Introduction
Already much has been written about a continuing surge in the demand for NFTs and the jaw-dropping financial transactions that have captured headlines. If you are not aware of the technology, NFTs are tokenized versions of assets traded on a blockchain behind cryptocurrencies. They are referred to as Non-fungible tokens which are units of data linked with unique digital files that are cryptographic assets on a blockchain. It can be anything, but it must be pieces of art, recordings of live performances, or music. These tokens are traded on what are effectively online digital art markets stored on the blockchain. Blockchain is the digital ledger technology supporting smart contracts, cryptocurrencies, and other feature-rich applications.
Nowadays NFTs are becoming noticeable due to the high values that some early tokens have sold for. A digital trading card that belongs to Tom Brady was sold for more than $1.3 million in Ethereum. Christie from the famous auction house sold an NFT of a digital painting for $69.3 million.
In this post, we’re going to know the impact of NFTs on fintech in detail. So without any further ado, let’s get started!
What is the impact of NFTs on Fintech?
As we all know, NFTs are going to become the headlines in the near future. There is a considerable amount of money invested in NFTs and the market is significantly growing and will gain more importance in the coming months. The rise of these tokens might have some major implications for the fintech industry. But the integration of DeFi and NFTs is where the fintech innovation will come into the picture in the near term.
Driving DeFi innovation
We all know that NFT has already influenced cryptocurrency, but it also has a high impact on fintech. The tremendous potential of NFT in the fintech industry is dominated by the feasible impact on the environment, and fears of security. It plays a vital role in the future development of DeFi, or decentralized finance. If we consider a fintech project, DeFi disrupts the current financial intermediates via cryptocurrency or the blockchain.
For instance, teller finance starts using collectible NFT to forge liquidity for their algorithmic credit risk protocol. These currently owning Teller NFTs can access several APY advantages and some to-be-announced long-term benefits. Other fintech companies who are planning to invest in launch services that are similar to DeFi, may use NFTs as an alternative to crypto fundraising techniques. Because the fintech industry has the ability to evolve as the crypto space grows and influence new investors, depending on NFT-related Defi projects. The emergence of blockchain funds and stocks is one of the best examples of an NFT project in response to the crypto space’s growing value. Trading NFT tokens is another example of NFTX which is known as a community-owned protocol.
Increasingly collateralized
Non-fungible tokens are already using collateral for loans. You may find that many NFT collectors are often using services like Arcade when they want to connect with NFT owners who are planning to borrow money by collateralizing their tokens. Lenders can demand more interest as compared to traditional loans when it comes to accessing funds without selling their digital assets.
Moving further, Web3 is the third age of the internet which is being developed based on blockchain technology, where the opportunities for digital collateralization expand. There is nothing that exists today that does not have a digital shadow even if we consider banking transactions that can serve as conceptual collateral.
Crypto volatility
Recently we have seen that there has been significant volatility in the crypto markets with the costs of Bitcoin and Ethereum dropping. Not only are the cost of Bitcoin and Ethereum lowering, but NFTs are also down, suggesting that NFT investors are scrutinizing to reap the benefits of bargains.
Final Note
So that’s it for the post. We obviously cannot predict the future, but it is clear that the demand for NFTs is increasing and it will continue to shape the fintech industry. Apart from this, it will also highly influence blockchain technology as it will be an important part of that. As far as the financial industry is utilizing NFTs as investment vehicles, the one who has a clear vision and NFT strategy in mind will be surely in a prime position and reap the benefits of it. Not only this, blockchain has largely been slow on the uptake due to existing technology stacks that banks have in place with the anticipation that a future of DLT creates.
Apart from this, it enables more security, blockchain offers a variety of advantages when it comes to financial institutions which include lower friction for transactions due to automation and a higher level of customization for financial services because of the adoption of Defi and the usage of NTFS will continue to proliferate for all participants. For the banking sector and financial institutions, there is an exact line in the sand between those who are investing in modern technology and those who are not. With the expansion of technologies that are going to disrupt and disintermediate the traditional banking systems need to make sure that they are aware of all the efficiencies, DLT can bring.
and those who are not. With the expansion of technologies that are going to disrupt and disintermediate the traditional banking systems need to make sure that they are aware of all the efficiencies, DLT can bring.
We hope you find this post useful. It would be great for us if you share this post on Facebook or Twitter to reach more audiences. Feel free to mention your queries in the comment section given below and we will get back to you soon!
Thank you!
