The Future Of DeFi: NFTs & flash loans

Posted on March 08, 2021 in Articles, Opinions
The Future Of DeFi: NFTs & flash loans
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A Short Introduction to DeFi

DeFi or Decentralised Finance is a financial architecture in which no single entity has control. DeFi is the key technology behind Bitcoin and other similar cryptocurrencies. In a DeFi system, several people can hold the records of a transaction. In a way, Decentralised Finance is the extension of blockchain technology as it opens up the door to future DeFi financial products instead of just value transfer.

DeFi is generally faster than a centralised system because no one has to dictate it. There won’t be a need for a singular entity’s approval while making a transaction with DeFi. We previously wrote an article which covers DeFi in full so ensure you read it to fully understand the innovation.

What is the Future of Defi: NFTS and Flash Loans

Decentralised Finance had a slow start, and it took a few years for people to realise the potential of such a sophisticated system. With the demand for faster and smoother applications, the number of DeFi projects rose significantly.

What Is The Future Of DeFi

It is no news that DeFi can replace many of the financial middleware we use today. The total pricing of goods and services may also change in the coming years if DeFi takes over the market. Numerous projects are already implementing DeFi protocol and are readying to take over the market. For instance, we are starting to see a growth in Flash Loans and NFTs (Non Non-Fungible Tokens). An article published on CoinTelegraph shows the impact of the revival of DeFi on banking.

Flash Loans

What is a Flash Loan?

Flash loans are one of the best use cases of the DeFi space and an extension to the blockchain technology. They are, essentially, loans that do not require collateral. You don’t even have to pass a credit check or perform the usual steps you may have to do when taking a regular loan. The only condition of flash loans is that you must repay the loan in the same transaction.

Ethereum blockchain makes the entire concept possible. Flash loans essentially depend on the flexibility of Ethereum and smart contracts. Think of Ethereum as a platform if you will- a platform of “programmable money”.

Why obtain a DeFi flash loan over a traditional bank loan?

There are numerous reasons why you should prefer a DeFi flash loan over a traditional bank loan. If you need a bank loan, you may have to submit collateral or maintain a decent credit score. A DeFi flash loan does not need anything as such. The only thing a DeFi demands is you pay the loan back in the same transaction.

For instance, if you took a flash loan and made a return from it, you can pay it back in the same transaction with ETH. If you don’t pay the loan, your transaction will be rejected, and the sender will get their money back. This rule is also referred to as the DeFi protocol. There is no way you can exploit the protocol, and hence, security is ensured with flash loans.

The Growing Trend in DeFi is NFTs

What is an NFT?

Non-fungible tokens or NFTs are a different type of digital assets compared to crypto-assets such as bitcoin and ETH. The difference between fungible and non-fungible tokens is simple.

Let us assume that you lend a dollar to your friend, Nate. Now, Nate may spend this dollar however he pleases. The end goal is that he returns the amount. It need not be the same dollar note he took from you, but its value does not change with the serial number as long as it’s a whole dollar note.

Now, let us assume that you gave your friend Nate an extremely rare Michael Jordan NBA card. In this case, Nate has to return the same card you gave him because its value changes depending on the rarity. He can’t just give you a Michael Jordan regular NBA card. In this case, the card is non-fungible.

What NFTs Has Decentralised Finance Unlocked?

Decentralised Finance has unlocked numerous NFTs from collectibles to games, art, and real estate. Card collectibles are also a great example. For instance, a Devin Booker card today is worth 74,500 USD. The pricing may increase as time progresses. With DeFi, card collection can be made much more profitable.

Gaming NFTs Are Going To Explode in 2021

NFTs have already started to take off and are expected to be a hit in gaming in the coming years. Gaming is truly an apt space to implement NFTs. The gaming industry is expected to be worth $138 billion in 2021 where most of the revenue flow is from gamers to corporations.

What Is The Future Of DeFi

NFTs in gaming refers to a smarter, financially savvy way for gamers to trade items. Imagine being the real owner of your in-game items, being able to sell your used cars in GTA or your swords collection in Assassins Creed. Well, as we start to see more and more games, you may see projects like these in the market very soon.

Enjin, a token that is available to trade on Zipmex, is one such project where gaming is part of its use-case and ecosystem. Developers from corporations like Microsoft use Enjin as platform to develop blockchain-based projects such as rewards systems within games.

Decentralised Finance brought us NFTs that will give you ownership over your in-game items. You can collect them, trade them, sell, and make smart investments, even when you’re just enjoying yourself. What’s more, the gaming industry can be good news for your wealth – if planned correctly.

Example of such fantastic games are Gods Unchained and Lost relics.

Art NFTs Solve The Issue of Providence in Decentralised Finance

Nothing can be made better with NFTs than art. Art is perhaps the first non-fungible token we invented. It only makes sense to be able to buy and sell art using crypto. Trading art with NFTs is quite simple. You need a crypto wallet for starters. Then, signup for an NFT service and start selling your precious collections. The price for such collections is usually set in cryptocurrencies.

NFTs are a new way to show ownership of an art piece or collector’s item. And popular artists are using it as a way to cash out on their creations. An NFT is created using code that ensures the authenticity of the item and records your ownership on the blockchain. It solves the problem of art forgery in the real world, where sometimes even experts cannot distinguish between a fake and real work of collectible art.

Here are two such top sales on Rarible- Eth-men, and The RollUp 2021.

What Cryptocurrencies Do You Need To Buy NFTs

You can buy NFTs using many cryptocurrencies. Usually, the currency depends on the platform and the product you’re buying. ETH is the most common way of buying NFTs. You can get the cryptocurrency to buy NFTs on Zipmex.

What Is The Future Of DeFi

It is quite simple to make purchases on our website.

  1. First, you have to create a verified account on Zipmex.
  2. Once verified, you will receive an email notification to your registered email address.
  3. Sign into your account using your verified email address.
  4. Deposit some fiat currency in the wallet to start trading.
  5. Finally, purchase the digital asset you want.

    If you are planning on purchasing NFTs then we recommend you invest in ETH. You can transfer ETH to buy NFTs on your favourite NFT platform.

What Is The Future of NFTs and Flash Loans?

NFTs have the potential to bring many new markets into play. Everything from simple DIYs to StarWars collectibles can be easily traded with this new architecture. We saw a huge boost to the NFTs in the past year, and it is expected to gain more attention in the coming quarters.

Flash loans are another amazing use case for such a brilliant extension of the blockchain. Traditional banking in a few years will radically change as more and more people begin to see the financial benefits DeFi is bringing to the space.

All investment carries risk. The above analyses or commentary are not intended or meant to be interpreted as investment advice.