How to lend & borrow NFTs
Dear Bankless Nation,
When NFTs took over crypto late last year, almost no one expected it.
Who would’ve thought that JPEGs of monkeys and pixelated punks would be worth thousands (or millions) of dollars?
Regardless, NFTs are coming a long way from being digital memes. There’s now billions of dollars of capital in the space.
As a result of this massive inflow of capital, people in the NFT sector are not only interested in collecting these NFTs, but also financializing them in different ways.
That’s what NFT-Fi (the intersection of NFTs and DeFi) introduces.
William shows us today how to take your first steps into this burgeoning ecosystem, starting with borrowing & lending NFTs.
- Bankless team
One of the hottest areas in DeFi right now is the crossroads of DeFi and NFTs, also known as NFTfi.
Within this “NFTfi” category, one of the largest sectors currently is the NFT borrowing and lending arena. This Bankless tactic will show you how to lend and borrow NFTs using the top projects in the field.
- Goal: Learn how to borrow and lend FTs
- Skill: Intermediate
- Effort: 1 hour of research
- ROI: XYZ
Intro to borrowing & lending NFTs
Welcome to NFTfi
There’s DeFi, there’s NFTs, and then there’s NFTfi, where the two fields intersect.
In the current NFTfi ecosystem, there are already all kinds of categories.
The largest right now are NFT marketplaces and liquidity protocols like OpenSea, LooksRare, Zora, NFTX, and Sudoswap. People buy and trade NFTs first, right?
Yet there are also NFT derivatives projects, NFT infrastructure projects, NFT pricing projects, and beyond. People are exploring the frontiers of NFTs so each of these sectors are growing fast, but the largest NFTfi category outside of marketplaces right now are NFT borrowing and lending protocols.
That said, NFT borrowing and lending projects come in different shapes and sizes.
- Difficulty: Intermediate
- Cost: +💰
NFTfi is a P2P marketplace for NFT-collateralized loans.
In other words, this project lets borrowers put forth prospective NFT loan parameters and then crypto lenders can choose to accept the terms on an individual-to-individual basis.
The advantage of this approach is that it lets you totally customize and opt-in to your NFT loan parameters. The downside is that it may take a long time, if ever, to find someone willing to take up the other side of your loan.
How to lend on NFTfi
- Go to app.nftfi.com/lend/assets and connect your wallet
- Click on an NFT loan proposition that interests you
- To proceed click on 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 NFTfi’s use of your funds (this is a one-time transaction)
- Then finalize your loan offer with your wallet, and voila! Your counterparty has seven days to consider your offer before the proposition expires
- See 3 lending strategies on NFTfi for more info on how to smartly proceed
How to borrow on NFTfi
- Go to app.nftfi.com/borrow/assets and connect your wallet
- Use the provided filters to find the NFT in your wallet that you want to put up as collateral
- Use the ensuing interface to specify your desired loan amount, loan schedule, interest rate, etc.
- Then use the “List as Collateral” button to finalize your listing
- Wait to receive a bite from a lender that accepts your terms!
- Difficulty: Intermediate
- Cost: 💰💰💰
BendDAO is an NFT borrowing and lending protocol that uses a peer-to-pool approach.
In other words, BendDAO depositors provide ETH into liquidity pools to earn interest, and then the project’s borrowers can get instant NFT-backed loans through these pools.
How to lend on BendDAO
- Go to benddao.xyz and connect your wallet
- Sign a transaction to verify your address
- Click on the “Liquidity” tab and then click on the “Deposit ETH” button
- Input the amount of ETH you want to deposit and then press the “Deposit” button
- Complete the transaction with your wallet and then sit back and wait as you earn yields - the current lending rate is 8.5% APR
How to borrow on BendDAO
- Go to benddao.xyz/liquidity/batch-borrow and connect your wallet
- BendDAO currently accepts deposits of Azuki, BAYC, CloneX, CryptoPunks, Doodles, and MAYC NFTs - if you have one of these and want to proceed, press the “Deposit” NFT button
- Fire off two approval transactions to start, one to approve the debt token and one to approve the NFT
- Enter your desired borrow amount and then press “Borrow ETH”
- You can then pay down your loan as needed through BendDAO’s borrowing dashboard
NFTfi is just beginning
When Bitcoin and the first cryptocurrencies appeared, you could send them from address A to address B and so forth.
It took the arrival of Ethereum, a smart contract platform, to make digital tokens composable, expressive, and able to be used in all sorts of different ways.
We’re seeing a similar trajectory from simple to advanced in NFTs. At first, 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 beginning to pave way to all sorts of more advanced use cases, like NFT derivatives, NFT loans, NFT pricing protocols, and beyond.
Today, NFT borrowing and lending projects like NFTfi and BendDAO make it easier for people to get capital against their ETH or to earn by supplying ETH against NFTs.
These are early pioneers in this field, but in the years to come I expect we’ll see many more NFT borrowing and lending protocols arrive and that they’ll be increasingly user-friendly. Familiarizing yourself with this space now can pay dividends going forward.