Parsing Object-Oriented Finance: An Emerging Vertical in the Crypto Market
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Parsing Object-Oriented Finance: An Emerging Vertical in the Crypto Market
AI-related compute DePIN appears to be in a favorable position and is poised to become the next major vertical.
Navigating Web3 tides with focused insightsAuthor: Niklas Polk
Translation: Airis, TechFlow
"It's like a ouroboros: the value of crypto tokens lies in your ability to earn yield from them, and that yield is paid by others who are also trading crypto tokens. [...] I would really love to see a story robust enough to explain where these yields come from—or could possibly come from—that is grounded in something external. And I’ve heard some plausible possibilities! For example, there might be fundamental structural reasons why cryptocurrencies are persistently more efficient for international money transfers. But I’d love to hear more such stories."
— Vitalik
Introduction
Cryptocurrency markets are moving beyond their initial focus on ERC20 tokens and DeFi. While these areas dominate current user activity (on-chain, the most common contracts are typically stablecoin ERC20s and decentralized exchanges) and portfolio allocations (currently, seven of the top ten token holdings among Nansen’s “Smart Money” are DeFi project tokens or tokens primarily used in DeFi), and have matured into offering multiple reliable operational products, their growth may plateau as their monetary market characteristics diminish and profit opportunities decline. Meanwhile, interest in non-monetary capital markets is increasing.
This shift has three potential implications: first, crypto’s next significant use case may lie in verticals and assets beyond ERC20 tokens. Second, for sustainability, these new assets or products must generate sufficient yield by either bringing new value on-chain or creating off-chain value. Third, these new use cases should be well-suited to crypto and interoperable with a new type of DeFi designed for non-ERC20 assets—leveraging the vast liquidity market (over $8.2 billion in total DeFi locked value) while utilizing existing mature products and avoiding vulnerabilities like price oracles. We refer to this other side of DeFi as Object-Oriented Finance (OOF). As Vitalik wrote, this new era of DeFi requires underlying objects rooted in more fundamental value—possibly from outside the chain—that can be evaluated through cash flows rather than data. This report explores several such verticals and identifies those with the potential to go beyond simple tokenization and primitive DeFi. Among many possibilities, we believe the following use cases will attract broader audiences.
Emerging Verticals
The following sections analyze five of the most promising emerging cryptocurrency verticals. Each includes a brief introduction, followed by key market metrics and a critical assessment of future growth prospects. The table below provides a concise overview of each vertical, highlighting its yield potential, possible DeFi intersections, and notable project examples, serving as a guide for deeper exploration later.
NFTs
NFTfi has most visibly driven the integration of non-ERC20 tokens—especially non-fungible tokens—into the DeFi ecosystem. At the peak of the NFT market, various NFTfi products emerged, most centered around lending. However, since many NFT collections lack intrinsic ways to generate yield, they often struggle to justify value beyond social "hype." When project sentiment or narratives shift, these assets are prone to sharp devaluations, making them poor collateral. This issue is further amplified by the extreme illiquidity of many NFTs, which has prevented most NFTfi and lending protocols from achieving or sustaining broad adoption.
Although the overall NFT market—and by extension, NFTfi—has not rebounded to prior highs in 2024, NFTfi continues to draw some attention due to the resurgence of airdrop activity this year.
Frequently Airdropped NFTs
As airdrop sybils become more sophisticated, protocols are seeking out "real" market participants. A common practice is allocating part of their airdropped tokens to holders of designated blue-chip NFT collections. For certain similar NFTs (e.g., Pudgy Penguins and Miladys), this addresses the "inherent" yield problem (i.e., a non-zero probability of future cash flows associated with holding the asset), making them more attractive lending assets and adding some resilience to their floor prices.
Nonetheless, the number of such NFT collections remains limited, constraining the market’s growth potential. Moreover, the frequency, value, and sustainability of airdrops are difficult to predict, leaving the entire vertical in a high-risk market state.
Inactively Airdropped NFTs
Since the end of the last NFT cycle, the value of most NFT collections has been declining. Lacking tangible fundamentals to support their value, these collections are largely non-productive assets highly sensitive to shifts in narrative and fear, uncertainty, and doubt (FUD), rendering them unsuitable as collateral. Notably, art-focused NFTs appear more resilient, as collectors primarily purchase them for aesthetic value—but financially, they remain non-productive assets.
While a new NFT hype cycle might temporarily boost demand for lending against these collections, such demand is likely fleeting, as it will eventually fade again without additional cash flows.
Gaming / Metaverse
Like the NFT market, gaming and metaverse markets have experienced peaks. This is not to say there are no exciting developments currently underway, but valuations and asset prices in the sector have generally trended downward.
