Thursday, 07 July 2022
How Are NFTs Transforming DeFi Canva

How Are NFTs Transforming DeFi

Written by  The Dubrovnik Times May 24, 2022

The two most prominent trends existing today in the Cryptocurrency market are Defi and NFTs. Decentralized finance and Non-fungible tokens have become quite popular in Blockchain technology. 


 

Defi allows users to access banking services using a decentralized network while NFTs help users tokenize their assets.


 

While these two entities are still performing individually in the market, it is important to reflect on the possibilities of using the two simultaneously for the benefit of the enterprises.


 

As we move forward with decentralized finance, it is reasonable to wonder about NFTs' evolution and how they will support Decentralized Finance. Today NFTs are often considered digital art. They have become collectible items fetching you high prices in auctions.


 

Today, we will discuss the NFTs and try to find answers to how they will transform Decentralized Finance.

Overview Of Decentralized Finance

Defi is a blockchain-based system that is meant for finance management. Decentralized finances allow users to conduct financial transactions such as payments, lending, savings, borrowing, interest, current trading, and the P2P model. Defi bypasses any third-party authentication and makes direct transactions.


 

Defi services are possible because of the Decentralized Applications (dApps). The majority of the decentralized applications are run on the Ethereum network.


 

Defi attracts a lot of attention from the Crypto market leaders. This is because they are of the opportunities Defi has brought to the financial industry.

Benefits of Decentralized Finances

  • Accessibility.
  • Transparency and immutability.
  • No centralized authority.
  • Interoperability.
  • No need for permission.


 

To better understand the benefits of Decentralized Finance, visit Bitiq.

A Quick Look At The NFTs

As you already know, NFTs stands for Non-Fungible Token. They are represented as real-life items recorded on Blockchain. 


 

Example of NFTs can take multiple forms -


 

  • Image.
  • Ticket.
  • Videos.
  • Real estate.


 

As long as they exist in real life, they can be converted into NFTs. However, unlike fungible tokens like Bitcoin and Ethereum, NFTs are different and exhibit different characteristics.


 

NFTs have created a lot of fuzz in the art community as creators can now actually monetize their artwork. And the best thing is that they do not need any middlemen like auction houses or galleries.

Benefits Of NFTs

  • Transparency.
  • Proof of ownership.
  • Investment potential.

How Can NFTs Benefit From Decentralized Finance?

Many times, it has been proven that NFTs can make quite a difference in traditional operations. But can they really do something in the sphere of finances? Let’s find out.


 

Centralized finance has always been controlled by a governing body that supervises every financial transaction, trade contract, and investment.


 

Although there is a body controlling and authenticating the transactions, it has its disadvantages - going through the verification and approval takes a long time.


 

In addition, when too many people are involved in transactions, the chances of fraudulent activity increase. This is where decentralized finance comes with a solution. All the transactions happen over the Blockchain network, and hence they are secure.


 

Sounds good, right? Well, this is when you are using only a decentralized finance network. Wait for the NFT to come on the scene.


 

Today, many Defi projects are surfacing. They are using NFTs as an asset to store value and serve as immutable proof of ownership. In turn, Defi helps NFTs to unlock the value of their digital assets.


 

Although these two technologies might seem different, they mutually complement each other to open up new possibilities in the financial domain.

Conclusion

One of the important aspects related to NFTs and Defi is the verifiability of the ownership. The ease of proving ownership opens the Defi space for the users. The users can then use the NFTs to use it as collateral for loans and other financial help.


 

The most important thing to remember about NFTs is that it has the potential to allocate value to almost everything. On the other hand, Defi helps in unlocking the value of specific assets.


 

Today, NFT-backed loans are slowly gaining popularity. This connects us to the future of NFT Defi.

The Voice of Dubrovnik

THE VOICE OF DUBROVNIK


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