Non-fungible tokens, often known as NFTs, need no introduction at this point. These digital treasures, which are a byproduct of blockchain technology, have risen to prominence as digital diamonds, presenting enormous new prospects in art, entertainment, and gaming.
Even though NFT sales are surging, financial experts worldwide are still disputing whether these digital collectibles have any practical applications. Most NFT projects haven’t been able to provide any use-cases for “JPEGs” to their satisfaction. The SYNC Network, on the other hand, is altering this for the better.
The SYNC network is actively transforming the DeFi ecosystem and reinforcing the presence of NFTs in the financial markets by merging NFTs and DeFi.
Introducing CryptoBonds, a New Crypto Asset Class
SYNC Network is an Ethereum-based platform that has launched CryptoBonds, a new asset class in the DeFi industry. CryptoBonds are time-locked NFTs with an ERC-721 contract that produce rewards for their holders. Okay! But, what exactly are they used for?
These NFTs are used to give liquidity to decentralized exchange protocols in simple terms. In today’s DeFi ecosystem, liquidity mining is perhaps the most popular incentive method. Investors utilize it to earn yields on their digital assets, while projects rely on it to create liquidity for users and keep their platforms running.
This incentive scheme contributed significantly to DeFi’s growth, but it is also to blame for the market’s instability. Why? Because investors have the ability to withdraw funds at any time, there is a sudden shortage of liquidity, price swings, and the failure of promising businesses.
CryptoBonds come into play in this scenario. This new asset class effectively preserves liquidity in DEX protocols while guaranteeing that long-term investors are fairly compensated for their contributions.
Let’s take a closer look at how CryptoBonds maintain liquidity and stability below the surface.
CryptoBond
The liquidity provider tokens (LPTs), SYNC tokens, and the NFT highlight artwork are the three major components of a CryptoBond. The artwork is generated uniquely for each new CryptoBond by an algorithm, and the NFT highlight is what gives CryptoBonds rarity and tradability. LPTs are the liquidity pair staked on the DEX protocol, whereas SYNC is the platform’s native token, which is locked in the CryptoBond with LPTs.
To build a CryptoBond, a user must go to a DEX protocol on the Ethereum network, such as Uniswap, and stake a trading pair in order to receive LPTs. The LPTs are then paired with an identical quantity of SYNC tokens and tied to an NFT highlight and CryptoBond ID to construct a CryptoBond on the SYNC platform.
Every CryptoBond has a lock period that can be anywhere from 90 days to three years long. During this time, investors will be unable to access their crypto holdings. However, because the bond is a rare NFT, it can be traded as a whole on NFT exchanges if the investor wants to get out of their stake before it expires. The entire ordeal occurs without disrupting the DEX protocol’s liquidity.
Liquidity provision on the DEX and interest on the SYNC component of the bond generate money for CryptoBonds. When the NFT matures, it is burnt, and investors receive all of the money and locked SYNC tokens and newly mined SYNC tokens, resulting in a far better yield than traditional liquidity mining. For context, the value of the 1,800 CryptoBonds generated thus far has increased by an average of over 203 percent, easily covering the recent crypto slump that caused SYNC to drop by 75 percent. The bigger the yield, the longer the lock is open.
A Wide Range of Use-Cases
The dispute over whether or not NFTs are helpful may now be put to rest thanks to the advent of CryptoBonds. NFTs are now being used in the DeFi ecosystem to produce liquidity and preserve stability and prevent risk. Pump-and-dump situations may now generally be avoided, safeguarding good developments. Aside from that, their scarcity makes them one-of-a-kind collectibles that can be traded for profit on NFT marketplaces. In the DeFi ecosystem, CryptoBonds can also be used as collateral for obtaining loans.
SYNC Network provides a peer-to-peer lending tool that uses CryptoBonds as collateral. The loan’s duration and interest rates are flexible and agreed upon by the borrower and lender. Additional promissory note NFTs are available on the platform, which can be sold on NFT marketplaces to allow the lender to recover their funds before the loan expires.
In short, this innovative platform can transform NFTs and the way the world perceives them completely. With $6 million in crypto secured across 1800 bonds, the project’s grandiose aspirations have already earned it a substantial success. This project’s future looks bright, and the team feels it has the potential to become DeFi’s stability standard.