However, unlike NFTs, these assets often feature built-in revenue mechanisms. Users participating in gaming or metaverse experiences are often willing to pay for access. For early-stage projects, the model can even be inverted—projects may directly distribute tokens to incentivize user participation. Either way, gaming and metaverse assets are typically productive assets, leading to competitive lending yields and use cases, such as Axie Infinity’s scholarship program, where Axie owners "rent out" their Axies to other players and share the resulting loot (tokens).
Nevertheless, such collateral faces many of the same drawbacks as NFTs, including volatility and market dependence, and most returns still come in the form of (equally volatile) tokens.
Real-World Assets (RWAs)
Real-world assets are typically productive assets, distinct from previously discussed types in that their value and primary yields originate outside the crypto space and are denominated in fiat currency. This mitigates many of the sustainability issues faced by NFT, gaming, and metaverse yields, reduces volatility, and makes these RWAs better suited as collateral. However, bringing off-chain assets on-chain weakens blockchain’s trustlessness. One must trust the entity bridging real-world assets onto the chain to ensure accurate valuation and protect user rights when problems arise—often involving multiple jurisdictions.
While this applies broadly across all RWAs, distinguishing between fungible/crypto-related RWAs (e.g., government bonds, funding rates) and non-fungible/crypto-unrelated RWAs (e.g., real estate, intellectual property) helps assess opportunities and challenges within this diverse asset class.
Fungible RWAs
Fungible and crypto-related RWAs—such as tokenized government bonds (e.g., Ondo, BUIDL, Maple) or other traditional financial products (e.g., Ethena’s tokenization of funding rates)—are conceptually close to DeFi, making implementation relatively straightforward, though regulatory hurdles may still exist.
These products typically take the form of pools where users deposit yield-generating tokens and manage them via DeFi like any other token. They integrate easily into most DeFi applications.
The underlying assets are usually pegged to USD or stablecoins, making them ideal collateral. However, despite their sustainability and reliability, their on-chain growth potential is questionable, as off-chain alternatives are already readily accessible, making it hard to attract retail users. Additionally, given that yields are typically in the single digits, unless combined with leverage or other DeFi yield strategies, these pools are often not the preferred choice for yield-seeking crypto natives.
Non-Fungible RWAs
Non-fungible RWAs are conceptually more complex, harder to implement on-chain, and often face greater regulatory challenges. Underlying assets are often illiquid (e.g., real estate), and their values harder to verify or estimate (e.g., intellectual property).
On the other hand, non-fungible RWAs often offer higher yields depending on the specific asset, as these yields typically originate outside the crypto market. This helps diversify income sources, and if successfully integrated with other DeFi applications, on-chain investors could gain access to substantial returns.
Moreover, for retail investors, such yields are usually inaccessible due to high barriers (e.g., IP ownership restrictions) or large initial investment requirements (e.g., real estate). This very inaccessibility is an incentive for bringing these assets on-chain.
However, to date, existing non-fungible RWA markets remain immature, operationally cumbersome, and plagued by regulatory issues, preventing widespread adoption or significant liquidity inflows.
NodeFi
NodeFi is an emerging narrative and fundraising method in which blockchain node operating rights are tokenized (typically as NFTs) and sold, with node operators receiving substantial rewards. For project teams, at least, this model appears highly effective; sales from just three major nodes (XAI in November 2023, Aethir in March 2024, and Sophon in May 2024) collectively raised nearly $250 million.
These licenses represent productive assets, allowing buyers to earn yield by running nodes or delegating operations.
Currently, depending on license pricing (which often increases over time due to tiered sales models), yields can be highly competitive. Given crypto markets’ tendency to quickly adopt successful models, more sales formats may emerge in the future, further expanding this nascent field.
However, NodeFi has drawbacks. First, its yields are closely tied to the crypto market, typically denominated in project tokens and dependent on valuation and network usage—factors that in turn affect the license’s value, making it highly volatile. Second, unrestricted use and integration of node licenses could introduce centralization risks to the network. Consequently, many networks are designed so that licenses are non-transferable and limit the number one user can purchase. Nevertheless, a thriving ecosystem around node licenses is conceivable, and new NodeFi products like XAI and MetaStreet are beginning to unlock these constraints.
Overall, although heavily dependent on crypto market conditions, the NodeFi vertical is growing and likely here to stay. While it’s still difficult to identify clear winners built on this foundation, as these productive assets continue to gain popularity, a dominant player may eventually emerge.
