The Actual Impact of NFT’s on Fintech
A non-fungible token, or NFT, is a unit of data linked to unique digital files on a blockchain. These tokens are commonly cryptographic assets, featuring recordings of live performances, music, or pieces of art. Records of NFTs traded across online digital markets are stored on the blockchain, in addition to transfers and bidding history. In short, a blockchain serves as a digital ledger technology for all manner of cryptocurrency, emerging applications, and even smart contracts.
At face value, an NFT may appear much like Bitcoin, but they couldn’t be more different. A non-fungible-token cannot be exchanged for another, as they each carry their own code, and value, making them unique from one another. NFTs have grown in recent notoriety, simply due to the fact that they offer high values, especially in recent sales. Even Tom Brady sold $1.3 million in Ethereum, back in March. A famous auction house, Christie’s, also sold an NFT for over $69.3 million.
Driving Innovation
Eventually, considering the impact NFT has already had on cryptocurrency, they are like to influence fintech, as well. Unfortunately, the immense potential of NFT on financial technology is currently being dominated by the possible impact on the environment, as well as with fears of security. NFTs may also play a significant role in the future development of DeFi, or decentralized finance. As a fintech project, DeFi disrupts existing financial intermediaries via cryptocurrency, or the blockchain.
Teller Finance, for example, began utilizing collectable NFT in order to generate liquidity for their algorithmic credit risk protocol. Those currently holding Teller NFTs will gain access to various, immediate APY benefits, in addition to some to-be-announced long term benefits. Other fintech companies hoping to invest in crypto, or launch services similar to DeFi, may use NFTs as an alternative to crypto fundraising techniques. Fintech has the potential to evolve as the crypto space grows, attracting new investors, according to NFT-related DeFi projects.
One example of an NFT project, includes the emergence of blockchain stocks and funds in response to crypto space’s growing value. The creation and trading of NFT index funds is another early example of NFTX, a community-owned protocol. We are likely to continue observing the development of additional NFT-related funds as time progresses.
NFTs Influence on FinTech
Due to the significant figures being invested into these non-fungible tokens, NFTs are likely to make headlines well into the future. In the coming months, this newfound popularity of NFT could also cause growth throughout the market. At least in the near term, the combination of DeFi and NFTs may serve as an innovation for fintech, however, this rise in popularity may lead to other implications in the same regard.
For example, NFTs are being used in order to generate liquidity for new DeFi services. Whereas, some DeFi startups, and community projects, have begun to offer new, NFT trading based services. This could create an entirely new asset class, as more digital assets become NFTs, changing the way investments are made. Aside from various concerns, especially in terms of environmental impact and overall security of NFTs, these non-fungible tokens are on track to influence the crypto space, in addition to fintech, and the financial sector.