The fragmented financial sector of the NFT industry makes selling NFTs and lending money to NFT holders far more difficult and risky, however Uniswap, Ethereum’s most popular decentralized exchange (often referred to as “DEX”), aims to become a powerful player in fixing this problem. Uniswap Labs has been taking steps and showing interest in the NFT space over the last few months and this could solve the biggest problem NFTs suffer from.
When the first version of Uniswap was released in 2018, it was revolutionary for crypto. Thanks to Uniswap, crypto holders could swap tokens conveniently and securely from their personal wallets, including hardware wallets. Uniswap provided the ability to buy or sell cryptocurrencies that were not listed on exchanges by giving its creators the ability to create “pools of liquidity” of tokens for users to trade against, ushering in a new era for Decentralized Finance (DeFi ) initiated. While this was great for “fungible” tokens (tokens that are all identical), it did nothing for “non-fungible” tokens, or “NFTs”, which were still a new idea at the time. Unlike crypto lending/borrowing apps, NFT lending/borrowing apps are difficult to build as it is nearly impossible to liquidate a redeemed NFT at a predictable price, largely due to how fragmented the NFT industry still is.
SCREENRANT VIDEO OF THE DAY
However, the NFT industry may not remain fragmented for long. On June 21, Uniswap Labs announced the acquisition of Genie, an app that combines (or “aggregates”) multiple NFT marketplaces into the same interface, solving the problem for sellers who are trying to differentiate between marketplaces for NFT royalty payment policies and the size of the NFT select customer base. On August 23rd, @Scott_eth, Head of NFT Product at Uniswap, tweeted that Uniswap is now “in talks” with 7 NFT lending and lending protocols to address fragmentation and “information asymmetry” issues across the industry remedy. These two moves together are significant for the NFT industry as Uniswap’s trading volume has historically surpassed that of Coinbase, which CoinDesk reported back in September 2020. Having NFT marketplaces and financial services alongside the hugely popular Uniswap token swapping protocol could accelerate the NFT industry.
NFT liquidity is fragmented and Uniswap could fix that
The biggest issue currently facing the NFT industry is the fragmented “liquidity” which (as an adjective) refers to the ability to convert an asset into cash/crypto and (as a noun) usually the amount of waiting cash/crypto in reserve to buy an asset (e.g. the tokens in Uniswap’s liquidity pools). Hence the term ‘liquidation’: conversion of an asset into ‘liquid’ cash/assets. NFTs are widely viewed as “illiquid” assets because they are difficult to sell and it is virtually impossible to predict the highest price at which an NFT will sell at any given time, making it difficult to create NFT financial services and it is often far more risky to contribute to regular DeFi applications.
NFTs have a lot of potential for financial services and passive income opportunities if their liquidity problems can be solved. Lending liquidity can be improved through the use of fractional NFTs, often referred to as “F-NFTs,” which split an NFT into smaller identical tokens that could then be purchased by many lenders who are taking lower risk, rather than a single lender who is takes a big risk, abound his risk. NFT leases will also be coming soon, which will complement the financial services available to NFTs by providing a risk-free way to generate passive income from NFTs used in gaming and Metaverse worlds.
While it is impossible to design a DEX that an NFT can sell outright, Uniswap tries to get as close as possible to this goal by merging all NFT marketplaces into a single interface while implementing lending and lending services that are easy Services can also be expanded to more. Uniswap is likely to become a critical part of Web3’s financial system, serving as a universal all-in-one currency converter and NFT financial center. Solving the problems NFT financial applications face before their best use cases are invented can overwhelm the industry, and Uniswap is the right app for the job.
Source: Uniswap Labs, @Scott_eth/Twitter, CoinDesk
Learn Crypto Trading, Yield Farms, Income strategies and more at CrytoAnswers
https://nov.link/cryptoanswers
Comments are closed.