January 13, 2023

Market Making and NFTs Twitter Spaces Recap

NFT market making is catching up with DeFi. Listen to what experts have to say.

Market Making and NFTs Twitter Spaces Recap

Jason Maier from Reservoir and Justim Bam from Asteria joined Brink to discuss how market making strategies in the NFT space are quickly catching up with DeFi. Below is a recording and a recap of our Twitter Spaces for those we weren't able to join it live!

The Future of NFTs and AMMs

  • Jason is excited about the new set of products being developed for passive liquidity for NFTs and is interested in researching the profitability of LPs in uniswap.
  • Mike expresses his excitement about AMMs for NFTs and the integration of NFTs with DeFi. He has been looking into market-making strategies and the development of advanced trading tools for this market.
  • Justin discusses the move towards more professional solutions in the NFT market and the line between passive supply and professional market-making. He is excited about the financial applications being built around ERC-721s.

OpenSea: Dominance and Future Forecast in NFT Space

  • Justin doesn't see OpenSea losing its dominance as the top exchange but sees room for other order book models. As of today, there hasn't seen a competitor to OpenSea that has a truly differentiated offering.
  • Justin is hesitant about the use of AMMs because it makes the tokens fungible again, which goes against the purpose of ERC721s.
  • Jason believes the NFT market is differentiating by user type, with OpenSea focused on retail users and Blur focused on pro traders.
  • Mike thinks there will be more tools like Blur that fill gaps in the market and offer more advanced experiences for both retail and pro users.
  • Mike hopes Blur will open up its order book data in the future.

Aggregated liquidity

  • Liquidity fragmentation is good as long as there's a way to interact with aggregate liquidity. Reservoir aims to solve the issue of fragmentation by aggregating all order books and normalizing the process.
  • The goal is to make NFT markets composable so that people can focus on their particular use case.
  • Building a composable NFT market enables developers to build higher level tools. Average users are able to search across different marketplaces and professional market makers are arbitraging between markets.

Use Cases of Non-Fungible Tokens (NFTS)

Event and Ticketing:

  • Mike sees big impact in event and ticketing through NFTS
  • Deeded ownership of physical objects beyond art is exciting
  • Music NFTS is also a topic of interest

Defi and Non-Fungible Positions:

  • Justin interested in real world assets on blockchain and Defi/ERC 721 intersection
  • Competition in Defi space will change interactions from fungible to non-fungible
  • Interested in products like Uniswap B3 positions, pseudo small belt positions, liquified chicken bonds, and dyad stable coin

Traditional Objects on the Blockchain:

  • Jason excited about financial NFT boom and traditional objects on blockchain
  • Example: biotech IP on blockchain
  • Interested in extensions of NFT logic like rentable NFT EIPs

NFTS in Academia and Journalism:

  • Kaylei impressed by impact of NFTs in academic settings and journalism
  • Potential for further exploration in these areas

Transit, Retail, and NFT Trading:

  • Jason focuses on this area because of increasing interest from wallets to add liquidity to users

Fees and Royalties

  • Companies will have to find new ways to capture value.
  • There is initial excitement about the idea of artists getting a share of transaction volume but the fees could be high and not enforceable.
  • Jason thinks the best solution for royalties is for them to be optional and for creators to give benefits to royalty payers. This will help avoid the issue of high fees, price volatility and ensure good bid liquidity.
  • Mike mentions marketplaces can make money as market makers and by making money on the spread.

The Future of NFT Spaces: Challenges and Opportunities

  • The biggest challenge is continuing to onboard users, especially as the crypto market experiences uncertainty.
  • NFT projects need to broaden their use cases and expand their services to excite users and become more sustainable.
  • The shift towards non-financial NFTs is exciting and could bring more widespread adoption of NFTs.
  • The tie of NFTs to financial assets can limit their use cases and turn them into just financial assets.
  • The goal is to start with NFTs that don't have the capacity to appreciate overnight to bring users in a different way.
  • ENS domains are a good use case for NFTs, with underlying value for the tokens.
  • The speculative activity in the NFT space will likely get washed out, but the things that have value for people will come through and create another period of value creation.

In the world of Non-Fungible Tokens (NFTs), a few products are shaking up the space and creating excitement among professionals in the field.

  • Jason believes NFTfi space will have a big moment soon.
  • Focus should be on building tools to make NFT market more efficient, better for users and less risky
  • Overlap between market makers, lending and perpetuals will make NFT market better and more accessible. Example: NFT Perp has seen significant amount of volume recently.
  • Tools should not only be used for speculation but also to help hedge risk and bring more people into NFT ecosystem.
  • Justin is excited about Art Blocks' sustainable approach to NFT business and community and believes Art Blocks values art in a truly unique way
  • Mike interested in solutions that bring liquidity on-chain for NFTs.
  • NFT space started with off-chain marketplaces but is moving towards solutions with permission lists and on-chain liquidity.
  • There is a slow shift away from off-chain marketplaces and towards solutions similar to ERC 20 side.

For full recording, visit the link below.

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