1,500 → a good place to discover trading listings.

sudoswap

A no-fee, gas-optimized (gas fees paid for approvals and transactions), multi-asset (supports trading ERC20, 721, and 1155 assets), non-custodial (assets do not leave wallets before trading) ultimate trading platform, utilizing version 2 of the 0x protocol.

How it works:

1. Create an exchange (add your assets and the assets you want to exchange).
2. Share the exchange code with the trading counterpart to execute the exchange.

Development direction and recent plans:

SudoAMM is an automated market maker contract focused on liquidity, specifically designed for NFTs. Traders can enjoy low-slippage NFT and token exchanges, and liquidity providers can better control the price volatility range of their provided chips, as well as set dynamic buy/sell limits. SudoAMM will gradually launch in April.

SudoAMM will use on-chain liquidity pools, allowing anyone to create and trade any NFT within the liquidity pool.

• Traders can operate like in any other exchange:
• Exchange NFTs for ETH or
• Exchange ETH for NFTs.

• Liquidity providers can operate similarly to other liquidity pools (e.g., Uniswap), choosing price ranges to provide liquidity and deposit assets:
• When traders and the pool exchange: deposit ETH, receive NFT.
• When traders and the pool exchange: deposit NFT, receive ETH.
• When traders and the pool exchange: deposit both ETH and NFT to earn transaction fees.

Summary

• Meets the basic functions of an OTC trading platform, allowing NFT to be exchanged for other tokens.
• SudoAMM incentivizes liquidity providers by decoupling pricing calculations from token reserves. Unlike static mechanisms, when the NFT supply in the pool is low, it further deteriorates prices (and vice versa).
• SudoAMM gives liquidity providers the initiative, allowing them to precisely set the volatility range of their pools.
  • Adjust their liquidity provision price range (e.g., from [0.667 ETH, 1.5 ETH] to [0.5 ETH, 2.0 ETH]).
  • Adjust the current pool price (e.g., from 1 ETH to 0.75 ETH, buy/sell quotes automatically follow adjustments).
  • Adjust buy/sell transaction fee rates.
• Native NFTs are pegged to ETH, with no additional conversion fees.
• The creation of liquidity pools replaces the trading order book based on mathematical formulas for price calculation and trade execution, allowing everyone to trade in a decentralized, trustless, and transparent manner.
• Liquidity providers can participate in multi-layer trading, gaining more profit opportunities.
• Question: What kind of NFTs will be supported? What considerations should be made when selecting NFT collectibles?
• Choose purely blue-chip NFTs?
• Or high-volume trading NFTs?

Trader.xyz

Trader.xyz allows you to easily trade NFTs with friends. Users can instantly create a trade, send listings via link, and securely complete transactions. The platform has no fees and low gas costs. Security is ensured by version 4 of the 0x protocol.

Operational Mechanism:

1. Select the token you want to trade (no manual input of token addresses required).
2. Enter the listing price (choose ETH, USDC, DAI) - or other tokens and NFTs (functionality is under development).
3. Create a shareable unique link, or allow only specific addresses to purchase -- meaning anyone with the link can buy.

Development direction and recent plans:

"We hope people can trade tokens end-to-end with friends and strangers on the Trader platform, safely and reliably, without trust. Whether it’s OTC trading, market trading, or auction trading, Trader can play a role. We believe that interactions between people in a safe environment are the future of online trading."

More refined trading settlement:

• Currently only supports trading between NFTs and ERC20 tokens, soon to support trading between ERC20 tokens and NFTs.
• Attribute-based orders: Create restrictive orders based on specific attributes of collectibles (e.g., how much ETH to pay for a bored ape with a certain attribute); liquidity is programmable.
• Orders are stored off-chain in a public order book via the 0x protocol → ultimately transforming into a liquidity aggregator (aggregating exchanges like Opensea, Zora, etc.).

