NFT finance Leveraging Non-Fungible Tokens

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NFT finance Leveraging Non-Fungible Tokens ( nft-finance-leveraging-non-fungible-tokens )

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Chapter 1 Introduction 1.1 Blockchain In 2009 Satoshi Nakamoto published the Bitcoin white paper and introduced the idea of an online payments system which facilitates transfer of funds from one party to another without the need of having a centralised financial institution.[1] To achieve this, it uses a peer-to-peer network which validates transactions based on an agreed consensus algorithm known as Proof-of-Work and proposes an alter- native to traditional payment systems. In the following years other types of blockchains have been developed in or- der to improve on or showcase a different implementation to Bitcoin. One project that we will particularly focus on is Ethereum which introduced the idea of "smart contracts". In 2013 Vitalik Buterin published the Ethereum white paper which proposed a blockchain with a built-in Turing-complete programming language that can be used by anyone to program any asset stored on this peer-to-peer network. The code that gets executed is called a "smart contract" and led to the development of many decentralized applications. [2] The DApp (decentralized application) space saw a boom in 2017 with many companies launched an ICO (initial coin offering) to raise capital and sell "shares" in the form of Ethereum tokens. This was conceptually similar to an IPO (initial public offering), albeit done in the early stages of the project, without having any users or even a working prototype. By overpromising the possible applications of blockchain at that time, many ICOs failed to deliver on their promises or to attract users. Within a year nearly half of the projects that raised money using an ICO were closed and the price of cryptocurrencies dropped sharply. [3] 1.2 Motivation One of the first types of useful projects to emerge from this crash were the DeFi (decentralized finance) projects which are leveraging the opportunity to replicate traditional banking ideas and solve its shortcomings using blockchain technology. Derivatives, lending platforms, decentralized exchanges and more, have all been part of the DeFi revolution. [4] 5

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