.jpg)
How Do NFT Loans Work?
DeFi is about to explode to all new highs and TLV (Total Locked Value) and that's mainly because DeFi is starting to spread its wings and come up with unique and interesting ways to do finances.
In a pervious article I talked about What Is DeFi Bonding and Bonds this article covered another advancement in DeFi and how bonds will and are starting to work on Decentralized Finance platforms such as PolyCub
What do you get when you combine NFTs and DeFi?
You get Loans or collateral.
A NFT loan is a offering by some defi platforms one of the main ones at the moment is NFTFi and a new one that just recently got funding for NBA Top Shot NFTs called Flowty. It allows a NFT owner to in a sense mortgage their NFT in exchange for crypto or Fiat. This is a relatively new area of DeFi and use cases of NFTs but in a way it makes perfect sense.
When you get a loan or take money out you are putting things up as collateral in case you default on the load. This could be a home, car, artwork or whatever someone is willing to accept as collateral.
What Makes A NFT A Good Option For Collateral With Loans?
A NFT is verified on the blockchain so there's no room for error in terms of it being a copy or the original. It also has verifiable ownership of the asset. The other benefit is the NFT itself can not be divisible or replicated as everything about it is transparent on the blockchain and verified. Think of them value in terms of art, physical collectibles such as baseball cards or Pokemon cards which are all the rage again. These things have value because people want them just like a NFT.
However with NFTs the only real use case for them was as a digital collection and trying to resell them for a profit. It's a slow and risky process for sure. However that did start to expand in utility cases such as Play2Earn games such as Splinterlands. However they now have a new utility to them in the shape of loans.
Now NFTs can be used for loans which allows someone to put the NFT up in exchange for something. If the loan is not paid back then the NFT becomes the possession of the person or persons who gave the loan.
How Do NFT Loans Work?
On a few platforms that currently have this option it allows the NFT holder to borrow funds with set terms without a middle man. In most cases the loan amount is the value of about 50% of the NFT asset. If your NFT has a current value of $100,000 would could expect a loan of about $50,000 on it. It also comes with a interest rate which often times ranges from 20% - 80% which depends on the popularity of the NFT that is being loaned out.
Since this is all done on the block chain the entire thing is transparent. There is no need for a middle man to collect fees etc and instead that value gets returned to the NFT owner and the person lending the loan.
If you're strapped for cash and have some NFTs of value floating around that you just can't seem to sell this new option of NFT loans might be in your interest.
Posted Using LeoFinance Beta
Flowty looks interesting!
I had a conversation about TopShot with a basketball head when I went out last week.
It's something I've wanted to get into, but he was saying they've managed their releases so poorly and it's really been screwed for the little guy.
Have you gotten into it at all?
Posted Using LeoFinance Beta
Not yet most of the NFTs that are used I don't own. If Splinterlands ever rolls around though I might ;)
~~~ embed:1519818955979845633 twitter metadata:TGVvQWxwaGEyMDIxfHxodHRwczovL3R3aXR0ZXIuY29tL0xlb0FscGhhMjAyMS9zdGF0dXMvMTUxOTgxODk1NTk3OTg0NTYzM3w= ~~~
The rewards earned on this comment will go directly to the person sharing the post on Twitter as long as they are registered with @poshtoken. Sign up at https://hiveposh.com.
Yay! 🤗
Your content has been boosted with Ecency Points, by @bitcoinflood.
Use Ecency daily to boost your growth on platform!
Support Ecency
Vote for new Proposal
Delegate HP and earn more
That's an interesting view of NFTs! When I have thought that I have finally got them, a new use case pops out! :)
Posted Using LeoFinance Beta
Awesome. You take an instant loan 50% LTV on a speculative asset that you probably bought cheap. Use that loan amount to earn yields. Even if you can't manage to repay, you just lose your NFT which might be down in price or probably worth even more. That's your luck. This reduces the risk of losing value.
Posted Using LeoFinance Beta
Interesting. I can’t wait to be able to take loan out of my Splinterlands NFT’s.
Posted Using LeoFinance Beta
Super epic! I see it happening