NFT Finance: 2 Years of Growth & What's Next

Transcript

thank you cool hey everyone my name is Rob massiello I'm the co-founder of arcade.xyz it's an nft lending protocol um I did a talk last year I'm happy back be back just introducing the concept around nft lending and what's now kind of being referred to as nft Finance do another talk this year really just a kind of General kind of update on you know where this base is gone where it's evolved into Quick show of hands like who I assume everyone owns an nft right put them up okay Has anyone used an nft Finance protocol borrowed Lent few hands

okay less people but that's kind of kind of makes sense um cool yeah quick disclaimer I'm not a financial analyst or advisor in any any capacity um Degen on your own you know volition um quick yeah what are we going to kind of talk about quick introduction on you know what the space is about um the type of categories that have sort of emerged in the last few in the last few months really last 12 to 18 months um kind of what the volume some mostly like statistics um like what we're kind of seeing in the marketplace the different categories that we're seeing across from people building in the space some yeah as I mentioned kind of Market statistics user user demographics I think it's like really interesting like who's using this

and why and just kind of some general thoughts around like where the space is going yeah as I mentioned you know arcade is a older nft lending protocol um you know I think by tvl or maybe like five or six in terms of like for nft Lending as a as a product category we generally see a lot like larger loans and lower defaults but lower in terms of like total number of loans I'm based out of the US and Miami Florida here's a couple nfts I own so yeah let's kind of get into it so what is nft finance just as like a recap basically prior to this year I think it really just encapsulated mostly nft lending um being able to use an nft as

collateral in a defy way to like borrow against so get liquidity against your squiggle board a crypto Punk Etc but now what incent to 2023 we've seen like kind of a huge explosion of a lot of different types of products out there amms aggregators et cetera et cetera I'll kind of touch on some of those but yeah prior to 2023 it was really like two different types of lending peer-to-peer one which is like like Nifty five arcade which are basically just you have a one two counterparties really really simple loan you have one one or more assets that you can borrow against you know with just a borrower and A lender and then peer uh peer-to-pool which kind of looks more like an Ave or compound like products

where you deposit an asset in and then have they use an oracle so you can borrow up against usually like a floor value there's not a ton of appraisals yet on the peer-to-pool products but um it's appeared a pool liquidity effectively so you can this is this is from Dune um you can kind of see over the last years whatsoever why I say in the last few months we've really kind of ramped up what mmt finances look like especially as people starting to talk about it as the nft finance is a summer of nft Finance um it's also kind of a long-winded name I think we got to find a better one than nft Finance but um it is kind of what it is for now total in total volume and I'll kind of touch on why I don't necessarily think this is the best metric for to kind of

capture the growth of the space but the total loan volume right now has reached about just so this is from last week so maybe it's a little dated but probably about two and a half billion dollars in total loans that have been conducted using nft Finance primarily lending protocols right um so that's you know simple borrowing like borrow against a thing you already own or by now pay later which again I'll kind of touch on in a little bit but yeah as I mentioned the space has grown to include derivatives amms pool stuff aggregation tranche liquidity kind of bond like structures and also some of the bigger marketplaces like a particular blur as well as x2i2 have introduced lending products in their own

rights so yeah kind of on the different you know products out there I would I kind of put a list here of the four so four bigger categories the ones I'm particularly interested in right now um and kind of talk a little bit about what I found adoption and you know as it's we're growing and it's it's still very new you know what I think it'll take to kind of get some of these other ones up and going and having real real usage so in the first piece The Lending side it's really simple people have hundreds of thousands of dollars millions of dollars worth of these jpegs that was like the original use case for like Nicki fine arcade was like okay I have a million dollars worth of board Apes these this is just sitting here I don't want to necessarily sell them I

want to get liquidity against them what do I do and there really wasn't too much infrastructure yet to be able to do this you could maybe go to like a like a centralized lender like a Genesis or something like that who would accept your collateral and like an actual put together like a term sheet for a loan it's not very defy that's like slow painful that's I mean they people have done it it's not a great process right so that's where some of the early peer-to-peer protocols have come in and you know and then peer-to-pool which I think is really only accelerated um at least on the Blue Chip kind of collections period you know the uh the you know board Apes mutant Apes crypto punks et cetera et cetera the like you know the the Primo um uh uh excuse me a profile picture

projects uh pfps they've found really good adoption like like I said we're in the billions now in total loan volume on the second side and the next bullet rather um on the derivative side we're starting to see people building out derivatives products options Perpetual uh you know perpetuals these have found some amount of adoption um they're super new um I think there's a lot of room to like improve and a lot of them are like in beta right now um I think part of the problem and I'm just kind of you know provide a little like General like like Market commentary around kind of where this space goes is that there's only we have an upper limit in the terms of the total like collateral and asset to actually buy people don't really want to take out

options against pfps that are only worth you know 0.2 ethereum right there's not just not enough there's not enough liquidity for that on the on the non-fungible side of things so we need to have more assets out there and then I think you can have more you know actual interesting derivatives underneath it on the aggregator side yeah there's a there's a bunch of aggregators now Goblin sacks um spice meta Street uh snow Genesis there's a bunch of these bunch of these different products out there that have tried to make it easier for people to take out loans and provide liquidity for Lending right now to do an nft loan you really have to have some level of understanding of the underlying collateral of what a good LTV looks like

