NFTfi Supernova: Maximizing Benefits from Idle NFTs - Pawnfi Strategy Analysis

Author: JZ Invest

As someone who relies on investment and trading, in addition to continuously increasing my portfolio assets, I also need to think about "how to increase quickly." Besides theoretical knowledge and familiarity with the rules of the game, how to use tools is very important.

Today, I want to talk about Pawnfi, an NFTfi project, and introduce how they maximize the utility of NFTs to help us earn the most assets in the shortest time. At the end of the article, I will share how I use Pawnfi, what benefits early users can enjoy, and the trading opportunities for NFTs—there's a lot of practical information.

So, this article is not only for NFT holders to read carefully, but traders can also develop their own NFT trading and arbitrage strategies through this article. Additionally, friends who want to airdrop can also study it to see what treasures they can find.

Let’s first introduce what Pawnfi is and why I think it is a Gem in the NFTfi space. Let’s get started!

1. What is Pawnfi? Infinite Development Potential?

Pawnfi is a one-stop solution for NFTfi, allowing lending, trading, staking, and providing liquidity on the platform.

Pawnfi Protocol as a one-stop NFTfi solution, fully functional

In simple terms, you can do the following on the Pawnfi platform:

• Collateralize and lend NFTs (ERC-721), or ERC-20 tokens like USDT, ETH
• Trade NFTs
• Use NFTs as collateral while participating in all activities of NFT projects, such as airdrops from Azuki and staking from BAYC
• Utilize the P-token mechanism to liberate the liquidity of NFTs.

You can think of Pawnfi as an optimized version of Aave, Compound + BendDAO, Paraspace, plus the exclusive and most important P-token mechanism. I believe this fragmented mechanism will lead NFTfi into the next stage.

Before understanding the P-token mechanism, let’s first confirm the security of Pawnfi.

Pawnfi's contract code has been audited by Peckshield, but the team still places great importance on security, so they are seeking cooperation with more code auditing companies. They have also integrated Chainlink's on-chain oracle to make the pricing and liquidation mechanisms safer and more stable.

Pawnfi has a complete code security audit report.

Additionally, based on my conversations with the Pawnfi team and CEO Wesley, I can confirm that the team has a unified goal and is very cohesive, so there will be no management-level blow-up incidents.

Wesley is also very willing to introduce Pawnfi to users and answer any questions. You can directly find him on Twitter, Telegram, and Discord. I got to know Wesley directly and bombarded him with various questions.

After confirming the security and the team, let’s talk about the P-token mechanism that excites me the most, and the operations derived from it!

How does the P-token mechanism create systemic changes in the NFTfi space?

Let’s first discuss the principle. On Pawnfi, you can use the Flashtrade feature to instantly exchange your NFTs for 1000 P-tokens. For example, if I have 2 BAYC, I can use their function to exchange them for 2000 P-BAYC, and so on.

With this simple function, previous Doge NFTs and Azuki #40 have done it, and even NFTX is doing this. Why do I think Pawnfi's P-token is so promising?

Like any DeFi project, having many users, high TVL, and scale effects can attract more users and funds, which is what we often refer to as the flywheel effect.

Previous fragmented projects focused only on fragmented functions without pairing them with other functions or even derivative functions after fragmentation, so they unfortunately could not scale.

The functions and advantages of Pawnfi's P-token platform are as follows:

• Lower investment threshold for NFTs:

Now investing in a BAYC can easily cost millions of TWD. With the emergence of P-BAYC, you can participate in the growth of the BAYC project without even having to buy one.

Taking U.S. stocks as an example, whenever there is a stock split, the price of a stock decreases, allowing more retail investors to participate, which improves liquidity as more participants join.

• Easier to short NFTs:

In the past, if you wanted to short an NFT, you had to borrow the entire NFT, unable to short a precise exposure, and then repay at a prohibitively high interest rate. The worst part is that if you wanted to short a high-priced NFT like BAYC, you had to have a certain amount of capital.

Now you can borrow precise short exposure with P-tokens at market supply and demand balanced interest rates, in short, you can easily short NFTs, which will also increase market liquidity and efficiency.

• More active NFT collateral lending market:

In the past, NFT holders could only collateralize a unit quantity of NFTs, simply using NFTs as collateral.

But now you can exchange them for P-tokens, choose how many P-tokens to collateralize (lend), and the remaining P-tokens can be sold for cash or even directly used to provide liquidity in Uniswap’s trading pool to earn more rewards.

• Arbitrage opportunities:

Each NFT exchange has its own fees, pricing, and liquidity, and different exchanges have different users and market efficiencies, so there will be arbitrage opportunities between them. I will detail this part in the next article, so remember to follow JZ Invest's Twitter for the latest information.

• Establish NFT indices:

Once the liquidity in the NFT market improves and trading units become smaller, the next step will be to establish indices and develop products similar to REITs, ETFs, ETNs, etc. At that time, the NFT market will become a growth market that large funds will enter, rather than just a stock market for NFT players and flippers.

Having discussed so much about Pawnfi's prospects and potential, what does it have to do with us?

Don’t worry, next I will show you how we can use Pawnfi and how to benefit from it.

Pawnfi Mega Drop Airdrop Event

2. Opportunities and Operational Strategies in Pawnfi

For everyone, taking advantage of the current low gas fees to interact and ambush airdrops is a promising investment.

But a better investment is to use Pawnfi directly, increasing our asset utilization and returns, and through the process of using it, understand this new NFTfi platform and mechanism, and get a head start on the game rules to strategically position ourselves in the blue ocean market.

However, currently, Pawnfi only offers early bird qualifications (with airdrop point bonuses) for use. There are three ways to obtain early bird qualifications for those who want to use it now:

1. Hold the following NFTs in your wallet: Bored Ape Yacht Club, Wrapped Cryptopunks, Mutant Ape Yacht Club, Otherdeed Expanded, Otherside Koda, Bored Ape Kennel Club, Azuki, CLONE X, DeGods, CryptoPunks, Otherdeed, Potatoz, Moonbirds, Doodle, Meebit, Pudgy Penguin, BEANZ Official, The Captainz
2. Get an invitation code from someone who has early bird qualifications. I have some invitation codes available, you can join the JZ Invest tg group to get one.
3. Join Pawnfi's Discord community, where they will periodically have events to distribute codes. I guess you can also ask someone for an invitation code on Discord.

So what exactly can we do on Pawnfi?

Pawnfi has quite a few functions, as it is a one-stop NFT solution, but specifically, I will do 4 things on Pawnfi:

1. Increase asset utilization: Collateralize my NFTs and borrow USDT or ETH for use.
2. Increase returns: Collateralize and lend my P-tokens to earn interest.
3. Increase returns: Provide P-tokens and ETH to Liquidity Boosting (Uniswap trading pairs).
4. Increase asset utilization and returns: Stake BAYC, MAYC, BAKC, and stake $APE, allowing Pawnfi to help me compound automatically.

The above 4 operations seem to require holding NFTs. So what can non-NFT holders do? I have also organized 5 operations from basic to advanced that everyone can note down for potential use:

1. Lend USDT, ETH, and other ERC-20 tokens to earn interest and collateralize loans.
2. After obtaining P-tokens, participate in blue-chip NFT investments with fractional shares, then lend them out to increase returns.
3. Borrow P-tokens, sell them, and later buy them back to repay, completing the shorting action.
4. Arbitrage between different NFT markets.
5. Simply stake $APE and let the platform compound for us, while also hedging on Binance (before more people know this strategy, it’s basically a guaranteed profit; as of 2023/6/13, the hedging cost is APY 55%, and the platform provides compounding APY of 104%, but note that both APYs are variable).

All these actions will interact with the platform, meaning you can earn Pawnfi's airdrop points, which can later be exchanged for their platform token $PAWN. You can find information about these airdrops on Pawnfi Doc.

Strategizing Airdrop Points

Having discussed so many operations, let’s return to airdrops. Why do I think Pawnfi's airdrop points are worth strategizing?

Their investors include Grayscale's parent company Digital Currency Group (DCG), Animoca Brands, which has the most resources in the NFT field, Coinbase Ventures, which is publicly listed in the U.S., and others like Crypto.com, Polygon, EVG, etc.

Additionally, many exchanges are also Pawnfi's investors and backers, and it is one of the most promising CoinList Seed projects, making token issuance, ICOs, and even listings on exchanges or IEOs possible.

But I still emphasize that I do not encourage simply farming airdrop points, so it’s best to have actual needs or discover and learn new fields through interactions, understand the latest game rules, see what loopholes can be exploited, and find profit opportunities.

3. Conclusion

The emergence of Pawnfi has a great opportunity to change the landscape of the NFTfi space, injecting new funds and attention into this sector. Currently, this project is still in its early stages, making it a good time to calmly research it.

After doing thorough research, find applications and strategies that suit you, whether it’s using idle NFTs to earn interest or collateralizing loans, or using P-tokens for investment, shorting, or arbitrage—these are unique functions of Pawnfi. In other words, it is still a blue ocean dividend period.

Finally, this article roughly introduces Pawnfi's potential, advantages, and what functions can help us profit.

In the next article, I will pick out several basic and advanced strategies for detailed analysis, including what Ape Staking strategies BAYC and MAYC holders can play, and what strategies can be laid out for the long-awaited Azuki Party on 6/23.

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