The craze of NFT has not seen any chance of slowing down lately. There are so many new projects that it is almost impossible for one person to keep up with them all. As a writer for Solanews it is one of my responsibilities to keep track of the NFT market and how things are going, but there are really too many for one person to keep track of.
There are a lot of people who still don’t understand NFTs. There is the talk of them just being JPEGs, that they are a scam used for money laundering, that anyone can steal your nft and make a pirate bay like market with them, or that there really is no future for them. This of course is all conjecture and what we in the business and those in the know like to call FUD (fear, uncertainty, and doubt)
I for one am glad to announce that I believe those negative feelings and screams are nothing more than a waste of time. The NFT space is young and early just like Bitcoin was back in 2011 and the scene is definitely poised for more in the future. With the metaverse looming there can only be more projects produced. In the meantime there are many that want to have more to do with the NFTs that they own now. Fortunately for us there is a sweet new method to do so and that method is by using HONEY.
How sweet it is
When I was a child mother used to always tell me “you catch more flies with honey than vinegar”, now let’s suppose the flies in this case are profits then this analogy would be spot on. With Honey there is lending and borrowing capability brought to your NFTs, thus allowing you to make use of the capital that is already stored in your NFTs. As a lender you can lock up your NFT liquidity in exchange for $HONEY tokens that can then be used for fees on the protocol while borrowers can use their NFTs as collateral and pay interest. That interest is then paid to $HONEY holders and lenders.
This project has a deep solution for increasing utility of your NFTs. The NFT has a opportunity cost with liquidity that is in correlation to the cost of the relative DeFi.You can forego the potential returns and yield of that capital by allocating capital to NFTs, If stablecoin farms are yielding 12% APR, the capital you allocate to NFTs has an implicit cost of 12% annually. For long term holders this can be a problem as this compounds over time and represents a significant cost. As stated directly from their whitepaper :”The protocol aims to tackle an inherent economic problem with NFTs (Non-Fungible Tokens), which is their opportunity cost. Acquiring an NFT worth X , presents an implicit cost (in the form of missed potential profits) relative to having invested X into any DeFi protocol for Y returns. In the long run, purchasing an NFT costs X * Y^N, for N equal to the number of years in which the NFT holder could have been receiving an APR on X. The variable Y can be visualised as the average yield of staking crypto on protocols such as AAVE or Curve. This cost not only compounds into exponential losses, but it forms a significant psychological barrier to acquiring NFTs. Honey is a means for users to gain returns on the capital invested in Non-Fungible Tokens, while allowing them to keep their claim over said NFTs.”
Get it right
Usually when there is a sale on an NFT there is a time aspect to a purchase. To make a large profit you usually need to sell early while the interest in the project is high. NFTs cannot really be traded as easily as other assets and require you to wait days to make a sale. If the floor reaches another low then your NFT’s value also suffers. By Receiving immediate liquidity through collateralisation you reduce listings and reduce the floor price volatility, thus bringing more value to your purchase and the product itself.
The thought is to buy an NFT cheap and then sell it at 100x the original price, but that only brings gains if you are actually able to sell said NFT, and a sale usually forces you to lose your part in the community you joined. To make your NFTs the collateral will help you to profit from gains without every having to lose the art you paid for. This would mean the process of flipping NFTs is no longer necessary, allowing projects to create more long lasting communities and buyers to continue to be a part of the community they loved.
DAO of Pooh
The whole process is a welcome idea and should bring an added utility to your NFT purchases in the future. Honey is governed by a DAO in which holders of the $HONEY coin will be able to govern the project and have those ideas implemented by what they call the Honey Lab. By organizing things with a DAO as a holder of the $HONEY token you can be assured a way to help the project go even farther and have the potential to make your NFTs even more profitable.
Now the idea does make one salivate at the possibilities, especially for those that have yet to sell their artwork on secondary markets. There is of course a lot of competition for sales on multiple projects on multiple markets such as Magic Eden , Solsea, Digitaleyes, etc. There are of course stipulations that have been made to make sure this is not just a free for all:
- For borrowing the NFT collection must match a number of conditions: it must present a large enough trading volume, it must be verified by one of the network’s lead marketplace, it’s code must be open source, and it must be at least 7 days old to provide enough financial history.
The program is vast and detailed and if you want to learn more you can read their whitepaper here. The future is mostly metaverse and NFT based and Honey is here to make that all the more sweeter, bring on the flies!
Remember none of our articles are financial advice or advertisement. Remember to do your own research and decide things based on your own financial situations. Some of the assets are held by our staff. You can find out more about Solanews and other articles and projects right here