Why do we use NFTs?
- Portfolios are as unique as Jack Dorsey's tweets
An NFT represents ownership of a non-fungible asset.
Investment portfolios are unique strategies or customizable financial products. The best way to tokenize them is as NFTs.
The main difference between Uniswap V2 and V3 is the latter's ability to support the tokenization of liquidity providers as NFTs. The move must have been informed by the fact that a liquidity provider determines every feature of their strategy (price ratio, fees, etc.). In other words, each liquidity provider token becomes a non-fungible, unique, and even a personal financial product.
- If your portfolio and mine are fungible, you won't mind swapping yours with mine?
It is illogical to represent portfolios as ERC-20 tokens. ERC-20 tokens represent the ownership of standardized products. While users can replicate the portfolios of others on Nested, at any time, they can update the contents of their portfolios. This makes it diverge or become dissimilar from the one it was copied from.
If we had represented those two portfolios in the form of ERC-20 tokens. These tokens would need to have the same underlying assets at all times. There will be a discrepancy between the two portfolios when they diverge.
Let's say X is a portfolio. Y is another portfolio issued from replication of X. Let's say X and Y are represented by the same ERC20 token. -> At the replication time X = Y If X gets updated then X != Y -> X and Y are backed by different underlying assets but they would be represented by the same ERC20. The model becomes broken.
- My mom knows what an NFT is.
There is considerable hype around NFTs. But more importantly, retail investors, and even the public, have understood the concept of NFTs in a shorter time than it has taken for them to comprehend cryptocurrencies.
We believe NFTs will help to bring DeFi to the masses.