Investing in Hook

We’re excited to announce that we’ve co-led a seed round for Hook, the easiest way for NFT owners to earn yield on their assets. Traders can use these options to speculate on price movements and access safer leverage. Today Hook announced that its kicking off an incentives program, the Hook Treasure Hunt, to reward early adopters for creating liquid options markets on Hook. Sign up now.

Hook’s initial product is a covered call strategy, which lets NFT owners convert market volatility into yield. Hook’s options are cash settled and so offer a way for option buyers to gain directional exposure to a given collection without having to buy the underlying asset.

Hook is the most novel approach that we’ve seen so far to NFT financialization and we believe represents a significant improvement over existing products. The two main current approaches to NFT financialization are lending and fractionalization. Lending lets NFT owners user their NFT’s as collateral, but then puts the burden on them to make their borrowed assets productive. This is useful in many cases but does not make NFT’s in and of themselves productive.

The other main approach to NFT financialization has been around fractionalization - you can take your NFT, split it into N parts, and sell those. While this is also useful, it has some issues. First, it’s generally a one way street - it’s very hard to make your NFT whole again after it’s fractionalized, and so this limits the market size. It also likely has negative tax consequences in that the owner is selling financial instruments. Lastly, it also often creates stranded assets where there is just not that much liquidity for these things.

Hook fits into the emerging wave of more sophisticated DeFi products, which generally abstract away complexity for users. Ribbon, which is building DeFi structured products, has grown at an impressive clip and is seeing most of their covered call vaults sell out quickly.

If you’re interested in connecting with the Hook team, reach out and we’ll connect you.

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