NFT lending: a feature that combines NFTs and DeFi
The NFT market is not liquid enough, so more and more financial instruments combine NFT and DeFi.
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NFTs may be used not only for buying, selling, and holding artworks. Like other assets, they can be part of more complex and profitable financial transactions. The cryptocurrency market is characterized by high liquidity, which cannot be said about the NFT market. It could be months before someone buys your NFTs. Therefore, the need for financial instruments in the NFT market arises due to significant illiquidity issues.
What is NFT Lending?
NFT lending is a loan that uses NFT as collateral stored in a smart contract. Lending can help you get more money than regular crypto or P2P loans. Plus, you keep your NFTs.
The annual percentage yield (APY) and loan duration are used as terms of the debt. Within the specified period, the borrower must return the money with interest, and get back their blocked NFTs. The blocked NFTs will become the creditor's asset if the payment is late.
Types of NFT lending:
- Peer-2-Peer NFT Lending
- Peer-2-Protocol NFT Lending
- NFT rental
- Non-fungible Debt Positions
Peer-2-Peer NFT Lending
P2P NFT lending works like a traditional loan. The agreement is made directly between lenders and borrowers. For example, when you add your NFTs as collateral, you receive loan offers from users interested in your NFT. If you like one of the offers, you can accept it and immediately receive WETH (wrapped Ethereum) or DAI (stablecoin) tokens from the lending user's wallet.
NFTfi is a P2P platform for NFT lending.
NFTfi Interface
Peer-2-Protocol NFT Lending
While P2P lending allows you to customize loan terms, Peer-2-Protocol NFT lending platforms will enable you to borrow directly from the protocol. This type of NFT lending is similar to DeFi lending, where coins are borrowed from lenders. NFT platforms require Liquidity Providers (LPs) to deposit tokens into pools. Borrowers can then access liquidity by moving their NFTs to available vaults.
Platforms where you can take advantage of NFT peer-to-peer lending:
- Pine is a platform that allows borrowers to borrow Ethereum (ETH) or Solana (SOL) against NFTs.
Pine.loans Interface
- BendDAO — about 1000 NFTs are backed by the protocol, including 273 Bored Ape Yacht Club NFTs.
BendDAO Interface
NFT rental
NFT holders can transfer their assets to strangers for a certain period and at a specific price with the guarantee that they will receive their NFTs back.
Renting an NFT provides the tenant with access to NFT privileges. Such as Discord servers, access to a closed community of NFT collection holders, or other benefits available to holders of certain NFTs.
reNFT is a platform for providing NFT rental services.
reNFT Interface
Non-fungible Debt Positions
This type of lending allows you to borrow stablecoins against NFTs.
JPEG'd offers to place NFTs as collateral in exchange for its stablecoin, $PUSd. Similar to peer-to-peer lending platforms like BendDAO, JPEG'd uses Chainlink oracles to monitor the market price of its NFTs.
JPEG’d Interface
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