Nick Emmons

Upshot is laying the foundation for the era of NFT financialization.  Our mission is to build tools that combine DeFi x NFTs in novel, powerful ways to create liquid markets for anything. 

To kick-start this journey, we have developed several tools that make it easier for developers to build on top of our platform. These tools include our [ML pricing models](https://upshot.xyz/post/how-upshots-ml-models-work), [API access to those pricing models](https://docs.upshot.xyz/docs), [the gmi wallet-scoring index](https://upshot.xyz/post/introducing-upshot-gmi) and a [marketplace aggregator](https://upshot.xyz/post/upshot-is-now-open-to-the-public).  Additionally, we have more tools like an NFT AMM, indexes, and lending coming soon.

It will take an entire community of developers to usher in the wave of NFT financialization, so we've compiled a list of 23 ideas that developers can create incorporating Upshot’s tools and data.

Whether you're a seasoned developer or just getting started, we hope these ideas get you excited to build the future of NFT financialization. So without further ado, let's dive into the list.

## DeFi x NFT Primitives

At Upshot, we give developers the tools to create more liquid markets for illiquid assets, allowing for more unique and expressive ways to interact with NFTs than simply buying and selling individual tokens. 

In the future, Upshot (and the entrepreneurs who build off our tools) will create markets where users can earn yield from their NFTs, short NFTs, leverage long NFTs, invest in a diverse basket of assets rather than an individual JPEG, and more. 

This section contains a list of financial instruments that already exist in the DeFi/tradfi world and could be built for NFTs using Upshot’s NFT appraisals as the underlying pricing logic. 

### NFT Synthetics

A synthetic asset is an asset that tracks the value of some other asset. 

All you need to create a synthetic asset is a pool of capital and a reliable price feed that updates consistently. Perhaps the most popular example of a synthetic asset is DAI, which is a synthetic asset that tracks the value of the US Dollar.

You could use Upshot’s appraisal feeds to create NFT synthetics for NFTs. Whether it be for a specific NFT, a specific trait, or a constructed basket of NFTs. For example, you could track a basket of clean CryptoDickbutts by using the appraisals of the clean Dickbutts included in the basket. Or, you could create a synthetic that tracks the average appraisal of the Hoodie trait in CryptoPunks.

Something to note is that as long as you have a “pool of capital” backing the synthetic asset, you could create the asset to track a basket of NFTs that you don’t necessarily own – making it different from simply pooling + fractionalization. 

### NFT Perpetuals

An NFT perpetual market is a market for buying and selling derivatives of a non-fungible token with a "perpetual" or indefinite lifespan.

 NFT perpetuals (or “perps”) enable traders to enter leveraged long or short positions in NFTs without the underlying NFTs needing to be involved in the process or held anywhere specifically at all. 

NFT appraisals could be used as the pricing mechanism dictating the value of perps. Similar to the NFT synthetics example above, perpetuals could be created on top of baskets of NFTs or specific traits to allow people to enter more exotic positions like going short on the “Beanie” trait in CryptoPunks.

### NFT Index Fund

Using our NFT appraisals and other novel NFT metrics, you can construct an investable index to track various collections or strategies based on synthetic assets rather than holding the underlying collateral. How you construct the index is up to you as the index provider. 

For instance, you could create an index that tracks the market cap of Punks, BAYC, Doodles, and Dickbutts, of 20 specific handpicked NFTs (even if you don’t own them) or an all-encompassing NFT index fund to give investors the ability to invest in “the growth of NFTs in general” as opposed to buying specific NFTs. 

### NFT-Backed Stablecoin

The first inklings of Defi were built by MakerDAO and the concept of locking collateral (ETH) into a vault and then issuing a collateral-backed stablecoin (DAI) to users. Maker has since expanded the collateral types in their vault to include other ERC-20 tokens, but not (yet) NFTs. 

With a reliable price oracle for NFTs, you could create a MakerDAO-style stablecoin backed by NFTs. You could use Upshot’s Chainlink adapter for bringing NFT appraisals on-chain and use those prices to monitor collateralization, manage liquidations, etc. 

There is more to consider with this idea around actual liquidity on the market because as users’ positions are liquidated, you will need to liquidate those assets on the open-market (which is usually quite illiquid). We have been doing some research here and will be releasing some work around liquidity scores, volatility estimates, and recovery rates soon. These new pieces of data will help but careful thought is still needed to design an NFT-backed stablecoin resistant to the woes of illiquidity.

### More Capital-Efficient NFT AMMs

As of now, NFT AMMs like Sudoswap, simply use a minimum floor price to enable NFT trading. This makes it less desirable for someone to deposit NFTs that are above floor into an AMM.

Using the Upshot Appraisal one could support the trading of more than just floor price by providing quotes and automated liquidity based on appraisals. 

