Where NFTs and DeFi Collide

3 min readJun 4, 2021

Decentralized Finance — An Emerging Giant

Decentralized Finance (DeFi) is one of the hottest terms in the world of cryptocurrency today. Beginning in the middle of 2020, media outlets began to notice the huge potential of DeFi protocols, while more crypto users also figured out the benefits of using the decentralized system.

Decentralized Finance works on smart contracts, instead of engaging with traditional, more costly intermediaries like brokerages or banks and it also provides the user benefit of being permissionless and transparent.

The likes of Nasdaq have called DeFi an emerging giant, with huge opportunities for growth and by January earlier this year, DeFi protocols had locked in $19 billion in assets. That’s an enormous level of growth over the course of just over two years, when the term was first used by Ethereum developers in August 2018.

As DeFi grows, the way in which it is used is also growing, as we will begin to see.

The Story of NFTs in 2021

During the same time period that DeFi has become a major trending topic in the cryptocurrency community, Non-Fungible Tokens (NFT) have also become one of the most talked about concepts in both cryptocurrency communities and within arts and entertainment communities.

The rise of NFTs has arguably been the most-talked about story within the creative industries throughout the first half of 2021, with artists and analysts alike predicting the trajectory that the world of NFTs will take. Add to that, that more than $2 billion was spent on NFTs during the first quarter of 2021 alone, and you can see the huge level of growth that NFTs have experienced in just this year alone.

The concept of an NFT has been so widely distributed that many people without any prior knowledge or engagement with the cryptocurrency ecosystem know what it is. That’s largely thanks to the sale of artwork by artists such as Beeple, who sold an NFT called Everydays: The First 5000 Days at a Christie’s auction for $69 million. It’s also down to huge levels of engagement that a variety of celebrities and influencers have had with the market, with everyone from Elon Musk to Eminem releasing their own NFTs over the past few months.

NFT and DeFi Collide

The growth in popularity of NFTs has led to various concepts forming around the broader use of NFTs in Decentralized Finance. One concept that has arisen over the past few months, is that of Fractionalized NFTs, which allows buyers to diversify their investment portfolio by putting their money into fine art.

By allowing smaller investors to put their investments into portions of non fungible tokens, the benefit here is that, while fine art can be a costly venture, this digital artform can actually be broken up and shared among a variety of owners, more easily and with the ability to track ownership transparently and seamlessly. A Fractionalized NFT would allow a variety of users to hold ownership of the artwork, while feeding liquidity into the market.

So, imagine the situation, you’re after a piece of digital art by your favorite artist. The artwork is made available through a vault built on APYSwap’s platform, which would act as a liquidity pool for users while, with the artwork being fractionalized as an NFT. Would you grab yourself a piece of that pie?




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