🔍 NFT loans, a novel concept in the decentralized finance (DeFi) world, use Non-Fungible Tokens (NFTs) as collateral for cryptocurrency loans, while retaining NFT ownership. Unlike traditional finance, this process is fully digital and blockchain-based.
🔑 Key Points:
NFTs: Unique digital tokens representing ownership, stored on the blockchain. They differ from fungible tokens like Bitcoin or Ether.
Blockchain: A decentralized ledger ensuring security and transparency, vital for NFT loans.
📈 How NFT Loans Work:
Step 1: Choose a suitable NFT loan platform.
Step 2: Upload NFT and set loan terms.
Step 3: NFT appraisal for value estimation.
Step 4: Take out the loan, usually in stablecoin.
Step 5: Repay the loan to regain NFT access.
👍 Advantages:
Liquidity without selling NFTs.
Portfolio diversification.
Maintaining NFT value.
No credit checks.
Flexible loan terms.
👎 Disadvantages:
Market volatility.
Smart contract risks.
Illiquid collateral.
Regulatory uncertainty.
Lack of standardization.
High interest rates.
🏦 Top Platforms for NFT Loans:
NFTfi
Arcade
Nexo
Zharta
BendDAO
💡 Conclusion: NFTs continue to evolve, offering innovative uses like NFT loans. This dynamic field promises further growth and diverse applications in the future.
To dive deeper, check out the complete article:
https://droomdroom.com/nft-loans-explained/
