Introduction:
The aim of Catalyst is to revolutionize the NFT market, this is a simple phrase that can have so many different meanings. The NFT market we have now is working for our relatively small community, it is composed of many different markets, sectors and even chains. For a 30B dollar market though; we are suffering from growing pains that will severely limit the market from crossing the 300B or 1T dollar mark. This is where Catalyst aims to help, by bringing DEFI to the NFT space to create synthetic derivatives. These derivatives will encompass many different markets and across chains to justify valuations and create a thriving NFT market.
Derivatives in Traditional Finance:
Derivatives are crucial to every mature financial system, these systems are built of financial markets which are all about risk; every transaction comes with a degree of risk. Professional market participants (traders, banks, investment firms) are always searching to offset risk in order to prevent financial disaster. Derivatives allow for market participants to manage their risk by limiting potential returns and losses.
The typical market ratio between money/debt/derivatives is 1/10/100 for traditional finance. Derivatives are the largest financial market, they’re so large it is actually difficult to determine the size but is estimated to be between 10–20 trillion. The crypto industry as a whole is actually very strange due to its inverse relationship with derivatives, although it has achieved a 2 trillion dollar market cap the derivatives market is almost non-existent comparatively. This leaves the door open for crypto derivatives to push the boundaries of the crypto market even further.
The Merger of DEFI and NFTs
Catalyst is a DEFI protocol that enables the creation of synthetic derivatives called Lysts. Our Lysts will mimic the price behaviour of NFTs being sold in a market. This method will work similar to how Mirror Protocol and Synthetix are able to create synthetic stocks on-chain without actually owning any of the stocks being represented. Currently, Catalyst users can lock testnet ETH as collateral, you are then able to mint up to 50% of your collateral value in Lysts. This newly minted Lyst can then be sold to short the market or added to a liquidity pool (50%ETH/50%dAsset) that will allow others to trade on AMM exchanges such as Uniswap. By providing liquidity to pools you are then rewarded with our Lyst token which can be staked to earn voting rights and to receive a percentage of fees generated form the protocol
NFT Derivatives
Catalyst’s NFT derivatives will emulate those seen in traditional finance but our DEFI protocol will give us greater flexibility and transparency to create more powerful assets. Currently, we are developing assets that will track the value of NFTs being sold in markets such as Art, video games, and metaverses. Specifically, our dLand asset tracks the median value of land being sold in decentraland. dLand provides exposure to the virtual real estate market without having to purchase individual land, lowers the barrier of entry and allows for anyone to hedge risk by shorting the dLand token. As we continue to develop a suite of NFT assets across different marketplaces, our assets can create a baseline pricing for the market as a whole that will allow for more powerful financial tools to be created. For example, we plan to enable collateralized NFT loans to provide NFTs with an immediate value proposition which only exists in a limited capacity now.
Revolutionizing the NFT Market to create a better World
At Catalyst, we believe that a thriving NFT market will change the world we live in, this means more people creating art, playing games, and building worlds. These creators will be able to earn compensation for their work, maintain ownership rights, earn royalty payments and a successful NFT market means more successful creators. We believe that we can be the catalyst that creates a sustainable market for everyone to participate, a platform built from the ground up to create value, not to extract it from the market.
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Properly Protocol rebranded to Catalyst in May.
