Non-fungible Tokens, or NFTs, have exploded into the public in recent months, expanding and even challenging our common concept of digital scarcity and ownership. NFTs had taken over Twitter feeds and Clubhouse chat rooms even before Beeple’s now-famous $69M NFT artwork made news for an eye-popping Christie’s auction, with many artists, game designers, and celebrities believing that this new technology will utterly disrupt their businesses.
Despite the fact that they’ve been around since 2014, NFTs are gaining in popularity as a more popular means to buy and sell digital art.
The term “non-fungible token” refers to a token that is not fungible. It’s usually programmed in the same way as cryptocurrencies like Bitcoin or Ethereum, but that’s where the similarities end.
Physical money and cryptocurrencies are both “fungible,” which means they may be traded or exchanged for each other. They’re also worth the same amount: one dollar is always worth another dollar and one Bitcoin is always worth another Bitcoin. The fungibility of cryptocurrency makes it a secure way to execute blockchain transactions.
NFTs aren’t like other cryptos. Each contains a digital signature that prevents NFTs from being substituted for or compared to one another (hence, non-fungible).
Many crypto enthusiasts have turned to the NFT market. For artists, it has offered a new way to make money and utilize their craft. For collectors, digital arts are innovative and they offer a new way to explore, critic, and profit off their art collections.
However, despite the NFT gold rush, many collectors have collected art that does not have any use cases apart from being NFTs sitting in the dusty rooms of hard-coded digital assets. Drops, a platform that is bringing a DeFi-like infrastructure to NFTs is changing that.
Drops And NFT Immobility
Ethereum has revolutionized the digital assets market. With NFTs, digital artists and art collectors have turned to Open sea, Rarible and other NFT Marketplaces to tap into a new market of digital assets.
According to NonFungible, $268.7 billion is the total amount that has been spent on completed sales in the NFT market.
Despite this humongous amount spent on NFTs, the market is rather stagnant in the way it offers utility to buyers. Many collectors have to wait for a resale before they can find a use for their digital assets. The whole NFT market is detached from the DeFi infrastructure and what it offers.
Drops, a platform founded by the team that created the NFT game Node Runners, is founded on the philosophy that NFTs should have mobility and utilities outside of being held as an asset till resale. While still in development, the concept is that instead of staking cryptocurrency, you stake your NFTs for rewards and returns.
Drops is creating an infrastructure that will allow NFT owners to stake their NFTs in exchange for dPoints, which can be used to buy new NFTs on the Drops platform. Drops is also working on the dNFT protocol, which will allow NFT holders to store their tokens in a digital vault and convert them to ERC20 tokens that can be traded on decentralized exchanges. The dNFT infrastructure will also serve as the foundation for trustless NFT loan smart contracts and yield farming, which will allow NFTs to be utilized to supply yield-farming protocols without having to sell the original NFT.
The Drops team has already revealed some big plans for the rest of 2021, including a move to Binance Smart Chain (BSC) and Polygon, a popular Layer-2 scaling network.
They also intend to establish markets for automated market-maker (AMM) governance tokens, as well as their ultimate objective of borrowing against actual NFT tokens. The latter includes additional components that will work in tandem with the loans protocol, such as a fractionalization protocol and an NFT leverage function known as “Margin NFT.”
Drops could be the first DeFi system to enable trustless loans against non-fungible tokens.
The value proposition
Drops offers three values for the ordinary NFT enthusiast.
- Borrow against DeFi and NFT tokens:
A unique feature of Drops is that it will allow users of its platform to supply their NFT as collateral while they earn rewards and returns on short-term loan taking on those NFTs.
- NFTs for loans:
Rather than let their NFT sit in the dusty rooms of your collections, NFT holders can put their NFT down as collateral and receive instant access to a trustless loan. There’s no need to speak to a lender, Drops permissionless NFT Lending Pools handles the rest.
- Idle assets into yields:
Drops offers NFT holders an opportunity to supply their assets to fungible and NFT Lending Pools in exchange for rewards and returns.
Drops is a project created by the founders of Node Runners, an NFT-based card game. The platform seeks to provide utility to idle NFT assets, allowing holders to obtain loans and earn yield against them, just as they can with fungible tokens.
The project points out the importance of such infrastructure for the future of NFT assets, particularly “financial NFTs” – more tangible NFT assets that represent financial instruments.