How Companies are Changing the Liquidity Problem in the NFT Industry
- Loot NFT’s new innovative metaverse aims to democratize the NFT space.
- It will do this by implementing its own Bidding Unit (BUN), in limited quantity and by allowing one-off auctions.
- Loot NFT aims to resolve liquidity issues through gamified methods of placing bids on NFTs.
From March to April 2021, NFT’s sales generated an aggregate value of nearly US $ 64 million. In October, sales reached US $ 336.6 million. While NFTs have been all the rage recently, like any new technology, they also face several challenges. Unfortunately, some of these issues have led many critics to refer to NFTs as a bubble about to burst.
Lack of liquidity is perhaps the biggest issue that worries most investors, so much so that some investors think NFTs are a riskier investment than most altcoins. Additionally, as the history of NFTs has shown, very few collections and coins stand the test of time, and unfortunately most lose value within a matter of months. As a result, NFTs become illiquid – meaning they are not easily sold or traded for cash without a substantial loss in value – leaving owners in dire financial straits.
For example, when a holder wants to sell their ETH, they can easily do so on any centralized or decentralized exchange and at any time. However, when it comes to NFTs, matching buyers and sellers can be much more difficult. Rather than trading in speculative markets, collectors generally prefer to HODLer their NFTs. In addition, they are sold bilaterally in the markets, with only a few potential buyers for each transaction. For example, an in-game NFT card may only be requested by a small group of buyers.
For this reason, the prospect of reselling an NFT remains bleak despite the Gray Market Value (GMV) of NFT transactions having increased significantly since 2020. As a result, NFT holders must either accept the highest bid received within a defined period of time. (potentially leaving money on the table) or waiting forever for liquidity until a bidder meets demand. However, it is not all gloomy, as several upcoming projects aim to address the NFT liquidity issue and price discovery issues, giving creators access to deeper liquidity. For example, revolutionary projects like Loot NFT seek to solve the liquidity problem by introducing a gamified method of placing bids on NFTs.
Loot NFT’s innovative new metaverse aims to democratize the NFT space, providing not only a platform where users can trade their NFTs, but also a complete blockchain ecosystem, from its own token to its e-commerce store, through its Loot Arena where users can fight to outbid.
Not only does this help solve the liquidity problem in the NFT space, it also democratizes the industry by leveling the playing field in the way its auctions are run. In traditional auctions, the rich can outbid any bidder mainly because the currency used in the auction is inflationary. By implementing its own auction unit (BUN), in limited quantity and allowing single auctions, the purchasing power disparity in auctions is considerably reduced. This approach also makes winning NFTs more gamified and therefore more engaging for users, thus encouraging more trading in the NFT space. Players can also earn NFTs at a fraction of the cost this way.
Since Loot NFT auction units are limited supply, capped per account and single-use only in auctions, the purchasing power disparity is significantly reduced. It also ensures that the implementation of a strategy can make winning NFTs more gamified and therefore more attractive to users, thus encouraging more continuous exchanges in the NFT space. They can also earn NFTs at a fraction of the cost this way.
Aside from Loot NFT, projects like Momento combine NFT + DeFi and allow NFT owners to earn rewards while HODLing their NFTs until they can find a buyer that matches their asking price.
Additionally, new-age platforms like Mintverse allow users to create, collect, and even crowdfund NFT art. In addition, projects like Sphynx offer interesting DeFi-NFT use cases such as NFT collateralized loans, NFT yield farming, and NFT co-ownership, among others. Such projects are initiated with the intention of providing products and services to solve the current problems encountered in the NFT industry.
While the booming NFT space has many advantages, liquidity is inherently an ongoing issue in the industry. However, as the nascent industry continues to evolve, companies are striving to create innovative ways to solve this problem. Pioneers like Loot NFT are offering exciting new ways to gamify the world of NFT trading, increasing engagement with players and thus increasing trading volume. The future is bright for NFTs, and it will be interesting to see how the space evolves.
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