Three Major Advantages to Understand Why "Blur Killer" Pawnfi Can Stand Out in the NFT Red Sea

Author: Mori

Those familiar with the crypto market know that the NFT industry has undergone significant changes, from the early dominance of OpenSea to the rise of multiple platforms like Blur and LooksRare, as well as the entry of large exchanges like Binance. The NFT market has gradually shifted from a "blue ocean" to a "red ocean." However, after the explosive breakthroughs in 2021 and early 2022, the NFT sector has not continued to grow, especially in the context of a sluggish crypto market, where issues such as low liquidity of NFT assets have become prominent.

Against this backdrop, Pawnfi, a leading provider of instant liquidity solutions for NFTs, has attracted considerable attention in the industry. This platform offers a one-stop service for traders, creators, investors, and borrowers seeking unlimited cash flow and returns, and can even release deep liquidity and explore the potential of NFTs in the DeFi space without requiring ownership or transfer of digital assets.

Next, let's take a look at why Pawnfi can carve out a path in the NFT red ocean surrounded by OpenSea, Blur, and even Binance NFT markets.

1. Pawnfi Competitive Advantage One: Core Mechanism of P-Token

The general way for NFT holders to earn is to buy low and sell high. However, due to the relatively long trading cycle of NFTs, the efficiency of earning is relatively low, leading to insufficient market liquidity.

Pawnfi has introduced a new concept called "P-Token" in the NFT world, which represents NFT collections in ERC-20 token format, allowing NFTs to be used in DeFi applications and trading platforms, aiming to solve liquidity and functionality issues. In the Pawnfi mechanism, each NFT collection has its corresponding P-Token based on the ERC-20 protocol, enabling traders to easily enjoy trading, lending, and earning in the secondary market.

Currently, the NFT collections supported by Pawnfi include: BAYC (P-BAYC), MAYC (P-MAYC), BAKC (P-BAKC), Otherside Koda (P-KODA), Wrapped Cryptopunks (P-WPUNKS), Azuki (P-AZUKI), Otherdeed Expanded (P-EXP), CLONE X (P-CloneX). Although the number of supported collections is currently less than that of Blur's NFT lending protocol Blend, the gap between the two is not significant.

(Note: The NFT collections supported by Blend include: Beanz, CloneX, Pudgy Penguins, Kanpai Pandas, Redacted Remilio Babies, BAYC, MAYC, DeGods, CryptoPunks, Azuki, Milady)

If you want to delve deeper into the application scenarios and mechanisms of P-Token, you can further understand through the article “PawnFi: Exploring the Protocol Mechanism and Token Value of the NFT Liquidity Engine”, which will not be elaborated on here.

Here’s the conclusion: Pawnfi's "P-Token" effectively addresses one of the biggest bottleneck issues in the NFT field—financialization. As long as financialization can be achieved, liquidity can be mobilized through financial products. P-Token acts as a bridge that organically combines NFTs with DeFi, greatly releasing the extrinsic value of NFTs. It can be said that Pawnfi has solved the problem of simultaneously coordinating ownership, efficiency, and compatibility in the NFT industry with this innovative approach, even leading ahead of industry leaders like OpenSea and Blur.

2. Pawnfi Competitive Advantage Two: Comprehensive Coverage of Ecological User Roles + Multiple Mode Choices

Pawnfi provides three major functions for users—trading, lending, and staking, essentially covering the needs of all user roles in the current NFT market, including traders, creators, investors, and borrowers. In contrast, Blur has only implemented aggregation functions on the trading side and only recently launched the lending protocol Blend, which has not fully achieved comprehensive coverage of ecological user roles.

Moreover, Pawnfi's three major functions also offer users multiple mode choices.

First is the currently popular NFT lending. We know that Blend adopts P2P Lending, which essentially matches NFT holders with capital holders to complete the mortgage of NFTs for lending funds on a peer-to-peer basis. BendDAO and ParaSpace use a pool lending model. Pawnfi, on the other hand, plays more of a role in providing a lending venue, with both parties being core and engaging in bilateral market-making. To cater to different user needs, Pawnfi cleverly utilizes P-Token to provide two lending modes:

• One is Leverage, which focuses on quick lending. By using NFTs as collateral, users can borrow nearly the equivalent value of P-Token (i.e., 1000) directly from the contract, with a loan-to-value (LTV) ratio close to 100%. This is suitable for those in urgent need of cash flow, and since it is priced in P-Token, even if there are any price fluctuations, borrowers will not lose ownership of their NFTs due to liquidation, as long as they repay the P-Token within the loan term, they can immediately reclaim their NFTs;
• The second is the Lending Market. Pawnfi's lending market resembles a decentralized lending contract, providing individuals and protocols with permissionless and fully transparent access to financial services. Similar to Aave/Compound, users can lend or provide any supported tokens in the Pawnfi market and use the provided funds to borrow another supported token. Notably, Pawnfi supports not only stablecoins (USDT, USDC, DAI, etc.) and mainstream coins (ETH, WBTC, etc.) but also NFTs (BAYC, MAYC, CryptoPunks, etc.), allowing users to use NFTs in Pawnfi's currency market like ERC-20 tokens. This secure and efficient way of accessing financial services further promotes the inclusivity and diversity of the DeFi ecosystem.

