Solvent Protocol: Solving the illiquidity problem of NFTs
NFTs have gained a lot of traction in the past year, trading over more than $23 billion in volume. While there are a lot of platforms and marketplaces that allow users to list and sell their non-fungible tokens, the process is exhaustive and time-consuming. Users lack ways to trade NFTs quickly and efficiently.
Liquidity is generally not much of a problem for other crypto tokens due to the process of liquidity mining and the presence of AMMs (Automated Market Makers). But for NFTs however, the situation is somewhat different. Due to the current ways of trading NFTs, NFT markets are highly illiquid and force users to undercut the floor prices of the NFT projects for just being able to buy/sell their NFT assets.
Solvent Protocol aims to address these issues and solve these very inefficiencies of illiquidity in NFTs. They are bringing on-chain index funds backed by assets in NFT collections such as CryptoKitties or CryptoPunks. Users can exchange their NFT assets instantly for receiving fungible token derivatives of those NFT projects.
What is Solvent?
Solvent is the first-ever liquidity platform for NFTs built on the Solana blockchain. The team’s vision for Solvent is to introduce optimized liquidity markets to NFT assets to enable better pricing discovery mechanisms and make trading of NFT assets easier and efficient.
With Solvent, users can get instant liquidity for their NFT assets at floor prices. Capital inefficiency and price discovery are two problems that cause illiquidity for NFT assets for users. The platform addresses these issues and enables DeFi services such as borrowing stablecoins, collateralized loans, yield farming, liquidity mining on AMMs (Automated Market Maker) with NFT assets.
The Solvent platform is currently running on the Solana mainnet, and the team has disclosed plans to move cross-chain and onboard NFT projects from other chains such as Ethereum soon in their roadmap. As mentioned in their litepaper, their long-term goal is to leverage Solana as a settlement layer due to low transaction costs and better scalability. The cross-chain bridges can help the Solvent platform bridge NFT assets from other chains and take advantage of Solana’s technology.
Converting NFTs into droplets
Users can convert their NFTs into fungible tokens called droplets. These give instant liquidity to and can be traded on AMMs for any other token. A bucket is a unique NFT collection or project on the Solana blockchain.
Droplets have multiple use cases as they can be traded for NFTs in the buckets, swapped for $SOL and $USDC, or staked in liquidity pools to earn rewards. For every NFT deposit, a user would get 100 minted droplets of that particular NFT project. 2 droplets would be charged as the minting fee for every deposit on the platform. Solvent is working on its V2 mainnet which will have the feature of minting more droplets depending upon the rarity of the NFTs that are deposited.
Use cases of droplets
Some of the use cases that Solvent proposes for NFTs and droplets are:
- Collateral loans: With a floor price that is AMM-based, Solvent can be used to calculate the collateralized value for NFTs and give out loans based on them.
- Making a passive income: By depositing NFTs into liquidity pools, NFT assets can be used to earn a passive income.
- Lending: The droplet floor price can also be used as a stabilized AMM-based source of a floor price to calculate the value of the NFT asset that can be lent.
- Fractionalized ownership for NFT projects: With droplets, users get a chance to own fractions of projects and NFTs that would otherwise not be possible.
- Floor perpetuals: Floor perpetuals that track the floor price of the NFT project as its index price and enable a stable floor price for the NFT project that is based on AMM instead of capitally inefficient marketplaces.
A successful private funding round
The platform recently closed its private funding round after raising $1.8 million from investors and participants like Solana Ventures, CMS, GBV Capital, and angel investors like the co-founder of Magic Eden, Zhuoxun Yin, and Solend Protocol’s co-founder 0xRooter. NFT whales like Arnold Poernomo of Masterchef Indonesia, NoJob from NoJobCapital, Marcus Maute of BridgeTower Capital, and SOLBigBrain from Big Brain VC also participated in Solvent Protocol’s private funding round.
Other investors that took part in the private funding include SkyVision Capital, Project Serum, Sola Eco Fund, Double Peak Ventures, Cropper Finance, Gate.io, Skynet trading, Darkpool Liquidity, ROK Capital, Genblock Capital, NxGen Ventures, MEXC Global, and Solanium Ventures.
The platform plans to use the funds to provide liquidity to pools on the platform, expand the team and develop the Solvent Protocol.
Solvent Protocol offers a solution to the illiquidity problem faced by NFT holders. The platform has successfully facilitated instant liquidity to more than 200 NFT assets across 5 NFT projects. Some of the major NFT projects that are included on the platform are Galactic Geckos, Degenerate Ape Academy, and Catalina Whale Mixer. Solvent Protocol is also looking to add more NFT projects in the near future. It also has a TVL (Total Value Locked) of $400,00 across its NFT droplet liquidity pools.
Solvent also launched its governance token $SVT recently. The token can be used for token staking and would benefit liquidity providers with reduced minting fees and portions of open market buybacks.
The platform is currently working on its IEO (Initial Exchange Offering) on Gate.io which will go live between 10 January and 11 January 2022. It will also have an IDO (Initial Dex Offering) on Solanium from 7 January 2022 to 11 January 2022. Solvent Protocol aims to work further on providing liquidity to its droplet token pools and expanding its team.
For more information on Solvent, please check out their official website.
Disclaimer: This is a paid post and should not be treated as news/advice