Summary:

• No platform fees (in contrast, Opensea has a 2.5% platform fee and a certain percentage of creator royalties).
• Smooth NFT trading experience among friends (allowing specific wallet addresses to purchase listed NFTs).
• Seeking to create liquidity for NFTs (launched attribute-based orders).
• Seeking cross-chain trading of assets -- cross-chain interoperability.
• Currently, NFTs cannot be traded among themselves; NFTs can only be traded with ERC20 tokens.
• Cannot prevent social engineering scams; UI is easily replicated; using hyperlinks is also unsafe, as malicious actors can create fake websites that look like the UI to trick others into connecting their wallets, thereby gaining access to their wallets.

OpenSea

The largest NFT trading market, OpenSea, announced on May 20, 2022, the adoption of a new Web3.0 market protocol that makes NFT trading secure and efficient. The core smart contracts are open-source and decentralized, similar to the 0x protocol, allowing creators to build based on the protocol.

Features:

• Buy/Swap: Ability to exchange NFTs or trade NFTs for ETH or other ERC20 tokens.
• Specific access conditions: When trading NFTs, buyers can set specific access conditions that must be met for the NFT being traded (e.g., if you only want to trade your Punk NFT with golden bored apes, you can specify that only wallets with golden bored apes can trade with you).
• Dutch auction listings: You can set a starting price and an ending price, as well as the auction duration (the listed NFTs will continuously decrease in price until a buyer appears or the auction ends).
• Tip rewards: The platform supports tipping (as long as the tip amount does not exceed the original quote).

What this means for the NFT OTC trading market:

• Open-source code: It is expected that more and more NFT trading markets providing OTC trading will emerge → more competition = better and faster innovation.
• NFT summer 2.0? - This is akin to the "Uniswap moment" for NFTs (the emergence of Uniswap led to many forks and imitators across different chains, driving the large-scale development and innovation of decentralized exchanges (DEX) and decentralized finance (DeFi)).
• But since the 0x protocol already exists, is there still room for OpenSea's new protocol? - This situation is somewhat similar to how the ERC-721A contract became mainstream. Azuki was neither the creator of this contract nor the first project to use it, but they marketed the contract well, leading the community to perceive Azuki as the pioneer of the contract.

Views on NFT Finance

As the NFT space continues to mature, more high-quality NFT collectibles have been issued, some even rivaling blue-chip NFTs. However, as discussed in our previous article, the more NFTs we accumulate, the lower the liquidity of our investment portfolio becomes. Therefore, the demand for NFT finance is rising to achieve maximum capital efficiency.

In our last report, we studied NFT finance through lending protocols and drew analogies with mortgages, where mortgage clients use low-liquidity assets as collateral to obtain loans. In that report, we focused on relevant protocols, including pricing methods for NFT collectibles and other strategies dependent on counterparties. We also delved deeper into peer-to-peer trading and peer-to-peer liquidity pool lending platforms, comparing the key features of the projects mentioned.

In this report, we will continue to explore four protocols: Rentable protocol, NFTfi.com protocol, Pine protocol, and CEDAR protocol. These four protocols aim to drive the NFT finance movement, providing utility for NFT owners and unlocking additional value from their NFT assets. Let’s take a closer look at the features, roadmaps, and competitive advantages of these protocols…

Rentable Protocol

The recently updated version of this protocol is Rentable V2, which allows any platform to provide collateral-free pure tokenized rental services without integration. Users renting NFTs on Rentable face no entry barriers, and NFT holders can earn rental shares without worrying about liquidation. Its composability enables a variety of novel and creative use cases that were previously unimaginable.

Features:

Stake/Rent NFTs -- NFT owners can "stake" their assets to earn income from renters while retaining ownership of the NFTs.

• NFT owners receive an oToken, a non-fungible token that serves as the sole proof of ownership and can be used to redeem the staked asset.
• During the rental period, this oToken can also be traded or used in any other protocol.

Renting NFTs -- Allows users to rent NFTs for various purposes:

• Metaverse items: Rent items, avatars, etc., and use them in any metaverse that supports WalletConnect.
• Access-restricted experiences: Rent NFTs to gain entry into exclusive communities, join Alpha groups, etc. (using tokenized communities from collab.land) and experience all the benefits available to holders.

