$8M Loan Issued, Backed By NFTs

frens, NFTs have been a hot topic in the cryptocurrency space. With more and more major brands and companies jumping into creating Non-Fungible Tokens, they are still spreading like wildfire.

NFT Collateralized Loans

There's a few different platforms that are trying to bust into the space offering loans in ETH collateralized by NFTs. This means that if you happen to hold a high dollar NFT like a Crypto Punk or a Bored Ape Yacht Club, you can take a loan out against its value in wETH or DAI. If you default on the loan, you lose your NFT to the lender. NFTfi in partnership with Metastreet have just issued the largest loan backed by NFTs in history with an $8 million loan. This loan was issued to an anonymous NFT whale that put up 101 Crypto Punks as collateral for a 30 day loan at 10% APR. This means that the borrower must pay back $8.8 million within 30 days or they lose all 101 Crypto Punks. For a whale with that amount of high dollar NFTs, I'm sure $800,000 in interest is nothing for them so I highly doubt that it will default.

The NFTfi platform is very interesting. Instead of NFTfi being the ones to issue the actual loans, they just act as the platform to make it possible. Users are able to offer up their NFTs as collateral and lenders are able to accept the loan. It's a peer to peer loan between the borrower and lender. The NFTs used for collateral are locked in an escrow smart contract and only released if the loan is paid back. If the loan isn't paid back, the lender is able to unlock the contract and receive the NFTs, often at a huge discount. Platforms like this unlock a great use-case for high dollar NFT assets that they have never had before. Thought you were going to actually use your Crypto Punk for something? Nah. It literally just sits in your wallet. Well not anymore. You can use that bad by to take a loan to do degen shit with.

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Think about this for a minute. Someone could theoretically take out a loan against their NFTs and buy a house. Instead of paying a bank a percentage and having to deal with the bank owning the house until the mortgage is paid off... That theoretical person could take this loan out and default on it. Then they have essentially used their Crypto Dicks to buy a house with no middle man. This is just another step toward taking the power away from the banks and giving it back to the users. Why the hell does a bank need to be involved if you want to buy something? We should either be able to deal with the seller directly and pay with whatever currency we please, be it crypto or whatever. There doesn't need to be a company involved nor a bank. We are slowly evolving toward a more decentralized future. What do you think about NFT collateralized loans?