NFTX has created a community-driven protocol that injects liquidity in the NFT market and gives holders a better ROI for owning an NFT.
While the growth of NFT space is unquestionably impressive, it still faces a fundamental problem as an asset class. And that is the illiquid nature of NFTs. The uncertainty is so high when it comes to NFTs and it’s what’s stopping more people from entering this space. The price discovery is still a concern for many NFT holders because the variables involved in the process are hard to track. NFTs also can’t be transferred like any other crypto token or stock.
Enter NFTX. To solve these pain points, NFTX has created a community-driven protocol that injects liquidity in the NFT market and gives holders a better ROI for owning an NFT. The innovation NFTX has pursued is truly remarkable. We have never seen tokenization of NFTs that grants owners to create an entirely new revenue stream. So if you hold any NFTs, you don’t have to wait for the price to increase significantly to make profits. You can just create a fund using the NFTX platform and issue ERC-20 tokens. This project is going to be a game-changer when NFTs go mainstream. And in this article, we are going to know why!
What is NFTX?
NFTX is a protocol that issues tokens for NFT collectibles. NFT owners can create vaults and issue ERC-20 tokens, allowing anyone to buy and trade-off an exchange like Uniswap. The protocol or platform one might say is completely driven by the community, making it a decentralized autonomous organization (DAO).
It is also built using on-chain contracts, making it fully permissionless. The members of the NFTX community can also propose changes to the consensus if and when the proposal gets 80% of participating voters. What the platform is aiming to do is- help users gain exposure to NFTs without trading individual collectibles. It also has a platform token with a total supply of 650,000.
What are the features offered by NFTX?
The platform added many features over the last year, and it now looks to fulfill significant market demand. The ones that add major functionalities to the NFTX platform are— Minting, Redeeming, Staking, and Vault Creation.
In April 2021, NFTX launched a new minting interface with much-needed benefits for NFT users. If you add your NFTs to a vault and decide to mint them, you will receive vTokens that give you a claim over any random NFT inside the vault. The best part about this is that— you can trade these tokens instantly on Sushiswap and earn trading fees. You can even acquire stablecoins if you want. The process of minting is also easy to understand. First, you choose a vault and select NFTs from your wallet that you want to deposit. Second, the NFTs should be approved by the smart contract. Third, the mint fee and NFT value are confirmed. And finally, the user gets a custom vToken.
NFTX also supports collections that came before the ERC-721 standard, as CryptoPunks is one of the biggest in this space. You can also mint without paying a high percentage in fees. The platform offers a no-fee option if you choose to stake your NFT for a minimum of 48 hours.
The tokens you acquired after minting can be used to redeem any random or targeted NFTs in any of the listed vaults. For example, if you have a vToken like PUNK, you can redeem a CryptoPunk you want by paying an extra 5% fee or get a randomly selected NFT. If you are out of tokens, you can always buy them from Sushiswap. In the second product- NFTX V2– users can redeem an NFT they prefer by paying extra fees. Now, this fee is not fixed. It can change based on the vault owner.
The protocol distributes 100% of fees to those who choose to stake their NFTs. One can also receive tokens to claim underlying staked SLP. To stake your NFTs, you first need to mint one. By minting, you will get the particular vToken of your collection. You can then use those tokens to add liquidity and claim staking rewards. If you are the first LP, you can also decide the floor price.
A vault represents a smart contract that has custody over all NFTs in a single collection. Vault creation has many benefits for users as well as owners. It gives a better interface to track NFTs like we do fungible cryptocurrencies. A vault not only injects liquidity, but makes it easier for an owner to sell his NFT without crashing the floor price.
As Vaults follow a single-price-for-all-NFTs method, collectors now have the freedom to pick from a larger selection without worrying about the rising prices for other items in the secondary marketplace. When users create a vault, they are producing an asset that will work for them by generating passive income.
Growth of NFTX
NFTX has proven to be a reliable platform for NFT holders to deposit their NFTs and stake for rewards. It has over $60 million in locked value, and vaults have over $40 million. The vaults hold over 9,7005 NFTs. The 90D daily minted chart shows us how constant the growth was when it comes to the NFT balance of NFTX.
The fees accumulated and given to stakers in the last 30 days amounts to $1.1 million. Over the same period, there were more than 1,100 active users, which means there was more than 1 mint or redeem.
In a seven-day period, the total mints plus redeems were 3,088 with more than 120 active vaults. The most well-known collection on the NFTX platform is CryptoPunks. There were more than 350 punks involved in minting and redeeming on this platform. In the main vault of the collection, there are 106 Punks. The lifetime fees collected from this collection is 438 ETH. We can also see how the token price of PUNKS grew over the last six punks. These vaults also reached a new record high token holders.
What’s next for NFTX?
NFTX still has so much room for innovation. Liquidity is going to be a forever problem. When NFTs go mainstream, collections need to have enough liquidity to make accurate price discoveries and seamless NFT transfers. But that is the only avenue. NFTX is likely going to explore more on ERC 20 loans where users can acquire capital by using their NFTs as collateral.
Collateralization of NFTs is the next big thing. Because it not only enables NFT collectors to gain capital for other investors, but also the ownership of their NFTs is not given away. If NFTX integrates a feature where the community can bid offers and collectively generate capital, it would create a real-world bridge for the borrowers.
Another possibility they will look into is randomized packs and gift cards. Similar to mystery boxes, they can plan an NFT pack that has random NFTs, and users can either buy it for themselves or gift it to others. Fractional NFTs are also a real use for NFTX. Now they are issuing tokens to claim one NFT. But what if they fractionalize NFTs and give ownership to all token holders. There are many more avenues the team can pursue, but it needs to first focus on the liquidity problem. With the market maturing at an incredible pace, we can expect some of these things to come to fruition.
Born and brought up in India, Karthikeya Gutta is a crypto journalist and freelance contributor for ItsBlockchain. He covers various aspects of the industry with in-depth analysis and research. His passion towards blockchain and crypto ecosystem is mainly because he believes it can really change the world and help millions of people.
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