Fungible Tokens are a sort of cryptocurrency that symbolizes an asset or a specific use and has its own blockchain. These tokens are fungible and tradable assets or services that exist on their respective blockchains. Many have comparable qualities and can be classed according to a single standard, most notably ERC-20. ERC-20 tokens are fungible and can be traded for one another.
Non-fungible tokens, on the other hand, have a variety of attributes as well as a uniqueness that makes them literally and metaphorically “one of a kind.” An NFT is a digital asset that can include art, music, in-game objects, videos, virtual lands, collectibles, and other items. NFTs can be associated with values that only the market can define. Paribus focuses on existing applications in both non-fungible and fungible tokens, with one of its primary goals being to investigate financial tools and products for NFTs.
Synthesizing NFTs
Non-fungible Tokens (NFTs) are becoming increasingly popular, with demand for these digital assets increasing at an exponential rate while garnering mainstream media attention. Compared to the standard crypto asset market, the non-fungible token (NFT) ecosystem is significantly underdeveloped in applicability and market cap — primarily due to immaturity — and the market size has become impossible to estimate.
Since the debut of the Cryptokitties, NFTs have been quietly collecting, and in recent months, they have flirted with exploding. The breedable, collectible, and utterly cute CryptoKitties are the focus of the game CryptoKitties! Each cat is unique and completely yours; it cannot be cloned, stolen, or destroyed. In 2021, NFTs gained popularity and began to permeate the mainstream economy in unforeseen ways. NFTs have the potential to create a whole new sector of the digital economy. Many more high-profile projects with real-world ties are in the works. We’ve barely just begun for pundits. In the world of art, the fundamental justification that NFTs are the only fully verifiable, tamper-proof assets on the globe is legitimate. The more rigorous uses, such as real estate and even financial items packaged as NFTs, offer clear advantages and practical applications.
Since crypto has evolved to include debt markets for various cryptocurrencies, experts have long claimed that there must be a mechanism to leverage these assets. To actually take off, these assets must be committed as collateral, utilized as collateral for loans, or even leased.
Valuation Metrics
NFTs are digital assets that can be licensed for a variety of purposes in terms of valuation. NFTs’ utility originates from their actual application, which takes place between the physical and/or digital worlds. As the two worlds become more interwoven, an asset class is required to convert asset value from the actual world to the digital world. The utility of any digital item lies at its core. A digital asset with no utility has no use case and so is in short supply. An NFT with high utility delivers instant value, which may develop over time based on the popularity and traction of the underlying initiative.
In a shifting market, values are traditionally derived from prior transactions and comparables. This value is also expressed in an agreed-upon currency. NFTs, on the other hand, lack this history and can be priced against USD, Ethereum, or any other asset, resulting in a moving target out of a moving target. Essentially, NFTs necessitate price discovery, which is taking place as the number of fans and subject matter experts develops in line with the number of speculators. The market will finally determine the value of an asset, i.e. its lending and borrowing capacity, emphasizing the need of developing a market. Fair value is determined by the fair mark.
Paribus’ NFT loan markets could aid in determining the realized value of NFTs, and crypto is a haven for risk-taking speculators. Users can eventually select the loan period, loan-to-value ratio, and interest rate. A rare item may have consensus value, but it is critical to understand how much and how long someone is ready to lend against it. Water will finally reach its equilibrium.
Leasing NFTs
NFT renting allows you to enjoy the benefits of having an NFT without the financial commitment of purchasing one. Buying and accumulating NFTs is not inexpensive. Even the cheapest NFTs from popular projects like Bored Apes and Cryptopunks is not available for purchase at a price within the typical person’s purchasing power. This is where NFT leasing comes into play. It implies exactly what you think it means: renting out tokens and giving individuals the pleasure of having an NFT (and the utilities that come with it) for a limited period.
The potential to rent out an NFT has piqued the curiosity of investors and bodes well for a huge market. While it may evoke a “huh?” at first, given a modicum of market efficiency, the potential to try out new things, play with games, or deploy capital leveraging alternate assets is considerable. The evolution will most likely resemble that of loan markets, with an emphasis on the asset’s attributes. Current market trends and industry demands will almost certainly have a substantial impact on the market. While Paribus is keeping an eye on this trend, there are a number of factors to consider, including lease duration and lessors’ willingness to subject themselves to what will most likely be customized agreements until the market takes shape.
NFTs have an expanding asymmetrical market base and deserve a seat at the DeFi table. Holders of these new and verified assets will be able to earn money in the loan and leasing markets. According to Paribus, the NFT markets will eventually achieve fair market value and the same level of liquidity as the vast majority of tradeable cryptocurrencies.
Keep in touch with Paribus by following:
