At this point, non-fungible tokens, commonly referred to as NFTs, do not need to be presented. A byproduct of blockchain technology, these digital collectibles have seemingly established themselves as digital diamonds and created immense new opportunities in industries like art, entertainment, and gaming.
However, as NFT’s sales skyrocket, financial experts around the world are still wondering if these digital collectibles have any use cases. To their satisfaction, most NFT projects have not yet been able to present use cases for “JPEG”. But the SYNC network is changing that for the better.
By combining NFTs with DeFi, the SYNC network is actively changing the way the DeFi ecosystem operates and consolidating the place of NFTs in financial markets.
CryptoBonds: the introduction of a new class of crypto assets
SYNC Network is an Ethereum-based platform that recently introduced a new asset class called CryptoBonds into the DeFi space. Holding an ERC-721 contract, CryptoBonds are essentially time-locked NFTs that generate rewards for their holders. OK! But what are they really for?
Simply put, these NFTs are used to provide liquidity to decentralized exchange protocols. Cash mining is probably the most popular reward system in the DeFi ecosystem today. Projects depend on it to create liquidity for users and run their platform while investors use it to generate returns on their digital assets.
This reward system has largely contributed to the growth of DeFi but is also responsible for the volatility of the market. Why? Because investors can withdraw funds at any time, creating a sudden lack of liquidity, price fluctuations and the downfall of promising projects.
This is where CryptoBonds come in. This new asset class effectively maintains liquidity in DEX protocols while ensuring that long-term investors are properly rewarded for their contributions.
Now let’s take a look beyond the surface to see how CryptoBonds actually maintain liquidity and stability.
A CryptoBond consists of three main components – liquidity provider tokens (LPT), SYNC tokens, and NFT highlight artwork. The highlight of NFT is what gives CryptoBonds scarcity and marketability and the illustration is generated only for each new CryptoBond by an algorithm. LPTs represent the liquidity pair staked on the DEX protocol and SYNC is the platform’s native token which is locked in the CryptoBond with LPTs.
To create a CryptoBond, a user must visit a DEX protocol such as Uniswap on the Ethereum network and wager a trading pair to receive LPTs. Then, on the SYNC platform, these LPTs are combined with an equivalent amount of SYNC tokens and attached to an NFT highlight and CryptoBond ID to form a CryptoBond.
Each CryptoBond has a lockout period which can vary between 90 days and three years. During this period, investors cannot unlock their crypto assets. However, since the bond itself is a rare NFT, it can be traded as a whole on the NFT markets, in case the investor wishes to exit their position before expiration. This whole ordeal takes place without disturbing the liquidity on the DEX protocol.
CryptoBonds generate income from providing liquidity on the DEX and also interest on the SYNC portion of the bond. At maturity, the NFT is burnt and investors get all of that income along with locked SYNC tokens and newly mined SYNC tokens, resulting in a much higher return than usual liquidity extraction. For reference, the value of the 1,800 CryptoBonds created so far has seen an average increase of over 203%, which easily covers the recent downtrend in crypto that led SYNC to drop 75%. The longer the lockout time, the higher the efficiency.
A myriad of use cases
With the invention of CryptoBonds, the debate on the uselessness of NFTs can finally be closed. Now, NFTs are used not only to create liquidity, but also to maintain stability and mitigate risk in the DeFi ecosystem. Pumping and dumping episodes can now be largely a thing of the past, protecting promising projects. Other than that, their rarity makes them unique collectibles and can be traded in NFT markets for profit. CryptoBonds can also be used as collateral for acquiring loans in the DeFi space.
The SYNC network itself has a P2P lending feature where CryptoBonds serve as collateral. The term of the loan and the interest rates are dynamic and agreed between the borrower and the lender. The platform also offers additional NFT promissory notes which can be sold in the NFT markets to allow the lender to recover their funds before the loan expires.
In short, this new platform has the potential to revolutionize NFTs and forever change the way the world views them. His ambitious visions have already brought significant success to the project with $ 6 million of crypto locked in on 1,800 bonds. The way forward for this project looks quite promising and the team believes this project could become DeFi’s stability standard.