Pooled NFTs: Passive Income For Any NFT

Pooling NFTs is a way to turn any NFT collection into passive income. The concept is simple, users deposit NFTs into Pools and receive a normal ERC-20 token for each NFT they deposit. Since ERC-20 is the token standard most used across Ethereum and decentralized finance, users can then take these Pool Tokens into the many applications that support ERC-20 tokens!

With access to new frontiers in DeFi, there will be many new ways for collectors to earn using their NFTs. Let’s highlight one of the most powerful ways collectors can earn passive income that works for any collection.

Passive Income For Any NFT

Adding liquidity to Uniswap is one of the easiest ways to passively buy low and sell high. Liquidity providers automatically earn income from Uniswap trading fees. Pairing Pool Tokens with ETH or USDC in Uniswap is an easy and powerful way to earn passive income for any NFT Collection. If you’re not sure how to do this, don’t worry, there are plenty of tutorials you can google and we will cover it in detail for you, in a future blog post!

Pooling NFTs is a simple concept with many powerful implications. Pooled NFTs not only bridge any NFT collections into decentralized finance (DeFi), but they also unlock fractional ownership for any NFT Collection. This is huge because it enables a much larger audience to gain exposure to collections that otherwise are priced out of the market. That’s a big win for project growth!

Is there a catch? We don’t think so. Our smart contracts are open source. There are no fees or unnecessary admin permissions. Every Pool Token is backed one-to-one with an NFT from its respective collection. We see this as a necessary and much-needed public good that should exist in the space.

When can I use it?

While we are still in the early stages of building this tool out, we have deployed the smart contracts live on Ethereum Mainnet! Checkout PooledNFT.com if you’re an early adopter. We’ve prepared a very crude interface that focuses on pure functionality, just for you. In time expect this to become much more refined, as we gather feedback from our users.

Out of the gate, we support ERC-721 and plan to ship support for ERC-1155 shortly.

How it works

Each NFT collection gets its very own NFT Pool. Similar to Uniswap markets, anyone can deploy a pool for any collection. This only has to be done once and our smart contracts prevent duplicate pools from being deployed.

NFTs are pooled together into a collection-specific pool that effectively makes each deposited NFT interchangeable with any other NFT from the same collection. Meaning, if you see an NFT in the pool that you like and want to swap it for one you already have, you can! We don’t charge any fees and all you have to do is pay the gas to validators.

The smart contracts ensure that Pool NFTs are always fully backed by an NFT from its respective collection. But, because NFTs from the same collection can be freely traded in and out of their pool, you are not guaranteed that any particular NFT from a collection will be in the pool, just that there will be one from that collection. It is reasonable to assume that the most desired NFTs will be traded out from the pool regularly.

Stay Safe

These smart contracts are relatively simple, our team has reviewed them thoroughly for possible bugs, and written extensive tests. However, Pooled NFTs have not been audited and risks always exist with new software. Given that most things on a blockchain are irreversible we’ve prepared an NFT collection that we control to help mitigate some of these early risks.

Our own NFT collection, Pawn Bots, is the first collection to make use of Pooled NFTs. If something were to go drastically wrong, we can reissue Pawn Bots with ease. We will seed liquidity on Uniswap with both USDC and ETH pairs. So look out for new arbitrage opportunities between the Uniswap pools and other NFT marketplaces like Open Sea.

That’s it, for now. Welcome to the new era for NFT collectors where liquidity, fractionalization, and DeFi are all within reach for any NFT collection! Happy experimenting!

An Intro to NFT Loans

— what are they and how they will shape the future of finances

When you or I go to buy a home or take out a car loan, we often have to put up collateral — something of tangible value that can be repossessed in the event of a default on the loan. But in the decentralized finance space, assets are not tied to our real-world identity, and so lenders need to find another way to ensure that their loans are repaid.

Borrowers can simply lock up their cryptocurrency as collateral, but there is another way to collateralize a loan — with non-fungible tokens (NFTs). NFTs can be digital tokens that represent real-world objects, such as art, collectibles, and even stocks. They are unique, indivisible, and have the potential to expand financing opportunities to those who may not have access to traditional methods.

The Value of NFT Loans

We all witnessed the meteoric rise of NFTs like CryptoPunks, NBA Top Shot, and Gods Unchained in recent years. But NFTs have far more potential than just linking to JPGs, GIFs, and digital collectibles. NFTs, like all other crypto assets, are smart contracts, and their unique identifiers can be programmed to represent real-world assets.

Real estate was one of the first and most obvious use cases for asset-backed NFTs. A real estate NFT can represent a deed, title, or ownership rights to a property. Further, illiquid and unique tangible assets like luxury cars, art, or racehorses can also be tokenized to increase their liquidity.

Crypto loans that use an NFT as collateral provide more liquidity and flexibility to the borrower. By being backed by tangible assets like real estate or even racehorses, NFT loans can provide more substantial collateral than traditional crypto loans. As you probably know by now, Crown Ribbon is a tokenized racehorse platform in the Hifi ecosystem, which enables the use of horse syndicates and other alternative assets as collateral.

Instead of needing to lock up cryptocurrencies like ETH as collateral, borrowers can use their NFTs as collateral for a loan. The process works much like a traditional loan, but with one key difference — if the borrower defaults on the loan, the NFT is sold to recoup the lender’s losses.

NFT Loans Could Solve the Web3 Failures of 2022

The DeFi market saw immense growth in 2021, but as with all other risk assets, saw a major pullback in 2022. Worsening the situation was a string of collapses, starting with TerraUSD, a stablecoin that relied on algorithms instead of collateral to maintain its value.

Another major collapse was the FTX crypto exchange, which minted its own token, FTT, out of thin air. When the value of FTT plummeted, investors lost billions.

NFT loans could provide a more secure form of collateralization, as the NFTs can represent real-world assets. When the value of a cryptocurrency used as collateral drops dramatically, DeFi protocols are suddenly at risk. NFT loans backed by tangible assets could provide an additional layer of protection for lenders.

The Future of NFT Loans

The start of 2023 hasn’t ended crypto’s winter, and the aftershocks of FTX’s collapse have left investors wary of crypto. A new approach to collateralization is needed, and NFTs may be the answer.

In developing countries, in particular, NFT loans could provide access to capital to those who do not have access to traditional services. By using NFTs as collateral, they can access capital without the need for a credit score or a bank account. After all, countries like Nigeria, Vietnam, and the Philippines lead the way in crypto adoption.

Ultimately, the NFT loan market is still in its infancy, but increasing regulatory clarity and the need for an alternative to 2022’s DeFi failures could drive demand for NFT loans. With NFTs representing real-world assets and providing greater liquidity, future investors could be assured that their investments are backed by tangible assets.