One of the hottest areas of DeFi right now is the intersection of DeFi and NFTs, also known as NFTfi.
In the current NFTfi ecosystem, there are already various categories.
The biggest currently are NFT marketplaces and liquidity protocols such as OpenSea, LooksRare, Zora, NFTX, and Sudoswap. However, there are also NFT derivatives projects, NFT infrastructure projects, NFT pricing projects, and more. People are exploring the frontiers of NFTs, so each of these areas is growing rapidly, but currently the largest NFTfi category outside the market is NFT lending protocols. That said, NFT lending projects come in different shapes and sizes.
This article will show how to lend and borrow NFTs using the top projects in the space.
NFTfi
NFTfi is a P2P marketplace for NFT collateralized loans.
In other words, the project lets borrowers come up with expected NFT loan parameters, which crypto lenders can then choose to accept on a person-to-person basis.
The advantage of this approach is that it allows you to fully customize and opt-in to your NFT lending parameters. The downside, if any, is that it can take a long time to find someone willing to take on the other side of your loan.
How to borrow and lend on NFTfi
- Go to app.nftfi.com/lend/assets and connect your wallet.
- Click on the NFT loan offer of interest.
- To continue, click the “Make Offer” button and choose to accept the borrower’s proposed terms or customize and request your own unique terms (amount, repayment, schedule, etc.).
- Next click the “Grant” button and use your wallet to approve the NFTfi to use your funds (this is a one-time transaction).
- Then use your wallet to finalize your loan offer. Your counterparty has 7 days to consider your offer before the offer expires.
How to borrow on NFTfi
- Go to app.nftfi.com/borrow/assets and connect your wallet.
- Use the provided filters to find the NFT you want as collateral in your wallet.
- Use the interface that follows to specify your desired loan amount, loan schedule, interest rate, and more.
- Then use the “List as Collateral” button to complete the list.
- Wait to get the loan amount from the lender who accepts your terms.
BendDAO
BendDAO is an NFT lending protocol that uses a peer-to-peer pool approach.
In other words, BendDAO’s depositors contribute ETH to liquidity pools to earn interest, and the project’s borrowers can then access instant NFT-backed loans through these pools.
How to Get a Loan on BendDAO
- Go to benddao.xyz and connect your wallet.
- Sign a transaction to verify your address.
- Click on the “Liquidity” tab, then the “Deposit ETH” button.
- Enter the amount of ETH you want to deposit and press the “Deposit” button.
- Use your wallet to complete the transaction, then sit back and wait for you to earn – the current loan rate is 8.5% APR.
How to borrow on BendDAO
- Go to benddao.xyz/liquidity/batch-borrow and connect the wallet.
- BendDAO currently accepts deposits from Azuki, BAYC, CloneX, CryptoPunks, Doodles and MAYC NFTs. If you have one of these and want to continue, press the “Deposit” NFT button.
- Initiate two approval transactions to get started, one to approve debt tokens and one to approve NFTs.
- Enter the desired borrow amount and press “Borrow ETH”.
- The loan can then be repaid as needed via BendDAO’s borrowing dashboard.
NFTfi is just getting started
When Bitcoin and the first cryptocurrency came out, you could send them from address A to address B, and so on.
The arrival of the smart contract platform Ethereum makes digital tokens composable, expressive, and usable in a variety of different ways.
We see a similar trajectory from simple to advanced in NFTs. At first, you can basically buy and sell NFTs, and while this is a start, it’s just the beginning of what’s possible.
The rise of the NFTfi space in DeFi is starting to pave the way for a variety of more advanced use cases such as NFT derivatives, NFT lending, NFT pricing agreements, and more.
Today, NFT lending projects like NFTfi and BendDAO make it easier for people to get funds with their ETH, or make money by offering ETH in lieu of NFTs.
These are early pioneers in the space, but I expect we will see more NFT lending protocols emerge over the next few years, and they will become more and more user-friendly. Familiarity with the space now can pay dividends in the future.