❕Problems in the Market

In recent years, NFT is developing real fast as a new type of crypto asset, innovation surrounding NFT has surged up. Among them, NFT Marketplace is a hot spot for innovation. Upon our analysis, currently there are the following main types of NFT marketplaces:

1️⃣Order Match 😶‍🌫️: Its centralization degree is too high. It is mainly reflected in two aspects. First, Order matching relies on off-chain operations, so the fairness and credibility of the matching process cannot be well guaranteed. Second, the centralized marketplace can usually decide whether to list an NFT project or not at will, so the rights and interests of NFT project parties cannot be effectively protected.

2️⃣Fragmentation 😶‍🌫️: Firstly, the FT price cannot effectively reflect the actual situation of the NFT price. Since the price usually relies on the arbitrage mechanism, and the risk-free arbitrage mechanism between this type of FT and NFT is not sound. In general, when the FT price is lower than the the NFT’s market price, it is necessary to rely on the arbitrage person to buy FT on the secondary market and redeem the corresponding NFT to sell, thereby locking in profits. However, since currently there is no trading platform that allows NFT holders to quickly trade in a way similar to market orders, so arbitrageurs have to bear the risk of price fluctuations associated with holding NFTs Exposure. Therefore, it is common to observe that the price of this type of FT is lower than the market price of the NFT. Secondly, fragmented assets have no actual use value. It’s well-known that the value of NFT assets is based more on cultural attributes, but fragmented FT assets cannot carry this kind of value. Finally, this mechanism is usually prone to governance risks, that is, malicious attackers permanently lock the staked NFT through means such as burning its fragmented FT tokens. In order to solve this problem, complex governance mechanisms must be introduced, which cannot effectively protect all relevant stakeholders.

3️⃣Sub-Pool 😶‍🌫️: One is that it lacks an effective liquidity incentive plan. In DeFi, a method of receiving rewards by staking a fungible token used to record the share of liquidity provided by the LP is usually called Yield Farming or Liquidity Mining. This is a general liquidity incentive scheme. Since the parameter settings of each LP in Sub Pool are not uniform and are in a discrete state, the liquidity provision of each Sub Pool is quite different, Quotation, in-depth provision, etc. Hence, in theory, it is impossible to effectively quantify the contribution of LP to liquidity, so it is impossible to reuse the existing paradigm, which greatly limits its potential as a basic component of NFT-Fi. Besides, the market making cost of LP is rather high. Under this paradigm, LPs are usually in a competitive relationship with each other. In order to increase the probability of transactions, thus obtaining higher handling fees, LPs need to update market-making related settings in a timely manner to ensure that their Sub-Pool quotes are more easily recognized by Traders, resulting in higher gas costs.