The NFT lending landscape is rapidly evolving, largely thanks to trailblazers like NFTfi and Blend. This area of the crypto market is drawing significant interest and investments, as many anticipate its continued growth.

To put things into perspective, the weekly loan volume in the NFT lending realm now exceeds $100 million, boasting an outstanding book value of over $95 million. Yet, interestingly, NFT lending makes up only a tiny 2% of the NFT market’s whopping $5 billion cap. The next step? Making lending protocols smarter, safer, and more user-friendly. As it stands, the prospects for NFT lending shine brightly, even without factoring in potential innovations like incorporating real-world assets.

However, it’s important to remember that, even for the crypto world, NFTs come with a unique set of risks and rewards. The lending conditions in this sector can sometimes be more reminiscent of short-term loans than traditional long-term ones.

If you’re considering taking a dip into NFT lending, keep these questions in mind:

1. Duration of the Loan: Always borrow only for as long as required. Factors like interest rates, the risk of the asset being sold off, market fluctuations, and potential rewards should influence your decision. Always factor in some wiggle room for unforeseen situations.
2. Interest Dynamics: Different platforms have different rules. While Gondi and Zharta might charge interest only when a loan is outstanding, others might charge you for the entire loan term, regardless of early repayments.
3. Liquidation Protocols: Some platforms might sell off your assets if its market value decreases, while others might have time-based protocols. Be aware of how each platform handles these situations.
4. Additional Liquidation Triggers: With platforms like Blend, lenders can opt out of their loan commitments, potentially triggering what’s known as “Dutch auctions”. This might mean you end up with a higher interest rate or a very tight deadline to repay your loan.
5. Loan Renegotiation: If the value of your NFT appreciates, some platforms might allow you to renegotiate your terms. Platforms like Gondi are notably flexible in this aspect.
6. Additional Benefits: NFTs can sometimes provide access to exclusive content or communities. Ensure that taking a loan against your NFT doesn’t deprive you of these perks.
7. Choice of Currency: Depending on your outlook on ETH’s value, you might want to borrow in ETH or opt for a stablecoin like USDC or DAI.

The realm of NFT lending is undoubtedly thrilling, but it’s still in its infancy. As a result, not all platforms are foolproof, and both lenders and borrowers might face undesired outcomes. However, the silver lining is evident. Despite the market’s current volatility and its fledgling status, there’s palpable growth in NFT lending. As the kinks get ironed out, it’s poised to become a substantial pillar supporting the broader NFT ecosystem.

CryptOyster

Join Pearl, a fintech expert mollusk, exploring cryptocurrencies and offering market insights via OysterTrade Signals and Seabed Consultancy. Connect to explore altcoins, unravel crypto mysteries, and challenge finance norms. Dive into “Venturing Beyond Shells: Unveiling the Cryptoverse’s Enigmatic Gem” today.

See author's posts