### NFT Betting Platform / Prediction Market

Prediction markets and parimutuel betting markets are a great way to enable traders to “bet on their beliefs” and crowdsource information. 

It’s been difficult to build these for NFTs in the past, as creating a market with parameters like “will Mutant Ape Yacht Club have a floor above 20 ETH on February 21, 2023” can be easily gamed. (Vote “no” and then list a mutant at 19 ETH right before the market closes). 

However, using our ML-based appraisal system, you could instead create markets around the average appraisal price in the collection or other more stable metrics than simply floor price.

### Buy Now Pay Later NFT protocol

Buy Now, Pay Later (BNPL)  has become popular in e-commerce. The idea is similar to a credit card, only it is offered by the retailer where payment is split up into multiple installments. 

A protocol could be built to enable BNPL interactions with NFTs. Not only would such a protocol help buyers to add leverage to their trade, it would also open up the ability for the protocol or seller to earn some extra yield on top of their sale price. 

The terms of these transactions (interest rate, how much collateral is needed etc) could be governed based on the NFT’s appraisal value and the wallet's gmi score. 

## Better Bot Automation
Automating trades, price discovery, and more are key to running high-volume but less labor-intensive trading operations. As of yet, the lack of robust, accurate, and real-time data has limited most bots in the NFT space. 

### NFT Trading Bot

NFT trading bots already exist, but there is a lot of room for improvement. Currently, NFT bots tend to simply send low-ball offers and hope someone bites. If so, the bot then re-lists that NFT at the floor. 

Using Upshot’s appraisal data you could build a smarter (and hopefully far more profitable!) trading bot.  For example, you can build a bot that will buy any Crypto Dick Butt listed for 10% under its appraisal value and re-list at its appraisal value. 

You also often see holders of various NFTs who list their NFTs at floor price, even when they have an extremely rare trait or trait combination. You can leverage Upshot’s appraisals to find these deals and snipe them off the floor. 

### Instant NFT Liquidity Tool (i.e. “OpenDoor” for NFTs)

NFTs don’t provide instant liquidity. This can be frustrating. If you need to cash out quickly, your only option is to list below floor price and wait for someone to buy. If you need to cash out instantly, usually your only option is to accept a bid way below the floor price. 

OpenDoor is the idea of offering sellers instant liquidity, but for a fee. 

For NFTs, someone could create a site or smart contract that offers to buy NFTs at or near their appraisal price and then takes a fee in exchange for offering instant liquidity. 

### Discord or Twitter Bots

A Twitter or Discord bot could notify followers or a channel when a good deal appears, when an NFT with a specific trait gets listed, volume increases substantially, or when smart money is moving in or out of a collection. 

Developers could also build collection/community-specific bots for Discord and Twitter. 

Ex: Members of the BAYC discord could check the appraised value of their BAYC by simply typing, “ /appraise BAYC #192” within discord. 

### Market Maker Bot

With the rise of NFT AMMs like Sudoswap, capital can flow in and out of collections more freely. However, moving this capital about manually can be inefficient. 

A market maker bot could automatically provide liquidity to NFT markets across marketplaces and AMMs based on Upshot’s appraisals and a defined set of rules. 

### Distressed Purchasing Bot (Loan Liquidation Auctions)

When NFT loans get liquidated, the underlying NFTs that were used as collateral are auctioned off. Someone could create a bot that automatically bids at those auctions at or below the appraisal value. 

This would ensure that you could automatically buy distressed assets during a short opportunity window without overpaying. 

## NFT Lending

An improved NFT lending system could utilize two of Upshot’s products: Appraisals and gmi. 

The Upshot appraisals would be used to determine fair collateral terms for the loan. 

Upshot’s gmi index (a novel grading index for NFT wallets to determine the quality of a specific NFT trader) could be used or adapted to function similarly to a credit score in order to identify safe wallets and fair terms for a loan. 

### Peer-to-Peer Lending Decisions

An individual could use upshots data to better evaluate peer-to-peer lending decisions. They could evaluate the counterparty's risk using the gmi score, and decide on the value of the NFT as collateral using Upshot’s appraisal models. 

Similarly, a large capital allocator could create and fund a peer-to-pool lending protocol where liquidation prices are governed automatically by Upshot appraisal values. 

### Peer-to-Pool NFT Lending Protocol

An NFT lending pool, like BendDAO, could enable NFT loans without expiration dates and a more accurate liquidation system than simply floor price. 

By using Upshot Appraisals, mid-tier and grailed NFTs could obtain better loans based on the value of their more coveted NFT rather than the collection’s overall floor price. 

### Renting NFTs

NFTs are often used in play-to-earn blockchain games (Axie Infinity, Decentral Games etc.). These NFTs can be rented to other players or guilds for a period of time so that those who don’t outright own an NFT can still play the game. Also, many IRL events and conferences are gated by NFT access. 

