Uniswap moves into NFTs while OpenSea moves into DeFi. What will the overall impact be on NFTs’ utility?
Uniswap´s recent move into NFT is game-changing for the industry and can bring financial utility to these unique tokens.
Last year we saw over $23 billion in trades in NFT trading, adding to a burgeoning industry with constant growth despite the odds of a crypto bear market. Thousands of NFT sales happen per week and they are now synonymous with celebrities, big brands and popular trends which helps spread mass adoption.
DeFi, on the other hand, is the ugly cousin of crypto and has not captured mainstream attention in the same way. Technical barriers, complex dynamics and poor user experience are likely to blame, but Uniswap might change all that.
What does marrying NFTs with DeFi look like?
Uniswap is the biggest giant in the DeFi space with a TVL of more than $4.77 billion and is one of the most solid and trusted brands in crypto.
The Ethereum Blockchain has the highest amount locked away in Uniswap ($4.58 billion) followed by Polygon, Arbitrum and Optimism. The marriage of NFTs with DeFi officially begins with Uniswap´s acquisition of Genie – the first NFT marketplace aggregator.
Users can go on Genie to discover, search and trade across different marketplaces such as OpenSea, Rarible, LooksRare and more. The coolest part about it is that you can do all that in just one transaction.
Uniswap NFTs enhance capital efficiency
Most marriages involve prior courtship and in the case of Uniswap as a leading DeFi platform and non-fungible tokens, this was no different.
In May 2021, Uniswap announced that liquidity pool (LP) positions would become NFTs on Uniswap V3 appearing as unique on-chain-generated art based on the position´s individual properties.
The introduction of NFTs to Uniswap3 is a huge step-up in capital efficiency and user experience. Based on the pool and the selected parameters on the liquidity-providing interface a unique NFT is minted representing your position in that specific pool.
This allows supporting positions with multiple fee tiers and concentrated liquidity ranges as opposed to simply choosing an equal value of tokens.
Selecting your preferred fee tier in any liquidity pool boosts the overall user experience and vastly improves capital efficiency due to the NFT element.
Gaming NFTs need DeFi for token staking
Gaming, NFTs and DeFi are a powerful combo enabling in-game currency exchange for cryptocurrencies like Bitcoin or Ethereum or regular money. For example, when Axie Infinity went mainstream during the Covid pandemic, most players in Latin America converted their Smooth Love Potion (SLP) tokens to stablecoins and then fiat currencies through exchanges.
GameFi, a market where gaming embraces elements of decentralized finance or DeFi, is disrupting the gaming industry in truly revolutionary ways. At the same time, it’s catching the eyes of VCs and investors worldwide as we covered in our latest BGA Games Report.
Staking is a central appeal to DeFi allowing players to lock up their tokens, building up interest in that particular token. Of course, at the same time hoping that the token value will increase over time.
The transferability of these gaming tokens and assets to other ecosystems not only adds liquidity into DeFi and vice-versa but also puts players in front of the driver’s seat bringing many benefits that traditional gaming, despite superior graphics and user experience can’t offer.
NFTs could become real-world DeFi
Many find NFTs and the eye-watering prices of popular collections like BAYC and Doodles mind-boggling and absurd. It is understandable that people like Vitalik Buterin, Ethereum’s creator, believe they should serve a more meaningful purpose.
Beyond the exclusivity and digital ownership, it is difficult to spot the real utility of these jpeg-looking assets. However, bringing NFTs to DeFi is groundbreaking for the crypto community and the mainstream at large because this might finally be the key to mass adoption.
NFTs serve many purposes other than art. Adding financial utility to non-fungible tokens as tradable assets will diversify and amplify what users can do with them. It will also pave the way to a whole new plethora of assets including real-world DeFi, making it more tangible and relatable.
A good example of this is the selling of an NYC office building in ETH as a non-fungible token on OpenSea. It is also worth noting that OpenSea purchased the DeFi wallet startup Dharma Labs back in January this year.
Uniswap´s move into NFT could usher in a new kind of NFT that does not only rely on rarity factors and exclusivity but actual financial utility alongside everything we already do with those NFTs.
Gaming is the binding glue that ties NFT, cryptocurrencies and DeFi together. With NFTs players can truly own their in-game assets on the blockchain, trade them and earn money by selling them as collectibles on secondary marketplaces.
Simultaneously, gaming needs DeFi for the transferability of these gaming tokens/assets. Uniswap becoming an NFT Marketplace is a major development, especially as other players in the industry such as OpenSea, already made similar moves to combine NFTs and DeFi.
This is exciting news in a tough bear market that is still biting hard. But whatever happens, we’ll bring you the latest news in our blog and the fastest updates on our Twitter feed. Follow both to stay up to date with everything in the world of NFTs and web3.