• Metaverse land: Creative creators can rent a piece of metaverse land and start building immediately.
• Renters accepting the NFT owner's listing will receive a wToken, which has the same appearance and functionality as the original NFT. Once the rental ends, the wToken will disappear, and the platform can identify the holder and renter to provide a personalized experience.

Image Translation:

Table Header: Features, Value.

First Row: NFT collateral-free rental, no entry barriers + expands platform users;

Second Row: Holders earn income + platform earns royalties, maximizing NFT utility;

Third Row: The rental process is fully tokenized, creating usability + composability;

Fourth Row: High customization achieved through plugins, rich integration with minimal engineering effort.

Summary:

Because no collateral is required, users can hold a premium NFT for a short period at a low cost, significantly lowering the high entry barriers for many games and platforms.

• Additionally, NFT holders will never lose ownership of their NFTs → they still have the right to receive airdrops issued by the project or participate in activities initiated by the project.

• Lenders/owners can directly receive pricing income from their listed rentals. There seems to be no corresponding pricing mechanism to determine rental fees.

NFT holders can earn passive income from assets that would otherwise remain idle, which is particularly beneficial for owners who lack the time or interest to participate in community activities or utilize NFT functionalities.

Rentable can be applied to the vast majority of NFTs, if not all.

• Rentable uses a token wrapping mechanism to package the original NFTs into wToken, replicating the original data, appearance, and functionality without any differences.
• The wToken will disappear once the rental period ends.

Renting maintains the scarcity of NFTs while broadening user channels and expanding platform users, benefiting creators and developers alike.

Rentable will need to collaborate with existing and newly launched NFT projects to integrate the concepts of oToken (for owners) and wToken (for renters) into the projects.

Pine Protocol

Pine Protocol is an asset-collateralized blockchain infrastructure. Built on this protocol, the Pine platform is a decentralized P2P lending platform where borrowers can obtain instant loans from lenders by collateralizing NFTs without permission.

Features:

First, lenders need to establish Pine Lending Pools (PLPs) on the platform → once established, they will be displayed in the Pine Loan Book on the platform (similar to an order book) → when a borrower applies for a loan, the borrower's NFT will be transferred to their Pine wallet as collateral, instantly receiving the corresponding loan.

• Each lending pool (PLP) is established by a lender, such as an on-chain wallet address.
• When creating a lending pool, the lender specifies the range of NFT collectibles acceptable as collateral (e.g., a specific ERC-721 contract).
• Specified collectibles must have a real-time valid price on Pine Pricer.
• Loan currency
• Defaults to the native layer-1 token, e.g., a BAYC pool will lend ETH.

• Lenders must deposit funds after establishing the lending pool; funds not borrowed from the pool can be withdrawn at any time.
• Borrowers can repay any amount of the loan and accumulated interest at any time. After repaying the full amount, the borrower will regain complete ownership of the NFT collateral in their Pine wallet.
• If the borrower fails to repay the loan as per the terms or if the loan-to-value (LTV) ratio exceeds the liquidation value ratio (LTV), the loan will be considered defaulted, and the lender will gain complete ownership of the NFT collateral in the Pine wallet.

Borrowers

• Collateralize NFTs to obtain loans.
• Pine's term loan structure has a specified maturity date, and borrowers can choose to repay early, but lenders do not have call options on the collateralized assets.

• Instant loans mean borrowers can receive funds without repeated negotiations with lenders → reducing the risk of scams.
• Loans can be received in currencies other than the native chain mainnet of the NFT collateral.
• Even if the NFT is collateralized, holders can still use the related functionalities of the NFT → access the corresponding DAO, receive airdrops, participate in community activities.

Through a case study, let’s illustrate how Alice can purchase an NFT priced at 80 ETH with only 50 ETH in her wallet (based on Pine's white paper content):

• Alice finds a lending pool (PLP) on the Pine platform that can provide 30 ETH.
• In a single atomic transaction, Alice borrows 30 ETH from the lending pool, adding it to her existing 50 ETH, completing the 80 ETH purchase on OpenSea. These three steps must be completed in the same transaction.
• Alice receives this NFT in her Pine wallet while holding the obligation to repay 30 ETH to the corresponding lending pool.