Using Upshot’s appraisal model, a developer could build out an NFT rental market that sets rental prices based on the underlying NFT's appraised value. 

## Analytics, Data, and Media

Sites like Defillama, Nansen and more have created products and dashboards that are highly visited and even have paying subscribers.

Most NFT marketplaces have limited data beyond floor price and volume. Developers, blogs, and influencers could utilize upshots data to create targeted media and analytics tools for their followers. 

### Smart Money Movement Wallet Watcher

Using our alerts system, a community leader or bot could send alerts when wallets with a high gmi are buying NFTs in a certain collection or selling their NFTs from a certain collection. This can be a powerful signal for whether or not the broader community should be moving in or out of specific NFT positions and in what direction a collection’s price might move.

### NFT Deal-finder

A niche site that identifies, filters, and presents NFTs that are mispriced relative to their appraisals could build a “discount marketplace” where traders could go shopping for deals. 

### Wallet Discovery Tool

A list or searchable database of wallets to trade with. 

For example, Upshot has created a number of useful labels for wallets in the NFT space. One of those labels is “Usually accepts bids”. Aggregating those wallets, and their NFTs into one location could help traders make better buying and selling decisions. 

### NFT Smart Collector Airdrop/ Whitelist Tool

A wallet having a high gmi is meant to signify how competent of an NFT trader or collector someone is. It also acts as a useful signal for identifying which collections have strong communities. Collection creators (or token creators) could airdrop NFTs to or whitelist wallets based on their gmi scores. 

This could help a project gain exposure to influencers and whales. 

### Browser Extension to Help Create Accurate Listings and Bids Across Marketplaces

We've seen browser extensions in e-commerce, that will alert you of a lower price on Amazon before you buy at Walmart. Why couldn't that same concept apply to NFTs?

A browser extension that alerts you of the price of an NFT (or general collection stats) across marketplaces could be helpful for users so that they don’t have to visit multiple sites before making a purchase.

## DAOs and Capital Management

NFTs are sometimes the keys to DAO memberships. 

In addition to NFT-driven DAO governance, there are ways to use Upshot’s tools to improve how DAOs and other capital allocators manage their NFT positions.

### Appraisal-Weighted NFT Governance

Sites like Snapshot already let people vote based on their NFT token holdings. However, as of now - that voting system is either binary (1 vote per member) or weighted by quantity (2 tokens = 2 votes). 

A voting system could be developed with influence based on the value of someone’s NFTs instead of the number of NFTs they have. AKA, a grail should have more sway than a floor.

### Valuation Metrics for NFT Funds

NFT investment DAOs often pool many ERC-721 tokens together and then issue ERC-20 tokens to their investors. This is great, but because NFTs are not constantly being traded it is often difficult to determine the net asset value (NAV) backing the fund and therefore difficult to determine ERC-20 token price. 

This problem of valuing NFT holdings isn’t unique to DAOs. Any fund buying NFTs needs a reliable estimate of what their holdings are worth.

One could build a tool for this using Upshot’s appraisals and stand up part of a fund admin function specific for NFT investments.

### NFT investment DAO that Buys NFTs Autonomously

Similar to an individual trader, a DAO could pool together funds and run automated trading strategies based on a set of rules around list price and Upshot valuation metrics. This would make the investment decisions of the DAO faster and more transparent rather than discussing and voting on every trade. 

![Upshot 2023](//images.ctfassets.net/lhkcghnr8ql4/4i1M2xJbSGXpS9GHlO97SU/9bdc1f4e97f2293f5cedc6f83819d567/New__Years2-06.png)

## Conclusion: Building the Future of DeFi x NFT on Upshot

The DeFi x NFT market is picking up steam and will eclipse the DeFi and NFT markets on their own. At Upshot, we’re excited to contribute to and help define this emerging category. We invite developers from around the ecosystem to build on top of some of the tools that we created to help explore the full set of possibilities at the intersection of DeFi and NFTs. 

If anyone in the community is interested in building one of these ideas, or inspired to build one of their own ideas using Upshot, please don’t hesitate to contact us: 

Email: contact@upshot.xyz.
[Twitter](https://twitter.com/upshothq)
[Discord](https://discord.com/invite/upshot) 

We’d be eager to partner and offer support. 

Stay in the loop!

- Access our [NFT Aggregator](https://app.upshot.xyz/)
- Read through our [API Docs](https://docs.upshot.xyz/docs)
- Join us on [Discord](https://discord.com/invite/upshot)
- Follow us on [Twitter](https://twitter.com/upshothq)
- Subscribe to our [newsletter](https://upshot.xyz/) 


Upshot is laying the foundation for the era of NFT financialization and we're excited for you to join us. To ring in the 2023, here are 23 ideas that you could build using Upshot.

23 DeFi x NFT Ideas to Build on Top of Upshot in 2023

About Upshot