NFT
A new report reveals that the financialization of non-fungible tokens (NFTs) is progressing rapidly, with NFTs evolving in complexity and interactions such as trading, lending and borrowing becoming more sophisticated. But many key issues remain, from reputation to the environment.
The financialization of NFTs continues at a rapid pace, according to a new report from Reflexivity Research. The report, which is not intended to provide investment advice, outlines the growth of NFTs as financial products. It also offers some caveats.
NFTs: pros and cons
The popularity of NFTs has skyrocketed. Especially with artists looking for ways to monetize assets. However, the report also points to the serious consequences for the environment. With NFTs accounting for 30% of all Ethereum gas consumption, these concerns are hard to ignore and are likely to grow.
A number of market factors are driving financialization. The report identifies the launch of BLEND as a recent step. BLEND (a portmanteau of the words “borrow” and “borrow”) is an NFT lending platform. It allows users to mortgage their favorite blue-chip collections.
Reflexivity’s report also recognizes the meteoric rise of the NFT marketplace Blur. Its launch in October 2022 aimed to close a market gap by providing an institutional grade UI/UX for spot trading. (Blur also owns BLEND.)
Misunderstandings about NFTs
The general public tends to think of NFTs as expensive JPEGs used for profile pictures. However, non-fungible tokens can introduce financial market dynamics into traditionally non-financial or illiquid assets. These include works of art, real estate, private equity investments, and film and media rights.
NFTs do this by digitizing unique items and facilitating their trading on a blockchain.
“Revolutionizing the art market requires more than NFT drops. A new form of patronage is needed, one that changes the way artists are selected, the provision of financial support and the commissioning and making of art. Even these three necessary shifts may not be enough,” Pastel Network co-founder Anthony Georgiades told BeInCrypto.
“NFTs will vastly improve existing processes in the financial industry, such as loan collateral, insurance and debt management, to name a few,” he said.
“In many cases, they eliminate much of the risk associated with borrowing and lending assets. Thanks to fractional NFTs, we will also see greater financial inclusion across a variety of investments as they lower the financial barrier to entry.”
Greater financial inclusion?
Some people greatly underestimate the applications of the technology. “I think actually [they] will make financial processes much more accessible and simple for all parties involved,” continued Georgiades.
Tech cheerleaders have often heralded NFTs as a revolutionary move that will allow entry into elite industries such as the arts. Although not everyone buys it. In fact, many are openly skeptical about the role these tokens can play.
“It takes more than NFT drops to revolutionize the art market,” Mark Lurie, CEO of Shipyard Software and director of The Foundation for Art & Blockchain (FAB), told BeInCrypto.
“A new form of patronage is needed, one that changes the way we select artists, provide financial support, and commission and make art. Even these three necessary shifts may not be enough,” Lurie said.