Development direction and recent plans

• Decentralized credit scoring
• Calculate credit scores for each address using on-chain data.
• TradFi Gateway (a lending method combining TradFi and DeFi concepts, capable of providing higher collateral factors than DeFi).
• Decentralized lending generally requires over-collateralization (i.e., executed with a lower maximum collateral factor).
• The Pine platform will provide a gateway for borrowers, allowing them to seamlessly add funds from traditional financing lenders (such as banks, lenders, etc.) (e.g., personal loans) to the DeFi loan collateral on the Pine platform.
• Support for multi-chain trading --- such as Solana, Binance Smart Chain (BSC), Polygon, Avalanche, etc.

Summary:

• For investors or users who do not hold NFTs, it is an interesting way to participate in the NFT market without bearing the risks of NFT ownership.
• Allows NFT holders to gain liquidity without losing ownership of the NFTs while retaining their rights as holders.
• DeFrag.fi offers an interesting insurance concept worth exploring; the DeFrag protocol will automatically provide insurance for your NFT assets through the financial tool of "put options."
• Pine also proposes an interesting new feature, "Pine Now Pay Later."

NFTfi

NFTfi is essentially a "trading market" for NFT loans and a leading NFT liquidity protocol that allows NFT holders to receive collateralized wETH and DAI from peer-to-peer (P2P) loans in a completely trustless manner, enabling holders to obtain the liquidity they need through NFTs. NFT loan lenders can earn substantial interest through NFTfi or, in the event of loan default, acquire NFT assets at prices significantly below market value. NFTfi is fundamentally a P2P lending platform.

Features:

Borrowers ------ Obtain wETH or DAI without selling NFTs.

• List NFTs as collateral and receive loan offers from users.
• Upon accepting an offer, the borrower directly receives the corresponding wETH or DAI from the lender's wallet.
• The NFT is transferred to an escrow smart contract during the loan term. If the borrower repays the loan before maturity, the NFT will automatically return to the borrower's wallet.
• If the borrower defaults, the lender can cancel the redemption rights of the collateral and obtain the collateralized NFT. NFTfi does not provide automatic liquidation services.

Lenders ------ Earn substantial loan interest or acquire NFTs at very low prices.

• Supports over 150 NFT collectibles (including CryptoPunks, Bored Apes, Art Blocks, Mutant Apes, VeeFriends, Autoglyphs, and most blue-chip projects), lenders will provide loans for supported collateralized assets.
• In the best-case scenario, lenders will earn very attractive annual percentage rates (APR). Even if the borrower defaults, the lender effectively acquires the NFT at a very low price. Some lenders also offer financing options for "loan purchases of NFTs."

The asset pricing mechanism of NFTfi is determined by users, meaning borrowers can collateralize their NFTs at any price, with lenders deciding whether to counteroffer or accept the bid. Of course, the platform will still provide some reference price information, such as 1. OpenSea floor prices and historical sale prices, 2. Valuations provided by Upshot, 3. Valuations provided by NFTBank. This pricing mechanism will inevitably lead to discrepancies between the asset prices displayed on NFTfi and those in the public market, but it provides a negotiation channel for both borrowers and lenders.

NFTfi charges a 5% service fee on the interest earned from successful loans by lenders, and no service fee is charged in the event of loan default. Borrowers do not have to pay service fees.

Development direction and recent plans

• Provide loans for ERC1155 protocol NFT asset bundles and ERC998 NFT asset packages.
• Indefinite loans: Compared to the V1 version of the protocol, the time limit will be lifted.
• Proportional loans: Current NFTfi loans have fixed repayment amounts. As the first innovative loan type to be launched by NFTfi, proportional loans will allow repayments to be made at a rate proportional to the effective loan term.
• Binding terms loan applications: Allow borrowers to submit loan applications with "minimum viable terms" that lenders will automatically accept.
• Repayment obligation receipts: In the V1 version of the protocol, only lenders received a note NFT as the basis for the loan. In the V2 version, borrowers will also receive a "repayment obligation receipt" NFT simultaneously.