Next is the NFT trading function. Whether it’s Blur or OpenSea, if you want to sell an NFT, you must place an order and then wait for buyers to bid. This "waiting" experience often brings users a sense of agony. In contrast, trading on the Pawnfi platform seems to always be able to "get ahead" and settle transactions, which brings us to Pawnfi's innovative trading features.

In the trading service, Pawnfi also offers two modes:

• One is Flash Trade, which allows users to instantly exchange NFTs and P-Tokens at a ratio of 1:1,000, facilitating seamless and efficient buying and selling of NFTs. For example, users can exchange N x mNFT for N x 1,000 x P-mNFT through flash trading, allowing them to quickly and flexibly gain exposure to P-Tokens (by frequently checking which valuable NFTs are in the pool and buying them at the floor price) or liquidate NFT assets, optimizing their NFT portfolios while maximizing returns.
• The other is Consignment, which is somewhat like consigning NFTs for sale on Pawnfi. Here, we must mention Pawnfi's P-Token mechanism again, as this mechanism eliminates the need for NFT holders to list at low prices for quicker cash flow matching. It allows the platform to provide an advance payment to NFT holders when selling NFTs, with the difference made up after the NFT is sold. If the NFT is not sold within the specified time, the advance payment must be returned to the platform to reclaim the NFT—this novel feature is believed to be unique in the current NFT market.

Now let's talk about staking. Pawnfi supports APE Staking services, which are similar to the current user experience of ParaSpace, but borrowing Ape Coin for mining is uncollateralized and carries no liquidation risk. More importantly, it can be integrated with all existing Pawnfi functions. This means that users who are already using Pawnfi can seamlessly migrate to the APE Staking service. Additionally, for those purely mining with NFTs, the combination with Pawnfi's lending market allows them to enjoy the APY of the lending pools P-BAYC/P-MAYC/P-BAKC while participating in NFT Staking and reinvestment services.

3. Pawnfi Competitive Advantage Three: Secure Trading and Liquidation + Passive Income

In addition to the two major advantages mentioned above, Pawnfi has some other advantages compared to other platforms, such as:

1. Secure Trading and Liquidation

Delegating NFTs on Pawnfi requires locking the NFTs in a smart contract, rather than just providing signatures and authorizations as in standard listings. The relevant smart contracts have been audited and verified by PeckShield, ensuring safe handling of the sales process. By using smart contracts, Pawnfi provides users with higher security and transparency, as well as faster and more efficient transaction processing.

Moreover, when mortgaging NFTs, users sometimes worry about liquidation. It should be noted that Pawnfi's liquidation mechanism is also designed around P-Token, making it relatively safer. With P-Token as an "NFT substitute," even if the floor price of NFTs suddenly drops, the NFTs themselves will not be liquidated. Instead, a portion of the corresponding P-Tokens will be deducted first. As long as users recharge and maintain enough P-Tokens in their wallets, their NFTs will not be liquidated. Coupled with the full collateral concept, users can also mortgage other unused assets, further minimizing the risk of liquidation.

Additionally, over-collateralization is a common lending method in the DeFi and NFTfi ecosystems. However, over-collateralization greatly reduces the efficiency of capital flow and weakens NFT liquidity. Pawnfi's design effectively avoids this. By leveraging the characteristics of NFTs and coins, users can borrow P-Tokens close to the NFT floor price without worrying about liquidation risks during the borrowing period, as long as they repay on time.

2. Passive Income

Pawnfi's NFT staking function allows users to easily earn passive income. Other NFTfi projects can only earn interest when NFTs are borrowed, while Pawnfi swaps the NFTs deposited in the pool for P-Tokens, meaning that as long as someone borrows, they can borrow P-Tokens, thus ensuring passive income from P-Tokens.

4. Conclusion

The following compares several noteworthy NFTfi projects in the current crypto market, showing that Pawnfi is one of the few NFT platforms that organically combines NFTs and DeFi.

Frankly speaking, NFT liquidity, or more precisely, NFT + DeFi, still belongs to a niche market, which may be largely related to the "current market value of NFTs being relatively small" and "the NFT pricing mechanism being imperfect." However, from another perspective, this precisely indicates the immense potential in this field. NFTs are likely to become one of the most important pieces in the crypto world. We have already witnessed the significant changes brought about by "DeFi Summer" to the entire crypto market, and it is believed that such changes will inevitably occur in the NFT space as well.

By analyzing Pawnfi's relevant advantages, we cannot help but acknowledge that calling it the "Blur killer" is not an exaggeration.