Over the past years, decentralized finance (DeFi) and non-fungible tokens (NFT) have become the most popular verticals of the blockchain industry. These sectors have been revolutionizing the finance and investment industry, with US$109.39 billion total value locked on DeFi and US$336.6 million sales on NFTs. These numbers keep growing along with these markets.

Because of the increasing usage of both of these verticals, it’s not surprising that they can go hand-in-hand. Moreover, with DeFi amplifying the use cases of NFTs, we can expect more innovations from these.

In the latest episode of the Human and Machine podcast, we interviewed three of the hottest projects that are transforming DeFi and NFT: Wilson Wu, Head of Asia at Avalanche Network, PARSIQ CEO Tom Tirman, and Sarutobi, Director of Partnerships at Yield Guild Games (YGG), came to the show as a guest. This article will summarize important points that were discussed in this panel discussion.

DeFi and Play2Earn

A typical case of the integration of DeFi and NFT is Play2Earn, an excellent concept pioneered by Axie. Now, this concept has attracted more and more people's attention, and people who are not in the crypto field are also beginning to be interested in it. NFT as an in-game asset may help users earn income by playing games.

So, this brings up another problem-how do people rent props without risk or collateral. This is where IQ protocol comes in. "Because many assets are costly, people who play games may not be able to afford five-figure NFT assets, and people who own these five-figure assets may not necessarily be gamers," shares Tom Tirman. At this time, DeFi has become the perfect solution to this problem-users can lend or borrow capital for these assets.

Playing with an economy in place

Sarutobi believes that it is normal for Axie prices to remain high. The play-to-earn economy is essentially the real economy. Therefore, finding a balance between asset inflation and correct pricing is the key to lowering prices. Price increases are also natural. This phenomenon is not always completely negative but only indicates a potentially great demand for assets by users. As the number of users increases, some games will be open to players for free. But even free games are profitable for players because these games can attract more players and drive the traffic of paid games.

Of course, high-threshold games are also indispensable. “It is like a core component of viability and a basic economy,” says Sarutobi. “There is currently no company in the industry that can attract users to participate in crypto projects more than Axie. YGG aims to become the largest play-to-earn blockchain game union; they will invest in NFT assets in a variety of different games and allow community members from all walks of life to use these assets to invest in digital assets and enter the crypto world.” In a sense, this is significant work, and in the future, it will also merge with the developing metaverse.

The underlying driver of NFT games

The main advantage of Avalanche is that it is not just a chain; the key is its decentralized distributed system. Avalanche is like the core chip that drives the performance of mobile phones. It plays the role of the bottom layer and aims to provide users with infrastructure. Thus, when people play these games; they provide them with a smooth experience. The most important thing is that Avalanche can support NFT games, with significant advantages over traditional game companies.

Wilson Wu believes, “Developers can use Avalanche to implement NFT-related projects. It’s just a matter of time.” Wilson Wu has worked in traditional financial markets for more than 15 years and has conducted in-depth research on financial markets. He joined the crypto market in 2018 and, by chance, realized that Avalanche is a high-performance, high-security index, and scalable smart contract platform. In the context of the expensive transaction fees and slow transaction speed of Ethereum, a platform that provides fast transactions will become a hot spot in developing blockchain transaction technology in the future. At present, Avalanche has expanded its market to five Asian countries and has more than 25,000 members.

Speaking of "how does Avalanche support "hundreds of millions of transactions,” Wilson believes that Avalanche's three chains are sufficient to support a huge user transaction volume. X chain is used for asset creation and transfer, P chain is used for platform and pledge, and C chain is responsible for executing smart contracts, where the X chain and P chain adopt the Avalanche Consensus which the core philosophy is ‘metastability’, as well as uses Directed Acyclic Graph (DAG)for organizing data processing and storage, thus Avalanche is proud of processing such enormous numbers of transactions -- as fast as 0.8 seconds. Therefore, Wilson pointed out that the system will not crash even if the transaction volume is huge.

Do borrowing and lending NFT require collateral?

Tom Tirman pointed out that borrowing and lending NFTs do not require collateral, custody, or even intermediaries, and they can rely solely on smart contracts. The working principle of the IQ protocol is: the asset owner puts the asset into the smart contract, the rental fee is fixed, the lessee can pay the fee and obtain a wrapped and expirable version of the asset. Therefore, the owner has no risk and does not need collateral. The only challenge is that these games, apps, DApp games, and projects must support the wrapped version to run as before.

PARSIQ allows everyone to monitor any large-scale events across different blockchains in real-time and connects them to any centralized part of their products so that any application-designed API can process data and make it as fast as possible. Thus, the speed is delivered to users while saving costs. The team is working with many DeFi and NFT projects to provide infrastructure for them. In addition, the IQ protocol allows people to rent expirable versions of existing digital assets, including homogenized tokens and non-homogeneous tokens.

The future of integration of NFT and DeFi

The value of the digital currency in the virtual environment is an essential element of the game, and it has always existed since the very early RPG. In Sarutobi's view, for ordinary users, games are a very suitable UI for hiding DeFi. Many players who play Axie don't realize that they are participating in DeFi. The game allows crypto to be quietly integrated into players' lives, making NFT "something that people don't even need to be aware of."

NFT is just another form of currency in the game, characterized by being built on the blockchain. Over time, especially with the continuous development of Metaverse, many blockchain technologies and DeFi, and even NFT itself will be hidden behind the icon.

Axie’s creation of the concept of “playing and earning” can be said to be the realm that gamers dream of. At the same time, digital currency is also a scene that gamers are familiar with. This will be more friendly and beneficial to users who are afraid of complex DeFi concepts. The integration of NFT and DeFi is booming. In general, a decentralized blockchain network is very suitable for value transfer. The challenge it will face in the future will be to optimize the user experience to make it more seamless, capable of cross-chain operation, and reduce the learning curve.

About PARSIQ

As a multi-level bridge between blockchain and off-chain applications, PARSIQ is a blockchain monitoring and workflow automation platform. PARSIQ technology is a proprietary ParsiQL programming language that allows users to monitor and interpret the endless data flow on the blockchain while monitoring the wallets of traders and ordinary users.

About Yield Guild Games

Yield Guild Games is an NFT decentralized autonomous organization that mainly helps investors gather assets and bet on NFT profits, and ultimately share the benefits with supporters. Currently, YGG is mainly focused on investing in NFT games.

About Avalanche

Avalanche (AVAX) is a new platform of Ava Labs, which allows anyone to easily create multifunctional blockchains and decentralized applications (dApps). It uses various innovations to overcome some of the shortcomings of early blockchain systems, including short transaction times, centralization, and scalability. It is a unique Avalanche consensus system that promises low latency, high throughput, and 51% attack resistance.

About Human and Machine

Looking for different ways to make complex knowledge available to the average person, Hikaru AKA The Very Boring Machine and Tlahui AKA The Very Average Human have joined forces to develop a podcast that simplifies various new DeFi Projects. Hikaru and Tlahui take advantage of their massively different personalities to try injecting a human touch and sense of humor to what is otherwise technical and challenging to understand. Through this 30-minute podcast, they interview CEOs or co-founders of DeFi projects and try to get simplistic answers. So simple that even Tlahui understands—sometimes.