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dear bankless nation,
When NFTs took over crypto late last year, almost nobody expected it.
Who knew JPEGs of monkeys and pixelated punks were worth thousands (or millions) Dollar?
Regardless, NFTs are far from digital memes. There are now billions of dollars of capital in space.
Due to this massive influx of capital, people in the NFT sector are not only interested in collecting these NFTs but also in financing them in different ways.
That’s what NFT-Fi (the intersection of NFTs and DeFi) introduces.
Today, William shows us how to take your first steps into this burgeoning ecosystem, starting with borrowing and lending NFTs.
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Unbanked Author: William M PeasterBankless contributor and metaversal writer
Graphic by Logan Craig
One of the hottest areas in DeFi right now is the intersection of DeFi and NFTs, also known as NFTfi.
Currently, one of the largest sectors within this “NFTfi” category is NFT borrowing and lending. This bankless tactic shows you how to lend and borrow NFTs with the best projects in the space.
There’s DeFi, there’s NFTs, and then there’s NFTfi, where the two fields intersect.
All sorts of categories already exist in the current NFTfi ecosystem.
The largest currently are NFT marketplaces and liquidity protocols such as OpenSea, LooksRare, Zora, NFTX and Sudoswap. People buy and trade NFTs first, right?
However, there are also NFT derivative projects, NFT infrastructure projects, NFT pricing projects, and more. People are exploring the frontiers of NFTs, so each of these sectors is growing rapidly, but the largest NFTfi category right now is outside of marketplaces NFT borrowing and borrowing logs.
However, NFT lending and lending projects come in various shapes and sizes.
For this tactic, we’ll walk through using the largest peer-to-peer NFT lending project, NFTfiand the largest peer-to-pool NFT lending project, BendDAO. Let’s dive in!
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difficulty: Intermediate
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Costs: +💰
NFTfi is a P2P marketplace for NFT secured loans.
In other words, this project allows borrowers to specify potential NFT loan parameters, and then crypto lenders can choose to accept the terms individually.
The benefit of this approach is that you can fully customize and opt-in to your NFT loan parameters. The downside is that it can take a long time, if ever, to find someone willing to take the other side of your loan.
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Go to app.nftfi.com/lend/assets and connect your wallet
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Click on an NFT loan offer that interests you
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To proceed, click the Make Offer button and accept the borrower’s proposed terms or customize and request your own terms (amount, repayment, schedule, etc.).
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Next, click the Grant button and use your wallet to authorize NFTfi to use your funds (this is a one-time transaction).
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Then complete your loan offer with your wallet and voila! Your counterparty has seven days to review your offer before the offer expires
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See 3 lending strategies on NFTfi for more information on how to proceed intelligently
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Go to app.nftfi.com/borrow/assets and connect your wallet
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Use the filters provided to find the NFTs in your wallet that you wish to pledge as collateral
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Use the following interface to specify your desired loan amount, loan schedule, interest rate, etc.
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Then use the List as Collateral button to complete your listing
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Wait until you get a bite from a lender who accepts your terms!
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difficulty: Intermediate
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Costs: 💰💰💰
BendDAO is an NFT borrowing and lending protocol that uses a peer-to-pool approach.
In other words, BendDAO depositors commit ETH into liquidity pools to earn interest, and then the project’s borrowers can get instant NFT-backed loans through those pools.
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Go to benddao.xyz and connect your wallet
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Sign a transaction to verify your address
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Click on the “Liquidity” tab and then click on the “Deposit ETH” button.
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Enter the amount of ETH you want to deposit and then press the “Deposit” button.
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Complete the transaction with your wallet, then sit back and wait while you earn returns – the current lending rate is 8.5% APR
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Go to benddao.xyz/liquidity/batch-borrow and connect your wallet
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BendDAO currently accepts deposits from Azuki, BAYC, CloneX, CryptoPunks, Doodles and MAYC NFTs – if you have any of these and wish to proceed, press the NFT Deposit button.
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At the start, fire off two approval transactions, one to approve the debt token and one to approve the NFT
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Enter your desired loan amount and then press “Borrow ETH”
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You can then repay your loan as needed from BendDAO’s lending dashboard
When Bitcoin and the first cryptocurrencies appeared, you could send them from address A to address B and so on.
It took the launch of Ethereum, a smart contract platform, to make digital tokens composable, expressive, and usable in all sorts of ways.
We see a similar evolution from basic to advanced in NFTs. Initially, you could basically just buy and sell NFTs, and while that’s a start, it’s just the beginning of what’s possible.
The rise of DeFi’s NFTfi sector is starting to pave the way for all sorts of more advanced use cases like NFT derivatives, NFT lending, NFT price protocols and more.
Today, NFT lending and lending projects like NFTfi and BendDAO make it easier for people to receive capital against their ETH or earn by providing ETH against NFTs.
These are early pioneers in this field, but I expect that we will see many more NFT lending and lending protocols in the coming years and that they will become increasingly user-friendly. Familiarizing yourself with this space now may pay dividends in the future.
William M Peaster is a professional writer and creator of metaversal– a new bankless newsletter focused on the emergence of NFTs in the crypto economy. He has also recently contributed content to Bankless, JPG and beyond!
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No financial or tax advice. This newsletter is for educational purposes only and is not investment advice or a solicitation to buy or sell any assets or make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
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