If DeFi (Decentralized Finance) was the biggest issue in the blockchain market late last year, NFT (Non-Fungible Token) is drawing the most attention this year. Let’s find out what peculiarities each of them has.

DeFi(Decentralized Finance)

Defi means decentralized finance based on blockchain technology and aims to replace the roles of existing financial institutions with cryptocurrency through blockchain to enable all financial transactions such as payments, remittances, deposits, loans, and investments. It refers to receiving a certain amount of loans with cryptocurrency as collateral or providing other collateral and borrowing cryptocurrency. At this point, all financial services do not require intermediaries because they are automatically done through smart contracts.

Representative services using DeFi include Decentralized Exchange (DEX, Decentralized Asset Exchange that allows assets to be traded in a P2P manner without a central institution) and Stable Coin (Designed to minimize price volatility, USDT for example). This does not require banks, credit card companies, securities firms, etc., which act as central intermediaries in the financial market, and all financial services are available only with an Internet connection, so it is convenient and time-saving.

NFT (Non-Fungible Token)

NFT stands for a non-fungible token and is a token representing a crypto asset with sparsity on the blockchain. It is a means of digital tokenizing from existing assets such as artworks, real estate, and games. As it is based on blockchain, information data such as ownership and sales history are stored on the blockchain, so it is impossible to forge because the first issuer can be identified at any time. In other words, NFT is a digital certificate that certifies who owns a particular asset. Anyone can view images of the work online, but only those who purchase it through NFT can claim ownership.

With the recent attention of NFT, digital data has been produced and traded actively with NFT, which was previously unexpected. The popular gif image “Nyan Cat” on the internet was traded for a large amount of 600 million won, and Twitter CEO and founder Jack Dorsey’s first tweet in 2006 was traded for more than 3 billion won. Beeple’s “Everydays” image file was sold at auction for 78 billion won.

Although the concepts of DeFi and NFT differ, both have something in common that they are based on the Ethereum network. It is also drawing attention as some ideas and examples can be realized by combining the two.

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Insurance

DeFi and NFT combine to release insurance products. In the DeFi protocol, insurance can be purchased without KYC by combining NFT and insurance, and insurance certificates can be tokenized directly in the form of NFT to be traded directly on the NFT platform.

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Creator Economy

Using NFT in the DeFi market has the advantage of allowing creators to take full ownership of content creation and distribution. The creativity and execution charging of tokenized digital assets are endless, and it is possible to tokenize various creations such as songs, metaverses, games, and scenarios as well as works of art on DeFi.

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Collateralize

NFT artworks can be used for DeFi mortgage lendings. It is easy to trade non-current assets by segmenting and tokenizing expensive artworks. Since existing artworks are already used as collateral, it is feasible to encrypt them and convert them into NFT art. Using NFT tokenization like this, DeFi’s liquidity problem can be solved.

• Original Content

https://medium.com/d-labofficial/recent-trends-of-nft-vs-defi-119d87e389dd

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