May 3, 2022 · 9 min read

Emerging Tokens - 3rd May 2022

Making NFTs Liquid

There’ve been a number of big headlines in the NFT space in the past months. Apecoin was airdropped to BAYC holders, BAYC celebrated its 1st birthday two weeks ago, and OpenSea acquired NFT aggregator Gem. As the very space grows, the importance of creating liquid markets for NFTs becomes more and more important. This week, we look at projects that brings liquidity to the NFT markets. Some projects accept NFTs as collateral to give out loans, and some projects issue liquid tokens that represent the original NFTs.


Bend DAO is a p2p NFT liquidity protocol running on Ethereum. There are two main participants: the borrowers who deposit NFTs as collateral, and the lenders who deposit ETH that are lent to the borrowers. Borrowers receive a boundNFT (ERC721) an NFT that represents the debt and lenders receive bendETH which is an interest bearing ETH. Accepted NFT collections as collateral include Bored Ape Yacht Club, CryptoPunks, Azuki, Mutant Ape Yacht Club, Doodles and CloneX. There is 84,573 ETH (roughly $240 million) locked in the Bend DAO protocol. 

The borrow rate is dynamic based on the utilization rate. High utilization rate means that there is little capital available to be lent out. This will lead to a high borrowing rate. The borrow rate can range from 3% to 118%. Currently the borrowing rate is at 15.52%, however, even borrowers are earning money as they are rewarded with BEND tokens (43.16% APY) that exceeds the borrowing cost. Bend DAO’s collateral ratio is set in between 30% - 40% based on NFT collections. The liquidation rate is set at 90% for all collections. Liquidations are triggered when a ‘health factor’ goes below 1. The health factor is calculated as follows: (floor price * liquidation threshold) / debt with interests. Borrowers are given 48 hours to repay the outstanding debt in case of liquidation. If the borrowers fail to repay in time, the NFTs go to auction. The NFT owners can still repay during the 48h auction period. 

There are a few reasons why Bend DAO mint a boundNFT to represent debt - 1) to protect NFT owners from hacks as boundNFTs are non-transferable and non-approvable 2) to enable users to use boundNFTs are their social media profile as they have the same metadata and token ID as the original NFT 3) and enable boundNFT owners to claim third party NFT rewards and airdrops while their original NFTs are still used as collateral for loans. 

The native toke of Bend DAO is BEND, and the market capitalization of BEND stands at $372 million. The total supply of BEND is capped at 10 billion. Of those 10 billion BEND tokens, 31% is allocated to the DAO treasury, 48% to the community and 21% to the team. 5% of the total supply will be airdropped and read this to see your eligibility. It is claimable until June 18th 2022. 10% of the total supply is allocated to the Initial Fair-launch Offering. The price of BEND for the fair launch is set at 0.000003 ETH/BEND. The spot price of BEND now is 0.00001267 ETH/BEND. Bend DAO adopted the famous ve-nomics. BEND stakers get veBEND and it is the veBEND that allows holders to vote on governance proposal. veBEND holders also share 100% of the protocol income. Apart from the lending/borrowing rewards and protocol rev share, BEND has been handsomely rewarding Uniswap v3 LPs. The average APY of the BEND/WETH pool in the past 7 days is almost 600%. 

Bend DAO has become an influential protocol in the NFT space in a short period of time, now being the biggest holder of BAYC. As we are in early days of this project, there are various yield opportunities in BEND. It will be interesting to see how the project sustains its users and onboard more projects and expand.


JPEG’d is a lending protocol that lets NFT holders borrow a synthetic stablecoin PUSd by depositing their NFTs as collateral. Think of this protocol as Maker DAO but NFTs. The JPEG’d lending vault went live last week and currently the only whitelisted NFT collection is CryptoPunks. The team will soon launch vaults for Bored Ape Yacht Club and Azukis. How each collection’s price is calculated may differ and can be determined by governance. So far, 75 Punks have been deposited and each of them are valued at floor (currently 64 ETH). Thus the current TVL of the protocol stands at roughly $13.69 million. 

The borrow rate and withdrawal rate are set at 2% and 0.5% respectively, and users are allowed to draw up to 32% of their collateral value. Once the borrow rate exceeds 33%, their deposited NFTs will be liquidated. However, users can optionally buy an insurance (5% of the borrowed amount) to have their NFTs repurchased after paying all outstanding debt and a 25% liquidation fee calculated based on the outstanding debt to the DAO within 72 hours. Alternatively, JPEG Cards - meme NFTs that capture defining moments in crypto - that has cigarette attributes could be staked to earned boost on credit limits. 

