Nonfungible tokens might turn out to be a bridge to attach the legacy monetary system to the rising fintech world within the close to future. Throughout a latest interview, Adrian Lai, CEO of Liquefy — an funding agency and an incubator for decentralized finance platforms — instructed Cointelegraph China that artificial belongings, NFTs and digital securities are redefining the best way capital markets function.
Lai particularly believes that the worth of artificial belongings might give every particular person in decentralized finance entry to primarily any asset, so long as there’s a dependable information feed. This rising pattern between conventional finance and DeFi is inevitable.
Lai additionally identified that because the convergence between safety tokens and digital currencies grows better, we’ll see elevated exercise between conventional finance and cryptocurrencies. He added that:
“We’re seeing a merger of safety tokens, utility tokens and NFTs. NFTs may now symbolize actual belongings, which was not thought of a number of years in the past. The convergence of conventional finance and the crypto house is growing increasingly.”
Lai gave centralized exchanges for instance, saying that a few of them have been transferring past the normal understanding of being merely a buying and selling venue. Platforms like BlockFi and Coinbase supply retail-focused companies like financial savings accounts and crypto fee choices — companies that make these platforms perform like conventional monetary establishments, at the very least partially.
Lai defined that artificial belongings are supposed to imitate different funding merchandise. They’ll mix varied derivatives merchandise comparable to futures, choices or swaps to simulate an underlying asset. These underlying belongings can embrace shares, bonds, indexes, commodities, currencies or rates of interest.
Though the convergence of conventional finance and the crypto trade is inevitable, Lai believes the present crypto trade nonetheless faces challenges comparable to liquidity publicity and dependable information oracles: “There’s merely not sufficient info within the crypto house. When somebody in crypto needs to commerce illiquid belongings, in lots of circumstances, there isn’t any ample pricing information and different supportive info on the blockchain to facilitate the commerce.”
Lai additionally identified that although there may be a variety of hype round NFTs, the present NFT market is just a digital collectible market, which doesn’t require a lot liquidity. Whereas Lai believes this collectible market is probably going right here to remain in the long term, a number of adjustments must be made to assist the broader NFT market develop additional.
He thinks that breaking down an NFT into a number of elements for funding functions might turn out to be a brand new pattern for the digital collectible market:
“NFTs might additionally symbolize actual belongings, and making a fraction of an NFT out of an actual asset is an effective technique to supply conventional finance publicity to crypto. On this case, liquidity is necessary since you wish to commerce a fraction of the actual asset.”
In response to Lai, tokenization has beforehand been primarily achieved through safety token choices. Nonetheless, he believes that it will change resulting from DeFi, as tokenizing belongings with DeFi might make tokenization extra accessible for everybody:
“Whereas safety tokens are backed by real-world belongings and their possession is legally acknowledged, the liquidity of safety tokens can fluctuate, and we’ve seen in lots of circumstances that when safety token homeowners wish to promote their holdings, they might not have the ability to execute the commerce at the most effective worth.”
Lai believes that the maturation of DeFi and tokenization of real-world belongings through DeFi protocols can have extra potential than utilizing the normal safety token providing mannequin: “Tokenizing belongings in a decentralized trend opens up a lot better liquidity for asset homeowners. On the similar time, it provides real-world belongings publicity to all of DeFi’s customers.”
As Cointelegraph beforehand reported, 2021 will likely be a pivotal year for DeFi that may remodel the best way monetary companies are used. So, might tokenization additionally play a component on this?