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NFTFi, or “NFT finance,” refers to the emerging ecosystem of decentralized protocols and applications providing financial utility to NFTs. |
Traditionally, NFTs have been primarily associated with digital art, collectables, and gaming items. However, the concept of NFTFi expands the potential use cases of NFTs by integrating them into various decentralised financial (DeFi) protocols and applications. This integration opens up a range of financial opportunities for NFT holders, including:
- Yield Farming: Similar to providing liquidity in DeFi, NFT holders can stake their assets in yield farming protocols to earn rewards in the form of additional tokens.
- NFT-backed Loans: Platforms within the NFTFi ecosystem allow users to collateralize their NFTs to borrow funds. The value of the loan is determined based on the market value of the NFT.
- Fractionalization: NFT owners can fractionalize their assets, dividing them into smaller, tradable units. This enables more accessible ownership and liquidity for high-value NFTs.
- Derivatives Trading: NFTs can be used as the underlying asset for derivative contracts, allowing users to speculate on their value without needing to own the underlying NFT outright.
- Insurance and Risk Management: NFTFi platforms may offer insurance products to protect against loss or damage of NFT assets, providing additional security and risk management solutions.
Disclaimer: These are some possible use cases for NFTFi as a whole. This is not an indication that the GMC collection will implement these use cases.