At this point, non-forgeable tokens, commonly known as NFTs, need no introduction. A byproduct of blockchain technology, these digital collectibles seem to have established themselves as digital diamonds and are creating huge new opportunities in industries such as art, entertainment and gaming.
However, while NFT sales are soaring, financial experts around the world are still debating whether these digital collectibles have any use. To their satisfaction, most NFT projects have not yet been able to suggest any use for “JPEGs” either. But the SYNC network is changing that.
By combining NFTs with DeFi, SYNC Networks is actively changing the way the DeFi ecosystem works and consolidating the position of NFTs in the financial market.
CryptoBonds: the introduction of a new cryptocurrency asset class
The SYNC Network, an ethereum-based platform, recently introduced a new asset class to the DeFi space called CryptoBonds. holding ERC-721 contracts, CryptoBonds are essentially time-locked NFTs that generate rewards for their holders. Great! But what are they actually used for? But what are they actually used for?
Simply put, these NFTs are used to provide liquidity to decentralized exchange protocols. Liquidity mining is probably the most popular reward system in the DeFi ecosystem today. Projects rely on it to create liquidity for their users and keep their platforms running, while investors use it to earn returns on their digital assets.
This reward system has largely contributed to DeFi’s growth, but it’s also the cause of market volatility. Why? Because investors can withdraw their funds at any time, causing a sudden lack of liquidity, price volatility, and the collapse of promising projects.
That’s where CryptoBonds comes in. This new asset class effectively maintains the liquidity of the DEX protocol while ensuring that long-term investors are properly rewarded for their contributions.
Now let’s scratch the surface and see how CryptoBonds actually maintains liquidity and stability.
CryptoBond consists of three main components – liquidity provider tokens (LPTs), SYNC tokens and NFT highlight artwork.NFT highlights are what give CryptoBond its rarity and tradability, and the artwork is uniquely generated by an algorithm for each new CryptoBond.LPTs represent stakes on the DEX protocol liquidity pairs, and SYNC is the platform’s local token that is locked into CryptoBond along with the LPTs.
In order to create a CryptoBond, a user must access a DEX protocol, such as Uniswap on the ethereum network, and bet a transaction pair to obtain LPTs.These LPTs are then combined with an equal number of SYNC tokens on the SYNC platform and attached to an NFT highlight and CryptoBond ID to form a CryptoBond.
Each CryptoBond has a lock-up period that can vary between 90 days and three years. During this time, investors cannot unlock their cryptocurrency assets. However, since the bond itself is a rare NFT, it can be traded as a whole on the NFT market in case an investor wishes to exit their position before maturity. This entire process is done without affecting the liquidity of the DEX protocol.
CryptoBonds brings in revenue by providing liquidity on DEX and also generates interest on the SYNC portion of the bond. Upon maturity, NFT is burned and investors receive all of this revenue as well as locked SYNC tokens and newly mined SYNC tokens, resulting in a much higher yield than the usual liquidity mining. For reference, the 1,800 CryptoBonds created to date have grown in value by an average of over 203%, which easily covers the recent downward trend in cryptocurrencies, resulting in a 75% drop in SYNC. The longer the lock-in period, the higher the yield.
Countless use cases
With the invention of CryptoBonds, the debate around the uselessness of NFTs can finally be put to rest. NFTs are now being used not only to create liquidity, but also to maintain stability and mitigate risk in the DeFi ecosystem. Pump-and-dump events can now largely be a thing of the past, protecting promising projects. On top of that, their rarity makes them unique collectibles and can be traded for profit on the NFT market.CryptoBonds can also be used as collateral to obtain loans in the DeFi space.
The SYNC network itself has a P2P lending feature with CryptoBonds acting as collateral. The term and interest rate of the loan is dynamic and is agreed between the borrower and the lender. The platform also has additional promissory note NFTs that can be sold on the NFT marketplace, allowing lenders to recover their funds before the loan matures. In short, this novel platform has the potential to revolutionize NFTs and change the way the world looks at them forever. Its ambitious vision has already brought great success to the project, locking in $6 million worth of cryptocurrency in 1,800 bonds. The project’s path looks quite promising and the team believes that this project can become a stable standard for DeFi.