NFTfi: The NFT Lending Protocol Transforming DeFi
Updated: Sep 16
NFTs have undoubtedly captured the world's attention, especially after the newsworthy Beeple sale. Since then, growth within the NFT space has continued to skyrocket. This innovation transformed crypto assets from static to interest-bearing, and value-laden investments, providing more highly-disruptive opportunities for stakeholders.
While these non-fungible tokens instantly create appeal in their own right, they inherently have an illiquid disposition, meaning their value is stored or locked up in assets. This has raised one of the major pain points of NFT maximalists – lack of liquidity. Consequently, NFT investors would appreciate the idea of utilizing their assets even while they lie fallow in the various crypto repositories. So, in essence, obtaining liquidity without selling NFTs would create a massive appeal.
The necessity to resolve these liquidity issues spurred the transition of NFTs into the DeFi domain, thereby developing the NFTfi protocol. NFTfi leverages the liquidity of DeFi's infrastructure, which paves the way for disintermediated interactivity among NFT investors, especially releasing value impounded in the illiquid NFTs.
To paint a clearer picture of the numerous possibilities surrounding NFTfi, I would expound more on this protocol and how you can leverage it.
NFTfi is a simple peer-to-peer collateralized loan platform or marketplace built exclusively for liquidating NFT assets. This liquidity protocol allows users to display assets from their NFT collection as collateral while letting eligible lenders determine which proposals are suitable.
When the two parties accept terms, the borrower’s NFT gets transferred into a double-audited escrow smart contract for the loan duration.
This open-ended decentralized platform is very similar to the Opensea marketplace, where people sync their Metamask wallets and transact with each other. Although identical to the famous NFT marketplace on a basic level, NFTfi's interface makes provision to put up offers, borrow and lend funds, thereby effectuating liquidity in the NFT ecosystem.
On the NFTfi platform, there are two main categories of users, namely the
Borrowers and Lenders.
The Borrowers are users eager to take a loan from the platform. They put up any ERC-721backed tokens for collateralization, and other users (lenders) can now offer them the agreed loan.
The Lenders browse through the platform to find favorable offers containing their favorite NFTs and offer loans on the assets they are happy to back.
To illustrate how NFTfi works, here are steps on how both parties can employ the services of this protocol.
As a Borrower, go to the NFTfi dashboard and click on "list as Collateral" to automatically list your asset on the marketplace. Once loan offers have been made for your listing, your asset's color changes to blue. You can then scout for a favorable offer. Accepting an offer locks your NFT in a smart contract and approves the loan payment into your wallet as ETH. To repay the loan, click on "repay."
As a Lender, make sure you have enough ETH in your wallet. On the top right corner of your dashboard, click the "Lend" tab, which provides an array of listed collateralized NFTs.Select a convenient proposal from the listed assets, fill out the amount you can give, repayment amount plus APR, and loan duration, and submit your offer. If the borrower accepts your request, your ETH will be withdrawn.
N/B: NFTfi charges nothing for your borrowing transactions but takes a 5% share of the interest that lenders earn on every successful loan transaction.
Since NFTs can allocate value to almost anything, it's only rational to pair them with a technology that makes such values available for users. DeFi helps in unlocking values affixed to any asset on the Blockchain. A perfect combination.
NFTfi's interoperable lending protocol is undoubtedly a proven instrument vital for unlocking those tons of value in the NFT space. Although still in its nascency, NFTfi provides an excellent opportunity for users. NFT Holders and Flippers can now earn yields on their ETH instead of passively storing them up in their crypto wallets, a historically impossible feat on the Blockchain. With users' rising amount and depth, NFTfi is unquestionably transforming the dynamics of crypto assets, token ownership, and financial services.
What do you reckon? Do you think NFTfi is a perfect and safe solution to NFT's liquidity limitations? Share your thoughts!
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