Image source: NFT Plazas
DeFi lending has become one of the most unexpected yet lucrative businesses of the digital age, especially through the use of NFTs.
It has become a new trend for users to use valuable NFTs as collateral for loans.
Recently, Fragment was able to borrow 1,000 ETH, equivalent to $1.3 million, with Mutant Ape Yacht Club NFTs.
Fragment
The superb loan was provided by Fragment, owner of a pair of NFT Mutant Ape Yacht Club.
The loan was made through the loan company NFT Arcade.
Arcade CEO Gabe Frank expressed his excitement.
“It’s awesome to see these loans getting funded in this market climate, and more so that it’s happening all on-chain via DeFi,” he said.
“Prices have stabilized some, and volatility has dropped, so lenders seem more willing to underwrite larger loans.”
“At the same time, the mega mutants are incredibly rare assets,” Frank added.
The loan
Fragment’s loan is a non-recourse loan, meaning Arcade can seize its loan collateral in the event of default.
On the other side are the Nexo and Meta4 NFT Lending lenders.
According to Arcade, the loan repayment terms are 1,044 ETH in 90 days at an annual rate of 18%.
“If the borrower defaults, the lender has an on-chain claim to the collateral in the protocol,” Frank explained.
“So the lender can claim the assets, unwrap it, and then sell it if they have to, or keep it on their balance sheets.”
Arcade
According to Fragment founder PTM, they are building IPs around Mega Mutants starting with Applied Primate.
“So we’re looking to have more Megas to participate in our universe,” said PTM.
“The idea here was how do we get some cash fast to take advantage of an opportunity. Lending was the right call for what we needed.”
“We will likely unwind the loan in the next 90 days or so.”
In March, a CryptoPunks owner used 101 NFTs from his collection to borrow $8 million.
The following month, another owner waived an auction at Sotheby’s.
Instead, they borrowed $8.3 million from DAI and used the 104 NFT lot as collateral. Borrowers negotiated the loans through the NFT-backed loan marketplace NFTfi.
Arcade also reports that NFT borrowings have increased steadily since June 2022, peaking at $2.5 million in September.
However, most of the activity revolves around NFT buying and selling, with $11.1 million generated in September.
Prime NFT holders also view borrowing for their collections as a lucrative option that would allow them to retain ownership of their NFTs.
Reference:
Someone borrowed $1.3M in Ethereum using Mutant Ape NFTs as collateral
