# Introduction

Fungify is composed of two parts: Index and [Pools](https://docs.fungify.it/protocol/pools). 

### Index

The $NFT Protocol facilitates a permissionless, exchange-traded fund (ETF) mechanism for non-fungible tokens (NFTs). It operates through a vault system where NFTs are deposited and a corresponding $NFT token is minted, representing the value of the NFTs within the vault. The $NFT token can be traded in the open market, and its value is pegged to the collective floor prices of the NFTs in the vault, as determined by an external oracle.

The Index is a non-custodial marketcap weighted NFT index allowing for instant NFT sales and a yield-bearing NFT index token. With a small set of elegant primitives, Fungify solves the most challenging problems at the intersection of NFTs and DeFi.

The 🔒[MarketVault](https://docs.fungify.it/protocol/marketvault) primitive allows for automated provisioning of liquidity to NFT holders who are seeking to sell outright. The MarketVault is capable of permissionless ingestion of NFTs, enabling a peer-to-contract marketplace.

The MarketVault enables the first decentralized 🖼️[NFT Index Token](https://docs.fungify.it/tokenomics/nft-index-token), $NFT, which allows investors to gain exposure to a broad set of community curated NFTs at any level of investment without needing to worry about the illiquidity of any individual NFTs. $NFT is fully backed by and redeemable for NFTs held inside the MarketVault, pegging its value to the broader NFT market via arbitrage.

<figure><img src="https://2905210537-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F4MLiYoPN4VVgZsIVgj7C%2Fuploads%2FNSPVSWyi7SjRpHvPZ4YD%2Fmarketvault-diagram.png?alt=media&#x26;token=69d38fdd-7099-4789-8e14-0045e68d0121" alt=""><figcaption></figcaption></figure>

### Pools

Pools is a cross-margin money market protocol that combines the elegance of legacy DeFi with the ability to handle your NFT assets – both as collateral and a source of yield. It is the first platform of its kind to allow both borrowing and lending of NFTs, along with borrowing and lending of any other asset type. Pools synergizes with the Index by facilitating a lending market for the $NFT token.


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