Initial NFTfi Offering

Concept

Initial NFTfi offering is a type of token offering whereby NFT projects raise funds by issuing tokens collateralized by NFT (non-fungible tokens). It’s the process by which NFT projects build up capital by issuing tokens backed by NFT collateral. In this sense, an initial NFTfi offering is something like an NFT-specific ICO (initial coin offering). However, and in contrast to traditional ICOs, which involve issuance of cryptocurrency and certain utility tokens, initial NFTfi offerings are specific to the issuance of NFT-backed tokens (NFT assets-backed tokens). The issued tokens represent fractional ownership of the underlying NFTs.

Connection with DeFi

NFTs (non-fungible tokens) have dramatically changed the digital asset landscape, enabling unique ownership of a unique breed of assets such as digital art, collectibles, and virtual real estate. However, NFTs are often illiquid, that is, no returns will be generated while such tokens are stored in the online or offline wallets. Then the concept of NFTfi (non-fungible token on DeFi) emerged, narrowing and bridging the gap between NFT ownership and decentralized finance (DeFi). On NFTfi platforms, users can avail their holdings by lending their NFTs to others against interest or sort of renting, or can borrow NFTs by providing collateral.

Offering process

NFT holders can take part in initial NFTfi offerings by placing their NFTs as collateral, against which fungible tokens (often called NFTfi tokens) are issued to them. The issued tokens can be traded or used within the network (to which these tokens are native – native tokens). For example, a lady owning a rare digital artwork NFT can participate in an initial NFTfi offering, placing her NFT as collateral, and in return receiving NFTfi tokens. These token holdings entitle her to have a share of the platform’s revenue or governance rights (in the same manner like a governance token).

For the borrowers, tokens can be used in virtual space, gaming, or as additions to profiles. For example, a gentleman may seek to use a well-known virtual land NFT in the virtual world. He can borrow it from the NFTfi platform by placing collateral (often in the form of stablecoins or certain types of NFTs).