NFT and DeFi have taken the world by storm in recent years, but both industries have their drawbacks. Combining them can be a force for good.
Ask anyone what NFT is and they will instinctively think of digital art – CryptoPunks, Bored Apes and Ether Rocks that have been sold for staggering amounts of money.
In some quarters, non-fungible tokens have been dismissed as vehicles for speculation, with critics complaining that greed is fueling demand for such assets.
But this argument does not give us the full picture. We’re barely scratching the surface of what these unique tokens can do, and new use cases are constantly emerging.
The music industry is tentatively exploring what NFTs have to offer. Live Nation, one of the largest entertainment companies in the world, has begun offering digital versions of ticket stubs to give fans a virtual reminder of the concerts they’ve attended. Other platforms allow consumers to invest in new music and receive a share of the royalties. TV shows and movies are also funded through NFTs – and despite the backlash from gamers, gaming brands are also embracing the technology.
NFTs can also improve existing crypto services, one of which is DeFi. What if this technology could be used to unlock access to certain authorized services…and could we see popular cryptographic collectibles widely used as collateral?
While the “NFTification” of the decentralized sector is seen as inevitable in some crypto circles, there are some hurdles to overcome. Let’s explain why.
NFT costs one coin
Any discussion of what is preventing NFTs from playing a larger role in the DeFi ecosystem must start with the cost of minting such tokens.
Even in a secure Layer 2 network, transaction fees mean that creating, distributing, and trading NFTs is often not profitable. This, in part, explains why these cryptographic collectibles are so prohibitively expensive, not to mention why new uses for non-fungible tokens are being explored very slowly.
As traders look forward to the launch of the Ethereum Proof-of-Stake network, this blockchain has become out of reach for many ordinary users. While faster, cheaper, and scalable competitors have emerged in recent years, some have been marred by repeated failures that have cast doubt on their reliability.
But what if users could be offered a completely gas-free experience during a transaction? Could this be a silver bullet that will lure tens or hundreds of millions of users into space – people who will be attracted to the development that this will encourage?
This approach would be beneficial for both the NFT and the DeFi sector as it gives crypto enthusiasts the freedom to transact as they please without worrying about costs. But in terms of infrastructure, there are other aspects to consider.
Innovation in DeFi
Right now, high gas fees mean that trading and farming is not financially viable for small users, while slow bridges connecting the Ethereum mainnet to layer 2 are frustrating. There is also a lack of stickiness in the DeFi space as users often switch from platform to platform in search of better short-term opportunities.
Of course, an even bigger hurdle is getting people to see what decentralized protocols and automated market makers (AMMs) have to offer. Poor user experience—and more complex features on centralized platforms—often give investors little incentive to jump into DeFi. The flip side of this is that as a result, consumers relinquish control over their own cryptocurrency.
But it doesn’t have to be this way — and one team says it built the first NFT-based AMM that was “designed from the ground up to address a number of critical issues for DeFi.”
Ruby.Exchange builds its infrastructure on top of SKALE, which is described as a powerful multipurpose solution for Ethereum. SKALE networks require no fuel costs and have a fast, decentralized and secure bridge to the main network, where two-way communication can take minutes rather than hours or even days.
And while the value of NFTs may be uncertain, Ruby offers limited-use gems — “beautiful, generative works of art that foster loyalty by providing both genuine utility and artistic value.”