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Vikas Singh is the Co-founder at Bliv.Club.
Over the past ten years, FinTech has had a huge impact on the worldwide financial services sector. India is acknowledged as a major FinTech hotspot globally, the promising India Fintech sector is anticipated to reach $1 Tn in throughout and $200 Bn in revenue by 2030. In 2021, the funding for fintech saw a 3X increase. An organic and cooperative environment has encouraged this expansion, which has also received backing from significant government programmes.
With the coming up of new technology and the rise of cryptocurrencies, NFTs also came to limelight with big creators and artists launching their own collections, to understand all this first we need to know what NFTs are. NFTs are tokens that represent rights to underlying digital content that is stored on a blockchain. While governments around the world are wary about cryptocurrencies, NFTs have been (relatively) warmly received, especially by the entertainment industry and creative artists. NFTs get an aspect of exclusivity since they are, by nature, non-identical and valued on their uniqueness. The ‘charm’ of having a one-of-a-kind connection to the underlying work of an artist, brand, or other entity has led to certain NFTs being viewed as collectibles, with high demand from experts. This is also true for India. According to a recent survey, India has the third most NFT companies headquartered worldwide.
Remarkably, the global market for NFT sales volume increased nearly 200 times in the first half of 2021 compared to the same period in 2020, reaching a whopping $2.5 billion. As a result, it’s no surprise that many regular users, investors, and financial professionals see several rewarding potentials in the NFT development and work hard to secure a major market share.
Here are 5 points which can help us to understand NFTs better
How Can Fintech Institutions Use NFTs?
NFTs have already had a big impact on the cryptocurrency market. With huge transformational and merging potential in the financial sector, NFTs are expected to merge with other blockchain applications to create an altogether new financial infrastructure. And the first thing that comes to mind when thinking about NFTs is the connection with decentralised finance (DeFi). DeFi is a rapidly expanding financial system based on blockchain technology that aims to abolish banks and institutions’ control over money, financial products, and financial services.
NFTs and DeFi were initially offered as separate applications, but it became obvious over time that NFTs could become a viable instrument for DeFi.
Despite several challenges to overcome and some aspects to streamline, many experts have already defined the ways fintech players may use tokens in their favour.
More Numbers of Partnerships and New Consumers
The simplest and most obvious approach to utilise NFTs in favour of financial institutions is to participate in sales or to organise a sweepstakes competition in which new clients can win an NFT.In addition, NFTs can be utilised to produce liquidity. Many financial companies create projects in which they offer innovative NFT-based services.
Finally, the NFT boom may encourage more traditional market participants to join in, resulting in more beneficial alliances and new solutions to strike the industry. NFTs can also be used to create liquidity in addition to this. The initiatives that many financial firms take up offer new services based on NFT trading.
How NFTs Will Probably Change FinTech
It’s likely that NFTs will continue to grab attention in the near future. The market for these tokens has already attracted a sizable amount of capital, and it appears that it will continue to expand over the upcoming months. The growth of NFTs could have a significant impact on fintech. The innovation for fintech will, at least initially, come from the combination of NFTs and DeFi. For instance, new DeFi services use NFTs to provide liquidity. New services based on NFT trading are being offered by a few DeFi firms and community initiatives. As more digital assets turn into NFTs, this might lead to the creation of entirely new asset classes and alter how investors make decisions.
Even though there are still issues with NFTs’ security and environmental impact, these tokens are expected to have a greater impact on the financial industry and fintech than they already have.
How much Risk is there while Investing In NFTs
Regardless of the fact that any investment is a risky business with numerous aspects to consider, the thrill of riches and the possibility of large gains continue to entice those early adopters looking for new ways to make a fortune.
Patience is currently the wisest course of action for investors because the market is still relatively young and all significant processes still need to be rationalised. Investors may invest in NFTs, but this should only make up a small portion of their overall holdings. If something goes wrong, there won’t be any noticeable harm, but it will still be possible to turn a profit.
Furthermore, the risk of fraud is always present where large sums of money are involved. The NFTs are no longer yours if a hack causes you to lose control of your asset.
NFTs Could Lead to DeFi Innovations
The future of decentralised finance may depend heavily on NFTs (DeFi). These are fintech initiatives that aim to undermine current financial intermediaries by using cryptocurrencies or the blockchain.NFTs may offer an alternative to existing crypto fundraising strategies, such coin IPOs, for fintech companies looking to make investments in the cryptocurrency field or introduce their own DeFi services.
Other recent NFT-associated DeFi projects demonstrate how fintech may develop as the cryptocurrency industry continues to expand and draw new investors. For instance, NFT-related funds are starting to emerge in the same manner as blockchain stocks and funds did in reaction to the increasing value of the crypto industry.
To Sum It Up
While the non-fungible token concept is still in its early stages, it has already shown a high potential for significant returns for its owners, producing genuine value for both buyers and sellers. NFTs can be used as a stand-alone instrument for numerous activities or as a component that can be combined with other applications in the blockchain ecosystem.
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Views expressed above are the author’s own.
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