What are Financial NFTs?

You might think that the latest NFT (non-fungible token) craze is all about digital art and collectibles.

Tokenizing digital art and collectibles, are simply one of many conceivable NFT applications. Merely said, NFTs are a type of digital certificate that can be used for a variety of purposes.

Anything that would profit from being more quickly transferrable, verifiable, and accessible with the blockchain in the future is likely to be represented by an NFT.

This is where financial NFTs come into play. Financial NFTs encompass everything from insurance and bonds to custom token baskets and tokenized real-world assets, and they’re on track to become the most widely used application of NFT technology to date.

Financial NFTs are a big step towards the NFT market, and one of the first real-world applications. At their foundation, financial NFTs are tokenized financial products that adhere to the ERC-721 and ERC-3525 token specifications.

ERC-3525 tokens are semi-fungible, and when utilized in DeFi protocols, they can incorporate complicated functionality that ERC-20 tokens normally cannot.

What are Financial NFTs?

Financial NFTs make it possible to tokenize loans as NFTs. This provides the NFT holder with a set interest rate for the duration of the loan.

The best aspect is that, as an NFT, this tokenized loan may be sold on NFT marketplaces, allowing holders to exchange loans and interest rates at a whim, as well as move from set to floating interest rates.

Again, the usage of financial NFTs also aids in providing LPs with distinctive liquidity provider positions in DeFi protocols.

These positions can be classified according to the quantity of liquidity given or the point at which the LPs entered the protocol.

This will allow LPs to keep their previous positions even when prospective investors enter the market, allowing them to achieve the maximum possible returns.

Financial NFTs could be used as an insurance token in DeFi’s cover protocols to ensure and give loss protection for users.

When we consider the big picture, it’s evident that financial NFTs can give a simple solution to DeFi’s long-standing issues.

Tokenizing financial items facilitate their mobility within the DeFi system and may also be the answer to industry interoperability.

Examples of Financial NFTs

A prominent example of financial NFT appeared in 2021, in Uniswap v3, which started issuing liquidity provision tokens (claims on tokens provided by market makers) as NFTs – totaling $1.3 billion in NFT assets from a single protocol.

Apart from Uniswap, NFTs have already started to be used for financial reasons in a number of ways. This includes the following:

Yearn.finance insurance contracts are being marketed as NFTs on Rarible and are underwritten by Nexus Mutual.

Solv Protocol is programming investment contracts into NFTs to improve project token transparency and transferability.

UFiT DAO combines several fungible and non-fungible tokens into “basket” NFTs.

Charged Particles is combining existing NFTs with interest-bearing ERC20 tokens.


By Yuan Su

Since 2009, the onset of the bitcoin network, Yuan Su has been covering the space. He is the author of Blockchain. He's also been the guest of countless bitcoin and cryptocurrency related podcasts throughout the world. Every opportunity, he speaks on or writes about Asian Economics and how bitcoin is the world's preeminent money.