Coverage on the intersection of NFTs and DeFi
Welcome to my weekly newsletter, where I share data-driven insights about non-fungible tokens and adjacent assets.
This week’s issue covers the intersection of NFTs and DeFi (NFTfi). One of the major bottlenecks to growth in the space is the lack of liquidity in the market. NFTfi verticals like lending, fractionalization and price aggregation of assets might hold the solution. In this post, we look at a peer-to-peer lending platform, a machine-learning-based appraisal tool and an NFT liquidity protocol.
📈 NFTFi.com crosses 14K YTD loans
NFTfi.com is a peer-to-peer lending platform where users directly lend and borrow NFTs from each other. Lenders earn interest in the form of DAI (a USD stablecoin) and WETH. Borrowers access liquidity by collateralising NFTs. The project recently crossed 14K YTD loans, tracking at 14,802. Cumulative volume reached ~$223.7M. In line with recent declines in NFT market volume, loan volume (USD) has decreased 61% from its peak in April 2022.
NFTfi retains 5% of the interest earned by lenders on successful loans. In the event of a loan default, there is no platform fee. Monthly interest earned (USD) declined 54% from $1.47M in May to $682K in July. Monthly fees (USD) peaked at $77.6K in May but have since dropped to $35.9K, in line with the general NFT market decline.
One drawback of NFTfi is that users must wait for the platform to approve NFT projects for use as collateral. Collections with the most YTD loan volume include Bored Ape Yacht Club, Cryptopunks, Mutant Ape Yacht Club and Art Blocks. In early July, two whales borrowed $3.16M across 147 CryptoPunks ($21.5K loan on each).
💡 Genie now shows appraisals from UpShot—a huge unlock for NFTs as an investable asset class
UpShot is a blockchain analytics platform that uses machine learning to provide near real-time NFT appraisals. Understanding the price of an NFT can be difficult as the vast majority are illiquid and lack rich price histories. Upshot just rolled out an integration with NFT market aggregator Genie—users can now easily identify which assets are listed at fair market value.
Another tool in their suit is UpShot gmi, a grading index for NFT wallets. In an industry where many people operate pseudonymously, it’s tricky to determine which wallets are worth lending to and trading with. Simply paste a wallet address into the text input, and the site will spit out a score indicating the wallet’s reputation and “degeneracy”.
📈 NFX maintains $40M TVL despite drawdowns
NFTX is an automated market maker (AMM) for NFTs, which is just another way of saying decentralised exchange (DEX). Users deposit their NFT into an NFTX vault and mint a fungible ERC20 token (vToken) representing a claim on a random asset from within the vault. This allows anyone to instantly sell any NFT listed on the platform by minting it as an ERC20 and swapping it on a DEX like Sushiswap. Despite considerable drawdowns in crypto prices, NFTX’s TVL has remained relatively steady since it crossed $40M in late May. In contrast, when charted against ETH, TVL is at an all-time high of 24.5K ETH.
Daily active wallets (a good proxy for users) peaked at 2528 in early June but has dropped in recent weeks by 10% to 2273. Active vaults on the platform, defined as a vault with more than one interaction over the last 30 days, has been trending up over the last year, currently tracking at 294.
NFTX charges a fee when an NFT is minted, redeemed or swapped in a vault. Total fees just crossed 3525 ETH. At the moment, fees accrue back to LPs as NFTX has yet to start generating fees to the protocol.