# Understanding NFT ETF

In today’s NFT market, selling quickly often means taking a big loss. Liquidity is limited, and most platforms like Blur or OpenSea primarily serve large traders, leaving the broader market underserved. Paddle NFT ETF solves this by introducing **P-Tokens:** ERC-20 tokens backed 1:1 by NFTs stored in ETF vault. This lets NFTs move like fungible tokens in DeFi, enabling instant trading, lending, borrowing, and yield generation. The P-Token mechanism also adds a safeguard that protects NFTs in extreme situations, allowing them to circulate securely across NFT and DeFi markets.

With this design, NFT ETF creates a true secondary market where NFTs gain the same financial utility as mainstream tokens. Unlike traditional ETFs, where holdings are disclosed only during periodic audits, every asset in Paddle NFT ETF is verifiable on-chain in real time: the moment an NFT enters the vault, the corresponding P-Tokens begin circulating.


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