NFT lending addresses the liquidity challenge faced by NFTs, an asset class valued in billions of US dollars traded monthly. Unlike Bitcoins, NFTs lack immediate liquidity and often require months or years to sell.
So is there a solution for NFTs to further thrive and fully leverage the resources they possess? The answer is quite simple: integrating DeFi and NFTs, specifically by enabling NFT lending. In this article, let’s explore what it is all about.
What is NFT Lending?
Want to know how to lend NFTs to someone? NFT lending is similar to borrowing against physical assets like cars or homes, but with digital collectibles. Here’s a simple explanation:
- NFT Collateral: NFT holders use their unique digital assets as collateral to secure a loan in cryptocurrency or traditional money. The NFT acts as security until the loan, along with interest, is repaid within a specific timeframe.
- Investment Opportunity: The value of the borrowed NFT is tracked during the loan period. Lenders can earn a share of the NFT’s appreciation or a percentage of future sales, making NFT an attractive investment opportunity.
By participating in lending, people can use their NFTs as collateral and potentially earn returns based on the value of the borrowed NFT.
Related Topics: What is an NFT Token? All about NFT
3 Common Types of NFT Lending
There are various types of NFT lending models available across lending platforms.
Peer-to-Peer NFT Lending
Peer-to-peer offers flexibility and operates similar to an over-the-counter trade. The lender and borrower engage directly in the transaction. Here’s how it works:
- The borrower, who is the NFT owner, lists their asset as collateral.
- Interested lenders make loan offers with their desired terms, including interest rates and duration.
- The borrower can accept an offer, enabling them to receive payment and complete the deal automatically.
- Once the deal closes, the NFT is moved to a digital vault and held until the loan terms expire.
- Upon loan repayment, the NFT is returned to the borrower’s wallet, while the lender keeps the interest. If the borrower defaults, the lender may renegotiate the terms or accept the NFT as payment.
Peer-to-Pool NFT Lending
Peer-to-pool offers increased liquidity and speed, although it may have fewer borrower flexibilities. The process involves borrowing directly from a liquidity pool. Here’s how it works:
- NFT owners list their asset as collateral and deposit it into the smart contract.
- They receive a loan based on the NFT’s value at an interest rate determined by pool utilization.
- Borrowers deposit collateralized NFTs and borrow funds from the pool at a calculated interest rate.
- If the NFT’s value falls below the minimum collateral ratio, it undergoes liquidation.
NFT Renting and Borrowing
NFT renting and leasing operate on a permissionless peer-to-peer lending system, allowing NFT owners to rent or lease their digital assets securely. Here’s how it works:
- NFT owners agree on a rental price and receive the agreed-upon fee.
- The NFT is held in a smart contract acting as an escrow during the lease period.
- Lenders enjoy access to token-gated perks associated with the NFT, such as play-to-earn blockchain games and in-person events.
- After the predetermined period, the NFT is returned to the owner.
NFT renting and leasing enable collectors and creators to earn yield on their assets while retaining access to the NFT’s appreciation.
You can better understand how to borrow these NFTs through the working mechanism of Lending/Borrowing Feature of NFTBOOKS.
How To Earn Massive Crypto From NFT Lending?
5 easy steps to earn massive crypto from NFT Lending:
- List your non-fungible token (NFT) on an NFT marketplace.
- Choose a lending protocol that suits your needs.
- Connect with lenders or lessors who are interested in engaging in transactions with you.
- Set your own terms and rates, bypassing the need for a third party.
- Enjoy the benefits of earning massive crypto through lending while maintaining control over your transactions.
For example: If you want to lend NFT Books on NFTBOOKS – a NFT Book Marketplace, you can:
- Register and buy an NFT Book.
- List it on the Borrowing Feature.
- Set the borrowing fee per day.
- Borrowers find and rent NFT books with suitable prices.
Related Topics: What is an NFT Book? Exploring the Intersection of Blockchain and Publishing
3 Potential Risks Of NFT Lending
While NFT lending offers benefits like automated contracts and transparent terms, it’s essential to be aware of the risks. Defaulting on loan terms can result in losing your NFT. In such cases, the NFT backing the loan may be sold through auction on most lending platforms.
Consider Concentration Risk
Some platforms only accept specific collections as collateral, which can lead to market volatility if multiple liquidations occur within that limited subset. This can affect both borrowers and lenders, impacting the recovery of loan amounts and the liquidity of the NFT.
Exciting Opportunities Ahead
The NFT lending space holds immense potential and is still in its early stages. As the ecosystem continues to evolve, there will be more innovative solutions and exciting opportunities to explore.
Join NFT Lending With NFTBOOKS
NFT lending allows you to access funds from your NFTs without selling them. However, since this field is still new, it’s crucial to use trustworthy platforms and be cautious about the terms you agree to.
NFTBOOKS is a trusted NFT Marketplace where anyone can borrow or lend NFT Books. All you need is a crypto wallet, $NFTBS, and $MATIC coins. Once you have these, you can buy NFT books and lend them on NFTBOOKS.
With NFTBOOKS, you don’t have to put up any money as collateral to borrow/lend books. It’s a user-friendly platform that connects borrowers and lenders, making exchanges easy and hassle-free.
Why wait? Begin your NFT lending journey with NFTBOOKS! Lending NFT books with no rental fees and receive NFTBS tokens instantly upon transaction acceptance. Explore this amazing opportunity only at NFTBOOKS.
