Non-fungible tokens, also known as NFTs, require no introduction at this point. These digital collectibles, a byproduct of blockchain technology, appear to have established themselves as digital diamonds and created enormous new opportunities in industries such as art, entertainment, and gaming.
Despite the fact that NFT sales are surging, financial experts around the world are still debating whether these digital collectibles have any use-cases at all. Most NFT projects, to their satisfaction, have yet to present any use-cases for “JPEGs.” The SYNC Network, on the other hand, is changing this for the better.
By combining NFTs and DeFi, the SYNC network is actively changing the way the DeFi ecosystem operates and solidifying NFTs’ place in financial markets.
CryptoBonds: The Birth of a New Crypto Asset Class
SYNC Network is an Ethereum-based platform that recently introduced a new asset class to the DeFi space called CryptoBonds. CryptoBonds, which have an ERC-721 contract, are essentially time-locked NFTs that generate rewards for their holders. Okay! But what exactly are they used for?
These NFTs, in a nutshell, are used to provide liquidity to decentralized exchange protocols. Today, liquidity mining is most likely the most popular reward system in the DeFi ecosystem. Projects rely on it to generate liquidity for users and keep their platforms operational, while investors use it to earn returns on their digital assets.
This reward system has significantly contributed to the growth of DeFi, but it is also responsible for market volatility. Why? Because investors can withdraw funds at any time, a sudden lack of liquidity, price fluctuations, and the failure of promising projects can occur.
This is where CryptoBonds come into play. This new asset class effectively preserves liquidity in DEX protocols while ensuring that long-term investors are appropriately rewarded for their contributions.
Let’s go a little deeper to see how CryptoBonds actually maintain liquidity and stability.
Examining the CryptoBond
A CryptoBond is made up of three main parts: liquidity provider tokens (LPTs), SYNC tokens, and NFT highlight artwork. The NFT highlight is what makes CryptoBonds rare and tradable, and the artwork is generated uniquely for each new CryptoBond by an algorithm. LPTs are the liquidity pair staked on the DEX protocol, and SYNC is the platform’s native token that is locked in the CryptoBond alongside LPTs.
To create a CryptoBond, a user must go to a DEX protocol on the Ethereum network, such as Uniswap, and stake a trading pair in order to receive LPTs. The LPTs are then combined with an equal amount of SYNC tokens and attached to an NFT highlight and CryptoBond ID on the SYNC platform to form a CryptoBond.
Every CryptoBond has a lock duration that can range from 90 days to three years. During this time, investors will be unable to access their crypto assets. However, because the bond is a rare NFT, it can be traded in its entirety on NFT marketplaces if the investor wishes to exit their position before it expires. This entire ordeal occurs without interfering with the liquidity on the DEX protocol.
CryptoBonds generate revenue through liquidity provision on the DEX as well as interest on the SYNC portion of the bond. When the NFT matures, it is burned, and investors receive all of the revenue, as well as locked SYNC tokens and newly mined SYNC tokens, resulting in a much higher yield than typical liquidity mining. For comparison, the value of the 1,800 CryptoBonds issued thus far has increased by an average of more than 203 percent, easily covering the recent crypto downtrend that caused SYNC to drop by 75 percent. The higher the yield, the longer the lock duration.
A plethora of Use-Cases
With the invention of CryptoBonds, the debate over the utility of NFTs has been put to rest. NFTs are now being used in the DeFi ecosystem to not only create liquidity, but also to maintain stability and mitigate risk. Pump-and-dump situations can now largely be avoided, protecting promising projects. Aside from that, their scarcity makes them one-of-a-kind collectibles that can be traded for profit on NFT marketplaces. CryptoBonds can also be used as collateral for DeFi loan acquisition.
SYNC Network itself has a peer-to-peer lending feature that accepts CryptoBonds as collateral. The loan duration and interest rates are dynamic and agreed upon by the borrower and lender. The platform also has promissory note NFTs that can be sold on NFT marketplaces to allow the lender to recoup their funds before the loan expires.
In short, this innovative platform has the potential to revolutionize NFTs and forever alter the way the world perceives them. Its ambitious visions have already resulted in significant success for the project, with $6M in crypto locked across 1800 bonds. This project’s future looks bright, and the team believes it has the potential to become DeFi’s stability standard.