Summary:

• NFTfi has proven to be a reliable project, with numerous successful loan cases involving blue-chip NFT assets, such as BAYC, Doodles, Moonbirds, Otherdeeds, etc.
• Compared to BendDAO, NFTfi is also a decentralized, non-custodial NFT asset collateral P2P lending protocol.

Monthly borrowers and lenders on NFTfi (blue for borrowers, red for lenders)

• NFTfi has also established very good strategic partnerships with some major companies in the NFT space, such as Flow and Animoca Brands.
• Compared to the Pine protocol, NFTfi's downside is that when NFTs are used as collateral, borrowers cannot retain "ownership" status.

• At the start of the loan, the NFT will be transferred to an escrow smart contract → the actual owner of the NFT during the loan period is the smart contract → no one, including the NFTfi team, can access the collateralized NFT.
• This means that borrowers will not be able to use the functionalities of the NFT and may not receive any airdrops (depending on the airdrop mechanism).
• Since both parties must wait before reaching an agreement, this user-determined, customizable pricing mechanism also means reduced liquidity and scalability.

Cedar

CEDAR is establishing an "NFT Buy Now Pay Later" protocol that can genuinely help NFT enthusiasts enjoy the appreciation and utility of NFTs. CEDAR lowers the barriers to acquiring NFTs, helping NFT enthusiasts obtain the NFTs they want at more affordable prices, while also helping NFT projects sustainably build and expand their communities.

Features:

How it works:

• Select an NFT.
• Pay the first installment and immediately gain all rights to the NFT.
• Once the loan is paid off, the NFT will enter your wallet.

All NFT benefits, including earning income from games, community activities, membership privileges, token airdrops, and whitelist memberships, can be accessed immediately.

Image Translation (from left to right):

User Benefits

Buyer enjoys all the benefits of the NFT first, then pays the full amount.

Lender enjoys high returns from liquidity pool investments.

NFT project parties sustainably expand their communities by helping NFT enthusiasts acquire NFTs more easily.

Pricing Mechanism:

CEDAR collaborates with NFT pricing and analytics platform SPICYEST to provide the most accurate price estimates for each NFT collection. Since NFTs are used as collateral in the CEDAR lending protocol, reliable and accurate NFT pricing feedback is crucial for managing risks related to price fluctuations and market changes. This is the moment for SPICYEST to enter the landscape.

CEDAR will work with SPICYEST to determine the eligibility, risk parameters, and health factors for each loan within NFT collections. SPICYEST's machine learning model gathers and processes data from numerous sources, creating Spicy Estimates based on features, latest sale prices, and previous sales data.

Summary:

• The collaboration between CEDAR and SPICYEST is absolutely excellent, especially in providing accurate price estimates for NFT collectibles.
• This will enhance risk management for LPs and borrowers.
• However, CEDAR may not capture a significant market share solely based on their BNPL (Buy Now Pay Later) protocol.
• Compared to other projects like Cyan or Pine protocol, CEDAR does not have a significant competitive advantage.
• At first glance, both CEDAR and Pine protocols seem to offer the same services, but since Pine also provides other NFT financing solutions (NFT collateralized lending), we can expect Pine to gain more traffic and community recognition.
• The entire concept of BNPL is undoubtedly intriguing, especially for collectors who want to enjoy all the benefits of owning NFTs but also want to free up liquidity for other collectibles; or even for those just starting out who may not have enough liquidity to fully purchase their desired NFTs.
• It is crucial to understand more about CEDAR's future plans before drawing conclusions.

Conclusion:

What kind of NFT OTC (Over the Counter) products does the market truly need?

