Matrixport Highlights Competition Ramping Up in NFT Lending, Fractionalization Space

There is intense competition between the lending and fractionalization verticals of the non-fungible token (NFT) space as their protocols offer similar product features and road maps, one of Asia’s digital assets financial services platforms has reported in a new study. Singapore-based Matrixport, which is Jihan Wu’s second adventure after leaving as the co-founder of mining chip company Bitmain Technologies notes, the conclusion after researching and testing the existing five NFT verticals – fractionalization, lending, rental pricing, and aggregators – to determine their pros and cons. 

While noting that lending products, in particular, are finding it hard to scale since there are no proven and reliable NFT pricing protocols to work with, the platform says the potential for product innovation in general is huge across the board considering the accelerated developments of each vertical, the evolving needs of NFT holders and the market still in its nascency with huge opportunities to unlock greater value in NFTs.

As a result, and based on the belief that NFT pricing oracles would be the key to unlocking the growth of NFT financialization primitives and plugging the critical gaps in scalability and accessibility, the leading Asian crypto financial services platform with ~$10 billion worth of crypto under custody says it will continue to watch the two spaces for strong product and execution capabilities. 

“At the same time, we should be paying close attention to two emerging verticals: the “Airbnb of the metaverse” – NFT rental marketplaces – and NFT aggregators,” Matrixport adds. “The former holding promise given the high adoption rates across games and metaverses at present, and the latter stepping up to offer effective value capture through gas saves and liquidity aggregation across marketplaces.”

It states in its new NFT Financialisation study that 2021 saw tremendous volume growth, reach, and new users of NFTs and their applications as well as emerging bottlenecks in their technology stack. 

“As builders create ever more novel applications for NFTs, we have yet to see corresponding development in the financial layer of NFTs to support such accelerated growth,” a part of the report says citing several critical issues facing the NFT’s burgeoning ecosystem. The issues include the difficulty blue-chip NFT holders face in accessing liquidity, problems with maintaining community growth without raising barriers to participation, and the limitations to yield generation on NFT assets owned by Metaverses landowners among others. 

Touching on the rental vertical market, the study suggests a collateral-free rental model with a product design to separate ownership and utility of an NFT to excel. It adds that NFT rental protocols in the space have no universal minting standards built around NFTs to separate ownership and utility hence the need to work closely with projects to build reputation and trust around their services.

“On the premise of a secure, adaptable NFT rental protocol, buy-now-pay-later (BNPL) or installment loans can drastically help to reduce the entry barrier for NFT brands, games and Metaverses,” it notes. According to the report, the evolution of the financialization of NFTs and the entry of institutional participants such as Genesis Trading and Nexo can “potentially catalyze this ecosystem to the next level with their expertise in the fungible token lending space.