How to lend & borrow NFTs
How to lend & borrow NFTs
Enter the world of NFT-fi and bring your jpegs to life.
Swell Network is decentralized liquid-staking for Ethereum. Get in on ground-floor now. 👇
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
🙏 Together with Circle
Join us for Converge22, Circle’s first annual crypto ecosystem conference, taking place September 27th-30th in San Francisco! Featuring wide-ranging demos and developer workshops, plus high-powered guest speakers including Ethereum's Vitalik Buterin, Aave’s Stani Kulechov, Mary-Catherine Lader of Uniswap Labs, Anatoly Yakovenko of Solana, and many more.
Register with code Bankless to receive $100 off your ticket!
Tactic Tuesday
Bankless Writer: William M. Peaster, Bankless contributor and Metaversal writer
How to lend and borrow NFTs
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.
For this tactic, we’ll walk through how to use the largest peer-to-peer NFT lending project, NFTfi, and the largest peer-to-pool NFT lending project, BendDAO. Let’s dive in!
1) NFTfi
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!
2) BendDAO
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.
Action steps
💥 Check out the NFTfi and BendDAO NFT borrowing and lending projects
👀 Also check out our previous A Beginner’s Guide to ETH Validators tactic if you missed it!
Author Bio
William M. Peaster is a professional writer and creator of Metaversal—a new Bankless newsletter focused on the emergence of NFTs in the cryptoeconomy. He’s also recently been contributing content to Bankless, JPG, and beyond!
Subscribe to Bankless. $22 per mo. Includes archive access, Inner Circle & Badge.
🙏 Thanks to our sponsor Circle
👉 Join us at Converge22 Circle’s first crypto ecosystem conference. Use code bankless
Want to get featured on Bankless? Send your article to submissions@banklesshq.com
Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.
Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.