The narrative which pervaded much of the last bull run centered around scalability issues as both Ethereum and Bitcoin experienced congestion as their popularity increased. The main problems were the speed and cost of transactions.
Without addressing scalability, the concept of mass adoption was dead in the water for cryptocurrency. Solutions such as the development of the Lightning Network for Bitcoin helped its rollout as legal tender in El Salvador. For Ethereum, it was a combination of roll-ups, sidechains, and sharding that helped to maintain its growth.
Whereas Bitcoin’s surge was driven by its notoriety as the most popular digital asset, Ethereum’s congestion issues were due in large part to the explosive growth of NFTs. As Ethereum transitions to proof-of-stake and Cardano undergoes the Vasil hard fork update we can see that blockchains are presently gearing up for greater adoption.
At Paribus we recognize that a critical aspect of the next bull run will be the desire of many people to unlock the liquidity they’ve stored within their NFT collections. At the moment due to the bear market and macroeconomic factors, NFTs are cheap in comparison to their future values in the years ahead. For the collectors who want to keep their prized NFTs as long-term investments the only way to leverage them is to use them as collateral.
Of all digital assets, NFTs are by far the hardest to relinquish because of their unique nature. The individual traits that characterize each NFT make them especially treasured by their holders and also complicated to assess as a form of collateral.
To solve the problem for both the holder of the NFT and the borrowing and lending platform we’ve taken an incredibly pragmatic and forward-thinking approach. Some platforms base their valuations on users’ opinions or best guesses as to the value of each NFT but this is time-consuming and inherently unreliable.
In order to scale NFT lending and borrowing the crucial factors will be speed and adaptability. To solve this problem we’ve had to simultaneously develop both a borrowing and lending platform as well as the unique infrastructure needed to automate NFT valuations. As this has never been done before it has been a challenging and incredibly rewarding process.
As Deniz, our CEO explains, “The development front for Paribus is going as well as anyone could reasonably expect. Our development team divides the work into groups, this gives us the ability to accomplish multiple tasks at a time. The borrowing and lending aspect of our platform has been largely working from known systems. The novel development we are accomplishing is on the NFT valuation algorithms. This has been a challenging task but one that we have been making impressive progress on.”
Given that both Deniz and our CTO, Simon have extensive experience in computer science and software development it seemed logical that we’d follow the machine learning approach to solving the valuation problem. Through the development of a proprietary algorithm, we can leverage artificial intelligence to gather and assess different datapoints and arrive at valuations quickly.
When using human intelligence to discern the value of a particular NFT, be that through a peer-to-peer system or a voting system, you introduce human frailties such as bias and increase the time taken to reach a valuation. Alternatively, some platforms just take the floor value of an NFT collection which places them at a significant disadvantage to platforms that can offer a more realistic price for rarer NFTs.
All of these factors increase exponentially when you take into account the likely cross-chain landscape of the next bull run. As such the only logical choice was to develop an algorithm to help automate the process.
As Simon describes, “The fundamentals of our NFT algorithms are designed to be multichain. There will of course be some required adjustments when using the code for various chains. Additionally, every NFT collection within the same chain will likely be unique, allowing us to take into consideration all the individual reasons for the value of that particular NFT.”
The other crucial factor for scalability is teamwork. It’s clear that to accomplish such a monumental task depends upon many great minds working together which is why we sought to align ourselves with strategic partners. What grew out of this wish was the development of an NFT Consortium to help stabilize and develop our NFT valuation service.
As Wilson, our COO explains, “We are continuing to grow and strengthen our NFT Consortium. This alliance will help make our NFT price valuations more accurate by cross-referencing the value of a certain NFT against the other members’ stated value. As we continue to develop our models and share the information between our consortium, we will be better able to accurately predict and understand NFT prices, giving us insights that could be incredibly beneficial in the future.”
In addition to strengthening our relationships with industry partners, we’ve also been focused on building our community through continued updates, town hall AMAs, and articles. As the age-old proverb says, “If you want to go fast, go alone; if you want to go far, go together.”