$25,000 Loan with a Single Cryptokitty as Collateral

By Tomadachi | Tomadachi | 6 Dec 2020

This week, a user of NFTfi - the Non Fungible Token (NFT) lending and borrowing platform - received a $25,000 loan in the form of DAI by putting up their rare Cryptokitty NFT as collateral.

In the deal, the borrower has committed to repaying 26,250 DAI or if they fail to do so, they will forfeit the NFT.

Growing Demand

As previously discussed here on Publish0x back in August, the NFT collateralised loans arena began heating up over the summer with NFTfi passing the 400 ETH milestone in activated contracts.

The basic principle behind the project is that anyone with an ERC-721 NFT who is seeking a loan can put that token up for collateralisation.

If another user of the platform is happy to accept that particular NFT in payment should the borrower fail to repay the loan then a deal can be struck between the two parties.

Once a loan is agreed, funds are paid out from the lenders account to the borrower, and the relevant NFT in the deal gets locked in a NFTfi smart contract.

If the loan is repaid as scheduled, the asset is transferred back to the borrower. If the loan is not repaid before the due date, the asset is transferred to the lender.

While attractive rates can be achieved for lenders, NFTfi point out the key to achieving a satisfactory outcome is to "... understand the assets you are offering loans on, and are happy to accept the collateral if the lender defaults."

Fortunately the range on offer is broad so those who are not partial to a pack of Cryptokitties can browse NFTs from Gods Unchained, Decentraland, Cryptovoxels, Ethereum Name Services (ENS), and even unique artworks to decide if making a loan is worth their while.