NFT (Non-Fungible Token) is a non-homogeneous token. The earliest attempt appeared in CryptoKitties, an encrypted cat game launched in 2017. Simply understand, each NFT is a unique digital currency asset that can be circulated, traded, and purchased. It has different values and attributes and is not interchangeable.
Since the beginning of this year, the soaring popularity of NFT has made it gradually enter the mainstream, and many media even call 2021 the first year of NFT. The development of the NFT industry has not disappointed the public. Cross-border cooperation with art, games, sports, music and other fields has made people aware of the potential of the market. According to Reuters London, the NFT market has soared to new highs this year, with sales reaching $2.5 billion in the first half of the year, compared with $13.7 million in the first half of 2020.
However, under the wave of "everything can be NFT", the crisis is looming: According to market monitoring, the NFT trading market has obvious signs of cooling down. As the world's largest NFT trading platform, OpenSea's Ethereum transaction volume reached US$3.4 billion in August, but the current daily transaction volume is gradually shrinking. In September, the single-day trading volume fell below US$100 million for the first time in more than half a month. Compared with the previous historical peak, the single-day trading volume has shrunk by more than 70%.
It has been tested by the market, which proves the huge potential and value of the NFT market, and signs of slowing growth have also exposed existing problems and hidden dangers. The non-transparent value discovery mechanism of NFT, the complexity of the transaction process, the lack of sufficient liquidity in the market, and how to stimulate the enthusiasm of creators are all problems that the NFT industry needs to solve urgently.
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DeFi and MakerDAO
Before talking about the dilemmas and solutions faced by NFT, we can first briefly understand the DeFi market and how MakerDAO became the largest DeFi system on Ethereum.
Decentralized finance, or "DeFi" for short, is an ecosystem of financial applications built on top of blockchain networks. As the name suggests, this ecosystem is open to everyone, operates without the authorization of any central authority, and allows users to fully control assets and interact through decentralized applications (dApps). Compared with traditional finance, the advantages of DeFi are mainly reflected in decentralization, simplicity and speed, and inclusiveness.
At present, the most extensive application cases of DeFi mainly include decentralized exchange platforms (DEX), lending services, issuance of stable coins, mortgage loans, insurance, etc. Among them, the Open Lending Protocol is one of the most popular applications in the DeFi ecosystem. Compared with the traditional credit system, open decentralized lending has many advantages, including instant transaction settlement, support for collateralized digital assets, no credit review, low transaction risk, and low borrowing costs.
MakerDAO came into being. As the first lending financial system built on Ethereum, Maker's vision is to become a decentralized "central bank". It is hoped that through the creation of over-collateralization on the chain, it can provide liquidity that can be adjusted with demand for the currency market. The cryptocurrency Dai (transliterated from the Chinese "loan") issued by MakerDAO has also become the first decentralized stablecoin on Ethereum (1 Dai = 1 US dollar).
The foundation of the Maker ecosystem is built on a smart contract called "collateralized debt position (CDP)": users can create Dai by depositing Ethereum in the smart contract, and the amount of Dai created depends on Based on the value of Ethereum invested by the user in the CDP. The whole process is equivalent to the user mortgaging the ether to obtain Dai, and the user can use these Dai to trade or buy more ether. In this way, users can go long on Ethereum in a way of decentralized leverage.
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The Dilemma of NFTs
For the future of NFT, many people in the industry have good imaginations, shouting the slogan "everything can be NFT", and believe that in the future, NFT is expected to be combined with more items in the real world, acting as a bridge between the physical world and the blockchain world , Assets in the physical world, such as houses and cars, may be chained on a large scale, exist and trade in the form of NFT, and will profoundly change our daily lives.
However, the shrinking trading volume of the top trading platform OpenSea reflects that NFT still faces many problems that need to be solved. We sorted out several problems in the current NFT market general articles.
1. Valuation and liquidity issues
At present, the market generally believes that there is a huge bubble in the current trading of NFT works, and the valuation and liquidity of NFT assets are also one of the reasons that have been questioned by the market. Because NFT works have unique characteristics and rely more on community promotion, how to make an accurate valuation is still a difficult problem. In terms of asset value, the value of NFT will appreciate or depreciate according to market demand, and the liquidity of NFT is relatively low. Once the market heat is relatively reduced, the asset value of NFT will also be greatly reduced.
2. Difficult transactions
Because of the risk of insufficient liquidity in the market, it is easy to cause difficulties in selling NFTs and complicated transaction processes. If the existing NFT liquidity pool cannot provide attractive prices, it will be difficult to reach a deal. Buyers will also face subsequent sales and transactions after purchasing NFT, and there is no guarantee that the purchased NFT can be sold smoothly.
3. Positivity issues
At present, NFT creators can only collect royalties in the primary market link of casting NFTs. In the NFT secondary market, there is usually no preset mechanism for NFT creators to collect royalties. This has implications for the motivation of NFT creators and traders.
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ENVELOP: Endowing NFT with intrinsic value and liquidity
ENVELOP is a complete set of NFT cross-chain solutions, aiming to endow NFT with internal liquidity, and is committed to realizing the value preservation and appreciation of users' NFT through technology, while increasing market liquidity and making transactions more convenient for users.
protocol:
protocol:
Oracle:
Oracle:
index:
index:
As an independent evaluation tool, the fully decentralized index can provide a reasonable pricing reference for the NFT market in the process of product deployment through one or more measurable parameters. This tool provides not only a quantitative but also a qualitative assessment of the interrelationships of assets, dealers, derivatives and other entities.
The ENVELOP protocol also provides users with maximum convenience in use. Users can add royalties to NFT, bear transaction costs and supplement built-in assets, or add temporary time locks to deposited assets. The ENVELOP protocol also allows users to store encrypted assets in NFTs, collect royalties and conduct decentralized betting through NFTs. At the same time, users can also use the ENVELOP oracle as a tool for evaluating NFT prices.
Application scenarios include creating unique digital assets in metaverse, games, sports and other markets; using NFT as an object of transaction, mortgage or deposit in DeFi; for casting NFT music works that can be marked with time and can be customized for royalties, etc. wait. At the same time, it also supports cross-chain services, currently supporting Ethereum and BSC chains. Soon, Polygon, Avalanche, Cardano, Flow and Solana chains will be supported.
The emergence of ENVELOP may greatly improve the problems of difficult NFT valuation, insufficient liquidity, and complex transactions, and will endow NFT with intrinsic value. Similar to the MakerDAO model, it allows users to maintain and increase the value of assets by staking, increasing royalties, and building other digital assets. Currently, the idea of ENVELOP has gained wide recognition, received financial support from the Rarible and Polygon Foundations, and also won the top ten places in the Binance 2021 Russia Hackathon. ENVELOP is striving to establish itself as a MakerDAO in the NFT field by providing a clear business model and a competitive market advantage.
