Astariaa decentralized finance project co-founded by ConsenSys and SushiSwap alum Joseph DeLong, raised $8 million in a round that included True Ventures, Arrington Capital, Wintermute and more.
The platform will allow holders of valuable non-fungible tokens to lock them up as collateral and borrow crypto against these NFTs, so they can buy other NFTs, as well as trade and invest in decentralized finance (DeFi). For borrowers, liquidity is instantaneous and liquidations more predictable.
why is it important:
- Astaria should launch in the third quarter, according to the project. He demos on June 22 at the “NFT.NYC” event.
Driving the news: Amid a brutal downturn in all things crypto, a lot of the air was taken out of the NFT market. But Astaria’s fundraising success suggests the sector’s obituary may have been written prematurely.
There is still a lot of wealth trapped in non-fungible tokens: Volume has fallen significantly in the NFT market, but it certainly hasn’t gone away, Bram said.
- Lending against NFT allows holders to access this wealth and put it to work, but there is still a lot of turmoil in the industry.
- Currently, at least one major hedge fund, Three Arrows Capital, is get called marginand it probably sells a lot of extremely valuable NFTs as it goes.
- Still, “with our system, they wouldn’t have to default,” said DeLong co-founder Justin Bram. In theory, they could instead access some of the value of these NFTs with loans.
There are many normal people who could also benefit from it. “A lot of these people who hold apes are NFT-rich and cash-poor, and we want to fix that,” DeLong said, referring to the Bored Apes Yacht Club, the the most precious only NFT collection in the world today).
Situational awareness: Decentralized finance and NFTs have been dance around each other since at least 2020and Astoria isn’t the only company entering the NFT lending space, but it believes it can significantly advance the product for users.
- “We believe this will add rocket fuel to the NFT industry,” DeLong said.
- Previous participants include: NFT fi, JPEG and Metalend.
Astoria uses a rating system, where a knowledge worker writes a term sheet about an NFT that reflects its particular characteristics. The appraiser decides the amount that can be lent against the NFT, the term of the loan, the interest rate and can even work out special conditions.
- If investors like the term sheet, they can post assets for borrowers. If the borrowers like it, they can accept the loan.
- Performing loans will generate income for appraisers, so they will be incentivized to write terms the market will like.
Astaria has also designed special features so that borrowers can still “use” their NFTs somewhat, if something special comes up (like accessing a party or unlocking a gift for holders).
Be smart: Price discovery in NFTs is very tricky. Not all Bored Apes are the same (not even close), for example.
- As DeLong explained, if you have 100 NFTs and someone buys one for a million dollars, that certainly doesn’t mean you have a 100 million dollar collection.
Reality check: It’s a complete bear market in crypto and future growth looks risky at best. So, this might seem like a crazy time to build a business around loans for JPEGs.
- But the Astaria team envisions in three to five years the next generation of NFTs that do much more than the first versions.
- “We are very focused on the long game,” Bram said.