1/The next major problem set in #DeFi is #NFTLiquidity.
It has become very clear that, like fungibles, nonfungibles are their own financial asset class.
One path to see this is to envision the future of NFTs as “liquid
2/Some say that NFTs “shouldn’t be” liquid, yet the innovation process continues.
Just like photography has become much easier to create in the last 100 years, liquid NFTs will surely bring down price points of tokenized digital content but will also open expansive new markets.
3/The key observation is this: #NFTLiquidity is merely a technical problem for #DeFi, and the entire set of economic mechanisms is its solution space.
👉🏻 In particular, because of tokenization, *the NFT liquidity problem reduces to the NFT price discovery problem.*
4/In other words, if we could reliably price a set of NFTs, we could issue a token backed by their reliably priced future resale value.
This is a core mechanism that today is underutilized in the market, and one that — we will soon see — applies to all illiquid assets.
5/Today, NFT price discovery proceeds via three main mechanisms: sales, auctions, and ERC20 fractionalization.
And the fundamental problem with each of these mechanisms is capital efficiency: in each mechanism, participants need to spend *at least* $N to value something at $N.