In the ever-evolving landscape of decentralized finance (DeFi) and non-fungible tokens (NFTs), NFTFN is pioneering a groundbreaking financial instrument: NFT-indexed perpetual contracts. This innovative approach merges the burgeoning world of NFTs with the dynamic mechanisms of traditional finance, offering traders a novel way to engage with digital assets. This blog post delves into the concept, creation, and trading of NFT-indexed perpetual contracts on NFTFN, highlighting the strategic decisions that underpin this revolutionary offering.
NFT-indexed perpetual contracts are a fusion of two cutting-edge financial concepts: the perpetual contract, a staple of cryptocurrency markets, and the NFT index, a composite of selected NFT assets. These contracts allow traders to speculate on the future value of a basket of NFTs without the need to directly own or transact individual NFTs. This concept was born out of the recognition that while NFTs represent a significant innovation in digital ownership and art, their market remains fragmented and highly volatile.
The selection process of certain blue-chip NFTs is rigorous, involving multiple filtering stages to ensure that only the most valuable and high-quality projects are included in the final index. Please look at the diagram below to see the NFT selection process.
Step 1: The process begins by collecting data from Opensea APIs and sorting the top 100 projects based on trading volume.
Step 2: This data is fed into a database and actively filtered based on various criteria, such as
Step 3: Next, we employ a 3rd party data vendor - BitsCrunch - to conduct an additional ‘Quality Filtration’ using Wash Trading Score and Collection Score as criteria to narrow the list of NFT projects further.
Step 4: The final selection of premium Blue-Chip projects is done based on all these filters and added to our NFT index.
Overall, this selection process ensures that only the most valuable and high-quality projects are included in the final index, providing investors with a reliable and trustworthy index of blue-chip NFT projects.
Once the assets are selected, the next challenge is determining their weighting within the index. NFTFN opted for a neutral market approach, which adjusts the weight of each NFT to be equally important in the index. This method ensures that the index accurately reflects the market dynamics of the NFT space. We ensure that the market can see this index as the VIX of the overall NFT market.
The backbone of NFT-indexed perpetual contracts is smart contract technology. NFTFN developed sophisticated smart contracts that automate the issuance, trading, and settlement of these contracts. A key decision in this process was ensuring that the contracts were both flexible and secure, capable of handling the complexities of index-based trading while protecting users' funds.
One of the primary goals of NFT-indexed perpetual contracts is to enhance the accessibility and liquidity of the NFT market. By trading contracts based on an index rather than individual NFTs, traders can gain exposure to the NFT market's growth potential without the need for significant capital investment or in-depth knowledge of individual NFT projects. NFTFN's decentralized order book further enhances liquidity, providing a seamless trading experience.
Trading NFT-indexed perpetual contracts comes with its own set of risks, primarily due to the volatility of the NFT market. NFTFN addresses this through a comprehensive risk management framework, including responsible margin requirements and automated liquidation protocols. These measures are designed to protect both the trader and the platform from excessive losses in rapidly changing market conditions.
NFT-indexed perpetual contracts represent a significant leap forward in the trading of digital assets, offering a bridge between the traditional financial world and the innovative realm of NFTs. Through careful asset selection, strategic index construction, and the use of advanced smart contract technology, NFTFN is not just facilitating a new way to trade NFTs but is also contributing to the maturation and stabilization of the NFT market. As this market continues to evolve, NFT-indexed perpetual contracts stand poised to become a key instrument in the portfolio of modern traders, democratizing access to the vibrant world of NFTs.
Ready to trade your favorite NFTs? Take a position at NFTFN.xyz now!
Note: This article is intended for informational purposes only. It should not be construed as an invitation or recommendation for any kind of investment in $NFTFN. Readers are advised to conduct their own research and seek professional advice before making any investment decisions.
About NFTFN:
NFTFN is a pioneering Perpetual platform, envisioning a comprehensive hub for perpetual trading, aptly named "Trade Everything Perps."
Our mission is to establish a universal perp trading platform that transcends traditional boundaries, catering to a diverse range of asset classes, including NFTs, Cryptocurrencies, Ordinals, RWAs, and beyond.
Socials:
Website - https://www.nftfn.xyz/
Discord - https://discord.gg/TzUHyqc5sw
Twitter - https://twitter.com/nftfnofficial
Telegram - https://t.me/nftfnofficial
.png)
Building Web3 Financial Products
NEVER MISS ANY UPDATE ABOUT US BY SUBSCRIBING TO OUR NEWSLETTER
.svg)
.svg)
Building Web3 Financial Products
NEVER MISS ANY UPDATED ABOUT US BY SUBSCRIBING TO OUR NEWSLETTER
.gif)
