When NFTs combine with DeFi, what basically happens is this: literally every physical object becomes a digital asset, while digital assets continue being made as usual as NFTs. Hence, if we can have a global 24/7 liquid market for buying and selling everything, imagine the possibilities of a global 24/7 blockchain enabled financial services market.
We can have anyone in the world borrow, lend and pay funds to each other; all tracked by the blockchain and secure owing to decentralization of the network. This is a revolution that has huge implications for the future of finance and digital assets.
Ciobanica, a digital art collector who goes by Silver Surfer used his collection of 10 NFTs, made by artists Pak and Fewocious, as collateral worth about $5 million on a marketplace that connects lenders to borrowers. Genesis, a company, offered him a six-month $1.25 million loan with a 7.5% interest rate over that period, the equivalent of a 15% annual rate.
Let’s understand the implications of this again when applied on a global scale. Banks and financial institutions, far from being replaced will actually have more work. That’s because once every asset is on the blockchain, institutions and individuals have an automated track record of their entire history. Now, banks will have the opportunity to serve more people instead of less. In fact, the blockchain by automating away the function of trust, will help banks do what they are supposed to: calculate risk and evaluate the borrower.