NFTs, DeFi and Real Estate

Can crypto ever solve the non-fungibility problem?

It has always been evident to me that convergence between NFTs and DeFi would eventually happen. I feel that the interfaces and protocols are getting to the point where we’re ready to see a Cambrian explosion of apps like we saw in 2020, because the building blocks are there.

Sudoswap is an automated market maker for NFTs. It can be understood as a decentralized version of OpenSea combined with Uniswap.

It allow for creations of pools with NFTs on one side, liquid tokens on the other side.

Everything is on-chain, so the potential for composability, i.e. to use the Sudoswap infrastructure to build other apps in a decentralized way, is real .

Since launch, both volume and users are growing in a hockey-stick fashion:

source: Dune Analytics

Blur is another tool (still in beta) that focuses on the heavy users: traders. It focuses on performance, aggregating multiple markets and making it fast and easy for traders to see the most relevant data in real time (disclosure: I’m an investor in Blur)

Now compare that to the OpenSea experience:

Feels like the difference between a professional trading interface and eBay, right?

Both Blur and Sudoswap account for the fact that Non-Fungible Tokens are, indeed, non-fungible. The uniqueness is recognized.

However, they both have this ingrained understanding that, while collections are very different, inside the same collection there’s much more semi-fungibility than non-fungibility. Particularly for floor on large collections like Bored Apes, Cryptopunks and other pfps.

From the DeFi standpoint, semi-fungibility is much easier to handle than non-fungibility. Leverage for NFTs is already happening (see NFTfi or JPEG’d), but have not quite reached the same point we are with fungible tokens.

But if ever get to a point where all the DeFi applications work for NFTs, I believe the real-world impact of what could come next is not to be ignored, because non (or semi) fungibility is still a problem in “real” markets.

Digressions on Real Estate

Some people treat Real Estate almost like art, assuming each house or building is entirely unique.

However, you can understand they’re part of a larger collection (a particular neighborhood, a particular category etc) and are actually semi-fungible.

Whole companies were build on that premise (like Opendoor) looking to apply quant-trading like statistical analysis to the real estate market, aiming to be a more efficient market maker than the current status quo — and still tbd if they’re a market maker or just a levered long player like previous (now failed) iBuyer experiments.

One of the issues with this electronic, scaled market making for real estate is that it’s very hard to account for particularities of each region, market and asset, without boots and eyes on the ground.

I wonder if we can use crypto incentives to get to a point where we could abstract the features of each piece of real estate: size, location, building quality, unique traits etc and trade everything on-chain, even if we still depend on a somewhat centralized layer.

Can I just make a collection offer?