It was in early February 2021 when popular culture got wind of the concept of NFTs in regards to digital assets. Shortly after a flood of "NFTization" took place resulting in countless digital assets having NFTs assigned to them in hopes of creating value. Unfortunately, the vast majority of the NFTs created were assigned to digital assets of zero value with the exception of a handful that would actually generate value for their assigned asset. The result of this phenomenon would be that popular understanding of NFT's are nothing more than a gimmick, only to fizzle out after the next news cycle.
However, the worlds understanding of NFTs has in some sense been short-changed, only seeing a skewed and inapplicable form of the NFT concept. The concept of NFTs does not have to be a gimmick, if properly crafted with purpose NFT's could show real world utility. For Sigmadex we did just that; our focus for the creation of NFTs demanded functional utility with purpose that adds value to the user experience as well as on the platform. Sigmadex harnesses NFT's in numerous ways allowing unique opportunities that work alongside the fundamental protocol.
Theoretical NFT Exploration
With a seemingly infinite number of possibilities for potential NFTs our team is systematically exploring a number of possible NFT integrations. By categorizing the most effective types of potential NFTs for the platform we can help determine and create the most unique user opportunities.
The importance of tackling risk mitigation is self explanatory, the less risk there is the more approachable providing liquidity becomes, this contributes to the growth of the DeFi space overall.
When crafting NFTs that deal with risk mitigation we took into consideration 3 main components:
- Compensate impermanent loss (total amount staked, % lost from initial staking to unstaking)
- Compensate slippage from swap (total amount swapped, % lost to initially specified price from actual price)
- Compensate gas fees (total amount, bulk-transaction gas discount)
NFT's could also be crafted to modify core components such as the stake duration and penalty amounts while injecting the element of randomness as well.
- Reduce penalty/stake period
- Receive rewards earlier
- Option to increase penalty/stake period paid in order to receive another random NFT
- Double down on the penalty curve (ex. 2x APY but also 2x unstaking penalty)
Another avenue that could be explored is the multiplication of APY through specially made NFTs.
- APY Multiplier (varying 1x, 2x, etc)
- Restake APY Multiplier
- Receive end-of-stake bonus
Randomization can yield upside for potential holders of NFT's that can be applied in truly unique ways.
- Switch farms/liquidity pools
- Increase rarity of another NFT held
- Co-op investing - as long as both (or all) cooperating users don't unstake early APY is given a boost
Bursting with Potential
When NFTs have a desired purpose in mind they can be created in such a way that their value becomes inherent and immediately apparent unlike the gimmicky NFT's the world was first exposed to.
NFT Secondary Market
When NFTs have valuable purpose and utility a secondary market for NFTs would likely emerge opening up even further opportunity for Sigmadex users.
A hypothetical secondary market situation could involve a user with a small budget farming a highly valuable NFT. For example an NFT that could significantly decrease early withdrawal penalty amounts which could be sold to a user with a large budget looking to capitalize on a shorter term while circumventing a large penalty.
With so many varying applications for potential NFTs almost anything is possible.