What is Peer-to-peer NFT Lending?

Non-fungible tokens are undoubtedly one of the most popular and successful sub-products of Web3. They continue to be a great asset class in cryptocurrency for community members.

While NFTs are by large considered as a collectible in the forms of art, sports memorabilia, and sorts, they can be utilized to be more than just a fancy digital term to your name.

NFTs tend to be relatively illiquid in comparison to cryptocurrencies such as bitcoin, Ethereum, etc. and can take months before one manages to sell it for a sweet price. Additionally, when you sell your NFT, it needs to be sold as a whole and cannot be done in parts (until and unless they offer fractional ownership). NFT owners who wish to make quick profits while retaining the ownership of their digital assets can now do so through NFT lending.

What is NFT lending?

NFT lending is a practice where one can borrow or lend digital assets for a stipulated period of time, typically against interest or collateral. There are four structures in the system- Peer-to-peer NFT lending, Peer-to-protocol NFT lending, Non-fungible debt positions, and NFT rentals.

What is Peer-to-peer NFT lending?

This model does the traditional, connects lenders and borrowers.

In this, a user can put up their NFT as collateral for a loan and evaluates its loan value based on market worth. They’ll receive loan offers from potential borrowers, and once they accept an offer, they’ll receive the cryptocurrency from the lending user’s wallet. The NFT will automatically be transferred to a digital vault for the loan duration. Once the duration is about to end, you need to repay the loan to get your NFT back into your wallet. In case the borrower defaults, the lender will get ownership of the NFT at a huge discount. Luckily, the volatile change in floor price will not affect the loan terms.

Some of the popular peer-to-peer NFT lending platforms include NFTfi, Arcade, and Blend.

NFT sales have picked up speed since the launch of peer-to-peer NFT lending platforms, especially Blend by Blurr. Dune Analytics reported that NFTfi facilitated $185.4 million of NFTs in cumulative loan volume since the inception and Bored Ape Yacht Club, which is a collection of 10000 unique NFTs (BAYC) 7,813, was used for a $100K loan on the platform.

Notably, Blend has become one of the leading NFT lending platforms, facilitating over 15.8k loans totalling 123.5k ETH ($224.4m) in volume from 1.2k unique borrowers and 1.6k lenders.