At this point, the non-fungible token, also known as NFT, requires no introduction. A by-product of blockchain technology, these digital collectibles have apparently established themselves as digital diamonds and created plenty of new opportunities in industries such as art, entertainment and gaming.
However, while NFT sales are skyrocketing, financial experts around the world are still debating whether these digital collectibles have any use-cases at all. To their satisfaction, most NFT projects have not yet been able to present a use-case for “JPEG”. But the SYNC network is changing that for the better.
By integrating NFTs with DFIs, the SYNC network actively manages the DFI ecosystem and cementes the position of NFTs in financial markets.
CryptoBonds: The role of a new Crypto resource class
The SYNC Network is an Ethereum-based platform that recently launched a new asset class called CryptoBonds in the DeFi space. Containing an ERC-721 contract, CryptoBonds are essentially time-locked NFTs that create rewards for their holders. All right! But, what are they actually used for?
Simply put, these NFTs are used to provide liquidity to decentralized exchange protocols. Liquidation is probably the most popular reward system in the Defy ecosystem. Projects rely on it to create liquidity for users and keep their platform active while investors use it to reap the rewards on their digital assets.
This reward system has contributed a lot to the growth of DFI but is also responsible for creating instability in the market. Why? This is because investors can raise funds at any time, leading to a lack of liquidity, price fluctuations and the collapse of promising projects.
This is where CryptoBonds comes into play. This new asset class effectively maintains liquidity in the DEX protocol while ensuring that long-term investors are duly rewarded for their contributions.
Let’s now look beyond the surface to see how cryptobonds maintain liquidity and stability.
A cryptobond consists of three main components – liquidity tokens (LPTs), SYNC tokens and NFT highlight artwork. The NFT highlight is what gives cryptobonds a rarity and commerciality, and the artwork is uniquely created by an algorithm for each new cryptobond. LPTs represent the liquidity pairs in the DEX protocol and SYNC is the local token of the platform which is locked in CryptoBond with LPTs.
To create a CryptoBond a user must inspect DEX protocols such as the Uniswap Ethereum network and be a trading partner to receive LPTs. Then, on the SYNC platform, these LPTs are combined with the equivalent SYNC token and combined with an NFT highlight and CryptoBond ID to form CryptoBond.
Each cryptobond has a lock period that can vary from 90 days to three years. During this period, investors cannot unlock their crypto assets. However, since the bond itself is a rare NFT, it can be traded overall in the NFT marketplace, if investors want to exit their position before it expires. This complete ordeal occurs without disturbing the liquidity of the DEX protocol.
Cryptobonds bring revenue from the liquidity provision of DEX and also pay interest on the SYNC portion of the bond. After maturity, the NFT burns out and investors receive all of this revenue, including locked SYNC tokens and newly mined SYNC tokens, resulting in much higher yields than normal liquidity mining. For reference, the value of the 1,800 cryptobonds created so far has increased by more than 203% on average, which easily covers the recent downtrend of crypto, resulting in a 75% drop in SYNC. The longer the lock time, the higher the yield.
Numerous cases of use
With the discovery of cryptobonds, the debate over NFTs may eventually be put to rest. Now NFTs are being used not only to create liquidity, but also to maintain stability and reduce the risk to the DFI ecosystem. Pump and dump episodes can now be a thing of the past, protecting promising projects. In addition to these, their rarity makes them uniquely collectible and can be traded in the NFT marketplace for profit. Cryptobonds can also be used as collateral to obtain loans in DFI space.
The SYNC network itself has a P2P nding feature where CryptoBonds acts as collateral. The term of the loan and the interest rate are dynamic and are agreed upon by the borrower and the lender. The platform has additional NFT promissory notes that can be sold in the NFT marketplace so that loan payers can repay their funds before their funds expire.
In short, this fancy platform has the potential to revolutionize NFTs and change their outlook on the world forever. Its ambitious outlook has already led the project to significant success with a $ 6 million crypto lock across $ 18 million bonds. The way forward for this project is quite promising and the team believes that this project can be a measure of DFI’s stability.