Alibaba, the Chinese e-commerce behemoth, has surprised the cryptocurrency world by launching a non-fungible token marketplace. Alibaba’s NFT marketplace allows users to not only buy and sell NFTs, but also license intellectual property (IP) protected by blockchain technology. Musicians, writers, artists, and game developers are among those who will benefit from the marketplace.
A multibillion-dollar industry
NFTs purchased on Alibaba’s Auction platform will be minted on the Sichuan Blockchain Association Copyright Committee’s “New Copyright Blockchain.”
Although the Chinese government has cracked down on cryptocurrencies, it is optimistic about blockchain technology. Chinese authorities are facilitating the integration of blockchain into key industries by allowing Alibaba to sell NFTs as part of their long-term vision to become the world’s leading blockchain power by 2025.
Alibaba has entered a crowded but rapidly growing market. It would face competition from OpenSea, Rarible, Makersplace, and others. The Chinese behemoth will make every effort to dominate the market by bringing NFTs to the masses.
According to DappRadar data, NFT sales volume increased from $13.7 million in the first half of 2020 to a whopping $2.5 billion in the first half of 2021. As NFTs continue to grow in terms of sales volume and adoption, the crypto community requires a long-term and effective strategy for making the most of these assets.
Putting NFTs to Good Use
As more people acquire non-fungible tokens (NFTs), there is a growing need to put these assets to use in order to reduce the opportunity cost of holding them. The problem with NFTs is that once you sell them, you may never be able to recover them. As a result, you may decide to keep them for an extended period of time.
Many people purchase collectible NFTs with the intention of later selling them for a higher price. But what if you don’t want to part ways with your prized possession? What if you want to get financing without selling the NFTs? Perhaps to buy the dip, exploit arbitrage opportunities, avoid margin calls on collateralized debt positions, or do something else.
Fortunately, there are marketplaces that facilitate trustless loans against NFT assets for such users. You can use your NFT as collateral to gain access to liquidity. Lenders can make loans with confidence because, in the worst-case scenario, such as foreclosure, they will receive the NFT deposited as collateral. People seeking yield can provide liquidity to NFT lending pools and back the assets in which they have faith.
Drops is a non-custodial peer-to-peer marketplace where you can borrow against your NFTs and earn interest on your idle NFTs. It makes instant NFT loans with high liquidity possible. Drops determines the value of NFTs using Chainlink Price Feeds and then mints ERC20 tokens representing the NFT. The same Chainlink Price Feeds are used to monitor users’ loan-to-value (LTV) ratios to ensure that it remains constant throughout the loan’s term.
ERC20 tokens are staked as collateral against which loans can be obtained. Borrowers receive the same NFT that they deposited as collateral when they repay the loan with interest, not another NFT of similar value.
Some NFT owners also charge a fee to rent out their assets. If you have collectible NFTs that you don’t want to sell, you can make some money by renting them out in the meantime. People who want to borrow your NFTs can do so for a fraction of the cost of purchasing them outright.
On their marketplaces, platforms such as Yiedl Finance and Flow provide the “rent” functionality. As an NFT owner, you have control over the rental price, duration, and NFT price. Borrowers will be required to put the NFT price up as collateral before renting it, removing the risk of theft.
Bringing it all together
As non-fungible tokens gain popularity, they will be used for purposes other than digital art and collectibles. The increasing popularity of NFTs has prompted investors to investigate the possibility of gaining liquidity and generating yield while holding their NFT assets for the long term. And this is just the start!