The governance token of the protocol is JPEG, and the total supply is capped at 69.42 billion. 35% is allocated to the DAO, 30% to the token donation event, and 35% to the team and advisors. The token donation event took place in Feburary and the event participants donated ETH or USDC in return for JPEG tokens. A total of $72.44 million has been donated at a price of 0.003478 USD/JPEG. The price of JPEG reached its ATH of $0.0074 during the mini bull run in early April. It is now trading at $0.003051, lower than its donation price. 

The JPEG’d team are exploring various means to bootstrap JPEG liquidity and to increase the usability of PUSd. The TVL of the WETH/JEPG pool of Sushiswap is over $30 million and the current APY is 17% (trading fees + SUSHI rewards). The team launched a bonding programme in partnership with Olympus DAO to offer discounted JPEG tokens to users who deposit into the WETH/JPEG pool on Uniswap V3 via Sorbet Finance. The team is also competing to launch a token reactor on Tokemak, a liquidity router, of 50+ projects looking to launch their token reactor, Tokemak is currently ranked at #7. Top 5 will get liquidity reactors and the vote to select the top 5 is currently live here. The utility for PUSd is somewhat limited at the moment. The team deployed a Curve pool that consists of PUSd, DAI, USDC and USDT. 

The project’s future will depend on the ability to de-risk changes in NFT prices, whitelist new NFT collections and expanding yield generating opportunites for PUSd. 


NFTX creates liquid markets for NFTs. NFTX pools NFT items in a vault and one vault exists per one NFT collection. When a user deposits an NFT into a vault, this mints a fungible ERC-20 token that can be traded on exchanges. For example, when a user supplies a cryptopunk NFT, the user gets back an ERC-20 vault token PUNK. PUNK can then be sold on Sushiswap. Or, if a user wants to buy a cryptopunk NFT, he/she can go on Sushiswap and buy PUNK and redeem a random NFT from the very collection for a fee. The user can select a specific NFT from the vault for an additional fee. Users can now swap an NFT for a different one in the same vault. The mint, redeem, swap fees range from 0% - 10% depending on the vault. There are more than 300 vaults (collections) available and there is more than $17.6 million in TVL. Vault fees are all paid to users who stake their SLP against the vault, in the vault tokens. NFTX also introduced inventory staking which allows users to deposit NFTs to NFTX vaults to earn vault yield without having to provide liquidity (vault token - ETH).  

NFTX’s ‘flagship’ vault token $PUNK has been recently adopted across many projects. Via Vesper Finance, users can deposit DAI and earn PUNK. A crypto index provider Index Coop that is behind popular indexes like DPI (DeFi Pulse Index) and MVI (Metaverse Index) launched an NFT index called JPG and $PUNK has been chosen to be one of the constituents.

NFTX is a governance token of the NFTX platform and has a total supply of 650k. 60% of the total supply was distributed during the community raise. NFTX lost 5.7% in the past 7 days. Following the price dip, the RSI and RVI are at 38 and 46 respectively. NFTX is one of the earliest projects to give liquidity to NFT holders, but now it faces a lot of competition. While NFTX has a lot more options for users in terms of supported NFT collections, it would be interesting to see how NFTX keeps innovating its service offerings. 


NFT20 enables a creation of liquid NFT markets by tokenizing NFTs as ERC20 derivatives that represent the NFTs. These ERC20 tokens can be traded on decentralized exchanges or can be paird with other tokens to earn trading fees on DEXes. NFT20 works similarly to NFTX. However, unlike NFTX that allows users to redeem a random NFT from a pool, NFT20 allows them to select a specific NFT. Owners of the NFTs that have higher value to respective to collection’s floor price, they can create a decentralized ductch auction to get a fair amount of the ERC20 token that the NFT items deserve.

MUSE is a native token of the NFT20 platform and has a $4.8 million market cap. This is less than 10% that of NFTX’s. The total supply of MUSE is 1 million and currently half of it is circulating. 50% of the total supply has been distributed to participants of the VeryNifty gaming ecosystem, 10% to the treasury, 10% to the team and 30% to the community as liquidity incentives. MUSE stakers share the protocol fee of 5% of the deposit fee. NFT20 also has a wide range of NFT collections like NFTX does, but at a smaller overall scale. However unlike NFTX that does not share its revenues, NFT20 does.  

Written by Jessica Kang for Novum Insights.

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