DePIN
Decentralized Physical Infrastructure Networks (DePIN) is a category that has recently drawn significant attention. Key sub-sectors include compute/AI-related networks (e.g., Render), wireless networks (e.g., Helium), sensor networks (e.g., Hivemapper), and energy networks (e.g., Arkreen). Although the DePIN concept has existed for some time (Helium launched its blockchain in 2019), the rise of AI since ChatGPT-3’s release in November 2022 has significantly boosted hype around compute-related projects. Following this trend, distinguishing compute/AI-focused DePIN from other types allows for more precise discussion of the space.
Compute / AI-Related DePIN
Although these projects have yet to capture a significant share of the GPU leasing market (the GPU-as-a-service market was valued at approximately $3.2 billion in 2023, compared to Aethir’s annual revenue of about $36 million and Akash Network’s cumulative rental income of less than $800,000 since 2021), the sector is rapidly attracting investor and user interest.
As AI becomes central to technological innovation and training proprietary models becomes a key differentiator for many companies, GPU leasing as a DePIN sub-sector may experience significant growth. Real-world demand and willingness to pay for GPUs continue to rise (a topic to be explored in detail in future reports), and these yields are highly competitive compared to other on-chain opportunities. Moreover, because these revenues originate outside the crypto ecosystem, they are typically denominated in USD—opening doors to intriguing opportunities such as yield speculation via platforms like Pendle, effectively allowing bets on the GPU market.
In addition, compared to other verticals (e.g., NFTs, real estate, project-specific licenses), GPU prices as underlying assets are relatively easy to evaluate and forecast, making them particularly attractive for lending use cases.
That said, the sector does face some trust and regulatory issues similar to those discussed in the RWA section, albeit to a lesser degree. Furthermore, DePIN networks are generally vulnerable to competition from off-chain counterparts, as these markets benefit from economies of scale and centralized efficiency. However, the unique opportunities offered by integration with crypto—such as token incentives and additional yield through DeFi—mean AI-related computing has a strong chance of capturing a meaningful market share in the future.
Non-Compute DePIN
Non-compute DePIN networks include wireless (e.g., Helium), sensor (e.g., Hivemapper), and energy networks (e.g., Arkreen). Their yields heavily depend on "node" utilization, with wide variations (e.g., frequently used Helium hotspots generate higher earnings, while Hivemapper rewards users more for mapping "important" streets).
This sub-sector faces many of the same challenges as AI-related compute DePIN, and in some aspects, holds fewer advantages. Demand-side users in many cases are already well-served by off-chain solutions, and industries like wireless and sensor networks do not face the same rising demand as AI computing. Moreover, setup, quality, and maintenance are harder to standardize and maintain compared to running GPUs in data centers. GPUs are generally more versatile, whereas many non-compute DePIN sectors rely heavily on project-specific hardware with limited applicability.
Still, DePIN’s potential is immense—an innovative non-compute application with strong product-market fit could capture global attention at any moment.
Conclusion
The table below summarizes how each discussed emerging vertical performs across the following dimensions:
• Growth Potential: Assesses the vertical’s capacity for market expansion and its ability to capture share from corresponding off-chain markets.
• Yield Potential: Evaluates the vertical’s yield-generating potential, excluding additional token incentives.
• Asset Volatility: Measures the volatility of productive assets and their correlation with individual project success, indicating suitability as collateral.
• Complexity: Considers implementation complexity, including off-chain components and regulatory issues.
Overall, AI-related compute DePIN appears well-positioned to become the next major vertical, combining a sizable and rapidly growing market, high yield potential, predictable asset pricing, and relatively low implementation complexity. Given time, synergies and potential interoperability between these projects and existing crypto-native use cases—such as innovative fundraising, lending, yield speculation/fixed-income products, or self-repaying loans—are likely to spark breakthroughs and lead to successful products.
Notably, NodeFi and non-fungible RWAs are also strong contenders. NodeFi offers substantial growth and yield potential with relatively simple implementation, appearing promising. However, it heavily depends on the success of underlying projects and tokens, and the typical non-transferability of licenses imposes limitations. It has yet to prove long-term sustainability or create easily DeFi-interoperable markets for these licenses.
Non-fungible RWAs offer relatively high yields and the potential to bring real advantages currently inaccessible in off-chain markets onto the chain. However, implementation and regulatory barriers are more complex, and no product has yet achieved deep retail penetration.
It’s worth noting that all three verticals face similar challenges in creating markets for their assets and successfully (and sustainably) integrating them into DeFi. A breakthrough in one vertical could thus catalyze innovation in the others. As Vitalik noted, current major DeFi lending protocols still don’t provide markets for low-liquidity, high-value assets—the very kinds of assets that "ordinary people" own and recognize.
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