The market needs an NFT OTC product that can meet the following three basic factors:

• Security: Collectors will certainly prioritize the security of each transaction; transactions should not be easily susceptible to malicious attacks and should prevent potential scams.
• Cost/Fees: For example, transaction fees (gas) should absolutely be optimized and kept to a minimum.
  Royalty issues: Some projects rely on royalties generated from each sale to continue building and developing; if OTC trading is used, these projects will not receive royalties, which may affect their development.
  My solution: Allow collectors to choose the percentage of royalties they wish to donate to the community. While this is not a perfect solution, it allows deeply engaged collectors to participate in the royalty system.
• Cross-chain interoperability: With the popularity of NFTs on chains like Solana and NEAR, I believe cross-chain compatibility will certainly attract collectors who want to acquire NFTs on other chains.

Although existing NFT OTC products have met the basic needs of most NFT collectors adopting OTC trading: the ability to exchange NFTs for other NFTs (e.g., exchanging a Mutant Ape for 2x Azuki), as well as simply selling their NFTs for other tokens like ETH, USDC, or DAI without incurring high fees.

I still believe that as NFTs gradually mature and grow into more complex assets, the demand for OTC platforms will change; platforms that currently meet all market expectations may not suffice in the future.

How will NFT finance continue to evolve and benefit the NFT industry?

As renowned projects like BAYC and Sandbox continue to release new content and projects in the space, we should expect to see more NFT finance protocols and a narrative shift towards NFT lending and borrowing agreements. We should also anticipate more capital inflow, especially from DeFi "natives" looking to leverage some of the attractive yields offered by these protocols. This will also provide more liquidity to the NFT market, making growth forecasts for the coming years more stable.

For GameFi enthusiasts, NFT leasing protocols may become an important trading market. As the GameFi narrative shifts from unsustainable guild structures, collectors of GameFi NFT assets now have a more sustainable way to lend their assets. This could lower the barrier for players to purchase all the AAA games set to release this year.

For example, players do not need to fully commit and purchase an NFT at a price of 2 ETH to start playing; instead, they can rent it for a period at a price of 0.2 ETH, then decide whether the NFT is worth a full purchase.

How can new builders develop better products than current peers?

When developing the "ideal" NFTFi product, especially those related to NFT lending and leasing agreements, how NFTs are valued and understanding the liquidity slippage of NFT automated market makers (NFT-AMMs) is one of the trickiest issues. In terms of collectible valuation, various projects, such as CEDAR, have established strategic partnerships with pricing systems to provide their users with the most accurate real-time prices. This collaboration will allow new protocols to focus on their core products while maintaining confidence in the NFT valuations for their users. Regarding liquidity slippage, NFT automated market makers must design formulas that differ from distributed trading platforms (DEX) like Uniswap, especially when dealing with highly volatile and low liquidity assets like NFTs.

Additionally, these platforms can integrate with other NFT technologies to provide more value-added services. For example, Numeus.xyz's NiftyMate, which is an NFT pricing engine that allows collectors to calculate the most realistic "fair price" for their beloved JPEGs. Such services can help first-time buyers accurately estimate the price of NFTs with certain attributes, making the NFT market less intimidating for first-time purchases. This will provide collectors with as much information as possible before making a purchase.

As for NFT OTC trading, I expect more builders to utilize the new Seaport protocol to enhance the security and creativity of NFT OTC markets. Incorporating basic capabilities such as verifying NFT validity will protect users during transactions.

I believe one of the most important scenarios for NFT OTC trading lies in GameFi. The exchange of game assets (equipment, accessories, weapons, etc.) between players is similar to the trading systems used in Web2.0 games (like MapleStory and RuneScape). Traditional games allow players to exchange any in-game assets or items for others, even in-game currency. These transactions are often very low-cost or even free; this is a primitive yet effective technique for transferring assets between players.

As the narrative shifts towards MMORPG games like Treeverse and Embersword, there is a growing desire for quick, low-cost, and secure NFT asset transactions. Therefore, platforms looking to expand services in NFT OTC trading could consider collaborating with GameFi projects to integrate their services into games or directly become the official platform for players to trade assets.

When it comes to merging NFT financing and OTC trading strategies with the development of metaverse/GameFi projects, the possibilities are endless. I have no doubt that in the coming months/years, we will see more and more NFT "natives" attempting such approaches. I also look forward to seeing more innovations that will elevate the NFT market to new heights.