what a good APR looks like you actually have to be somewhat sophisticated it's not particularly all that it's not as easy as just simply like you know an Ave throw in some usdc and then borrow like you you know you kind of know that maybe a crummy squiggle will stay relatively you know solid in value but it's slightly more volatile so and especially on the peer-to-peer side where you know they're you're not leveraging an oracle service um to kind of you know maintain a healthy borrower threshold on the peer-to-peer side you are effectively the you know you're setting your own Market terms so you really do have to kind of know what you're doing and that's where the aggregators have introduce an opportunity where they can make it easier for people and kind of provide a little bit more hand-holding

throughout the process as well as bringing together all the different you know these different platforms out there just on the nft lending side there's like 30 some odd protocols now um different you know they have different amounts of tvl different amounts of usage different amounts of you know type of users the collateral that they're seeing but there's there's a ton of them so I think aggregators have a great opportunity to kind of bring a lot of that together because it's really not feasible for everyone to go to 30 different protocols to go find non-fungible assets effectively and then on the latter side there you know kind of around like buying out pay later fractional investing rental appraisal or cool things like that I think these products aside from blurs Brian I'll pay later have found some a

level of adoption I think they're still trying to find some product a product Market fit blurs product in particular has been really popular whether it's for people actually wanted to do buy now pay later and assets or they're trying to like you know Farm the the reward system they have going I think we'll have to kind of see when that you know that that farming Pro program ends but they've you know they're still working I think a lot on the appraisal Oracle side there's a lot of a lot of opportunity for you know some cool stuff that's really needed when you start dealing with more esoteric assets as well um a little bit yeah some Market statistics stuff kind of the as I was mentioning on the collateral side it's really all dominated by Yuga assets primarily board

Apes um crypto punks mutant Apes even the the dogs it's they really have you know captured the majority of Landing activity these numbers though are super skewed this is from Dune it's from a pretty popular nft Finance dashboard um I think it's the meta Street one but a lot of this data you know it's coming from the buy now pay later products as well which is not particular it is a loan but it's not a loan against something that's fully collateralized you don't you don't actually really really own it yet so there's a lot of back and forth um you know around uh uh you know I want to say watch trading but there's a lot of you know moving hands in these loans um yeah as I kind of mentioned on the

tvl side this is sort of what the tvl looks like nothing super super crazy to talk about there Paris Paris Basin band both have the largest tvl and they're both peer-to-pool products they're able to you know put a lot of usdc die you know uh fungible assets into their protocol to earn yield on as I kind of mentioned you can sort of see in the last just few months once Blair introduced their lending product which is you know the primarily being used as this buy now pay later product really the volume really really exploded upwards so that's what I'm saying maybe it's not necessarily fair to say that the total empty Finance lending volume has really a reached two two and a half billion kind of up for discussion there who's kind of using these products

there's about 80 uh 8 600 8700 unique users right now all time for nft Lending that's compared to just last month there was about 18 000 unique nft Traders so there's a huge opportunity to still go and reach and that's like this you know kind of somewhat bear market and people aren't you know buying nfds like they used to so there's still a huge opportunity to um to go and reach some of these different users out there but one thing that's interesting is that users are super sticky if you look kind of where these these different um these bar charts here are the part the product the users that are on one protocol are kind of sticking to that those one protocols so it's pretty interesting um yeah I think you kind of can see you

know like on the on the blur side of things these product their product really is like very much kind of closer to an option because the aprs are so so so low um and in general they have like the vast majority of these really low APR loans that are really short too so it kind of looks a little bit closer to an option but they've gained a ton of users they've basically eclipsed every other product in the space in a super short amount of time so these rewards programs are super you know valuable and and for gaining traction and yeah just to kind of wrap things up kind of what's next for nft finance you know I think as I mentioned these products out there outside of the lending space are still gaining traction still finding users still finding ways to

um you know you know find product Market fit um I think we're we're missing more assets as you can kind of see in arcadium's uh kind of our view in particular we've been starting to adopt and embrace a lot of real world assets in particular tokenized uh real world assets like watches someone recently took a tokenized FTX credit claim and took a loan out against it for seven days apparently I don't know who the counterparties were but they did it for 7 000 7500 loan um I think as I mentioned the aggregation has a huge opportunity like you know reach across all these different protocols there's there's so many of them now I think there's some fun you know mint mechanic stuff that can come about leveraging buy now pay

later and things like that and um yeah there's you know I think just you there's a number of talks about people doing L2 support for nfts building more nfts on l2s and most of the protocols out there right now are all on mainnet maybe a few are on like like arbitrum or polygon but the majority of them are all on Main Nets and that's primarily because there's not a lot of collateral on El for nfts to be borrowed against on nel2 right it's mostly all L1 stuff so that's where all the protocols are as well and then yeah finally just kind of I think Dows will have a greater influence on um protocols most of protocol stuff out there right now is like very sort of centralized in decision making I think Dao's in the in the next couple months

as a lot of Protocols are starting to decentralize issue tokens you know stand up their formal governance Frameworks a lot of these dials will start to you'll actually have more Community involvement within the protocol so yeah that's kind of hopefully a decent overview of where we were last year and where we're up into today and uh yeah I hope everyone has a great conference thanks [Applause] [Music]