NFTsor non-fungible tokens have become a staple of the blockchain industry, and developers have sought ways to allow NFT owners to borrow money against the value of their tokens, but do so safely and reliably. This is easier said than done. To understand the challenges of lending apps for NFTs and the risks they pose to lenders, it helps to understand how cryptocurrency lending apps work. increase.
Decentralized finance (DeFi) lending/borrowing apps such as Aave, Compound, and Maker Protocol allow users (borrowers) to deposit one or more cryptocurrencies and borrow a portion of their value. Stablecoin (virtual currency stable against the dollar) From a lending pool provided by other users (lenders). When a borrower’s collateral falls too far in value or has too many outstanding interest payments, they maintain the solvency of the lending pool by selling the cryptocurrency, usually on a decentralized exchange like Uniswap. Deposits will be liquidated for The liquidation process is immediate, reliable and predictable, Using blockchain smart contractsA lending/borrowing app that follows this model can maintain near-perfect solvency even in the worst market conditions, making it fairly safe to earn interest on stablecoins held by lenders.
Not so with the NFT lending app. Apps exist to borrow against NFTs, but they are a whole different machine than DeFi apps. Marketplace NFTs such as OpenSea A predictable price is a different story than buying them. Since the NFT bubble burst, NFT market liquidity has dried up, making it even more difficult to sell NFTs. Addressing this issue requires different approaches. If NFT lending/borrowing apps pool lender deposits to share risks and rewards (like DeFi apps), NFT collection price crash It can damage all lenders in the pool. Ben Dao is an example of this model, and while it is much more efficient at securing lenders, it does not solve the problem of finding buyers to repay the lenders.
NFTs require different designs for lending and borrowing
For lending/borrowing apps to be safe for lenders, they must be able to liquidate more of the returned collateral than the borrower’s outstanding loan, or pass the liquidation responsibility on to the lender. but, Unlike sellable, fungible cryptocurrencies Selling non-fungible NFTs to multiple buyers relies on finding a single buyer interested in purchasing tokens. If market interest in a particular her NFT collection dries up after the loan is issued, the lender will be unable to find a buyer for that NFT after repossessing her NFT, and the lender will lose everything they loaned. increase.
NFT lending and borrowing app NFTFi Using a market-based system in which borrowers list NFTs and lenders browse the market for NFTs willing to provide loans, pushing the responsibility of NFT liquidation onto the lenders rather than the app. This design is easy to build and maintain, but relies on finding a single wealthy lender willing to take the risk, so there is little guarantee that the borrower will receive a loan.However, it is possible to implement it in a lending and borrowing app Fragmented NFT (or F-NFT) It is designed to distribute the costs, risks and rewards of a single NFT to a small group of lenders. This could improve accessibility and liquidity issues in the NFT market.
A secure and efficient NFT lending/borrowing app is a top priority for the DeFi industry as it could form the foundation for decentralized mortgages and lending services. However, his NFTs for 2022 are struggling to attract buyers on the open market, and wealthy lenders are happy to do so. Risk your money with potentially bad NFTs loan difficult. Building a lending/borrowing app for his NFTs that mitigates the lender’s financial risk is a major design challenge. NFTs Selling within a short timeframe and at a predictable price is not easy and solutions are still being experimented with.