The Theory: Financial NFTs
With the development of Decentralized Finance, explorations of bringing NFTs into more tangible scenarios of finance are conceiving the concept of “Financial NFTs.”
For instance, lending project 88mph uses NFT to implement fixed-interest rate lending, insurance project Armor Finance uses NFT as its insurance token for coverage, the fractional ownership platform NIFTEX is doing NFT financialization by using ERC-20, and the best-known exploration of Financial NFT is the LP token of Uniswap v3.
The Evolution of Financial NTFs
Generally speaking, it seems that we could say Financial NFTs are NFTs that are used in financial scenarios.
The reason why DeFi protocols adopt NFTs to implement complex functionalities for advanced financial instruments is the incapability of their original ERC20 tokens. What DeFi protocols want here is the upgraded capabilities for their original tokens, for example, the descriptive capability of ERC721 for ERC20 tokens.
ERC721 tokens, or NFTs, on the other hand, want the quantitative attributes of ERC20 tokens. That's why NFT projects like DODO, WOA, B20, Unicly, NIFTEX, and NFTfi adopt ERC20 tokens as a financial layer on top of NFTs to fungible the non-fungibles, thus bringing liquidity, utility, and accessibility to the NFT world. With the improvement of value propositions, NFTs use-cases embrace financial scenarios such as collaterals, crowdfunding, renting, economic attribution, NFT DAOs, index funds, etc.
For the call of financial scenarios, both ERC20 and ERC721 want an upgraded version with the capabilities of each other. This will make the concept of "Financial NFT" to be a reality of the DeFi world. Strictly speaking, what Financial NFT means is an upgraded version of NFTs with a brand-new token standard that could enable its abilities to express the multi-dimensional attributes of assets in the form of computable NFTs.
Class Hierarchy of NFTs, Computable NFTs and Financial NFTs
As a semi-fungible token, Financial NFT is a single NFT that can be split into multiple, independent non-fungible derivative instances, and vice versa - you can package multiple tokens into one Financial NFT as a basket. The capabilities of splitting/composing bring mathematical logic to Financial NFTs, thus making them computable to encapsulate many common trading patterns and circulation rules of money.
Solv Protocol provides Financial NFTs with its brand-new token standard vNFT (short for Versatile Non-Fungible Token) as infrastructure sophistication - an enhancement of ERC721 to simplify the implementation and programming of advanced financial products. Compatible with the ERC721 standard, Financial NFTs can reuse the infrastructures of NFTs. Combined with the advantages of the ERC20 standard, Financial NFTs inherit quantitative attributes from ERC20 as fungibles.
By the power of the vNFT standard, a variety of brand-new financial instruments are able to be introduced to the DeFi world as Financial NFTs, such as Solv Vouchers for allocations, which are used to represent the contractual relationship between investors and the project team, and the transfer of Vouchers represents the transfer of investment portions. With the infrastructure provided by Solv Protocol, any average user is able to create his own financial instruments or derivatives based on the concept of Financial NFTs.
What's more, Financial NFTs are upgradable to append new information/features to the original tokens. Any individuals could customize their own Financial NFTs with unique properties.
Last modified 3mo ago
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