While NFTs have constantly been making waves in the crypto industry, thanks to the explosive interest by the public and some very extreme valuation of projects (Beeple, BAYC, CryptoPunks), one question that is repeatedly asked is, how do you capitalize on the rising value?
One way would be to “flip”, where you buy an NFT and then put it up for sale at a profit. While this is akin to trading, there are people out there who would rather not sell their acquired digital art - and that is understandable. The drawback? Owners simply lock their money into the NFTs, which become effectively inaccessible unless the unique token is sold.
NFTuloan is a platform that helps you gain liquidity, without letting go of your favorite NFTs.
A Simple 5-Step Process
True, there are other platforms out there that offer loans against NFTs, but NFTuloan claims to do it better through its simple and automated process. People seeking out a loan can simply connect their MetaMask wallet to the platform and choose the NFT they want to use as collateral for the loan. NFTs are then evaluated on-chain using different automated tools and NFTuloan comes up with a fair loan value.
NFT owners then have the option to enter an agreement, defining the length of the loan (from as little as one hour and up to a 90 days. The approved loan is instantly deposited in the owner’s wallet in ETH.
What users get is an instant loan at an affordable interest rate which they can then use for different purposes (trading, staking etc.). With the potential to gain profits from the liquidity, they can return the loaned amount plus interest and gain back their NFT.
This way, NFT users can unlock liquidity on their assets without ever selling their NFT in the first place.
But is it Better?
NFTuloan is not the first NFT loan service and neither will it be the last. But the platform does have some better alternatives than its competitors. As of now, NFTuloan accepts the most number of NFTs in the market, with over 200 top collections in 2022. Compared to this, the nearest competitor does around ten times less.
It's not the vast acceptance of collections only that puts NFTuloan on a different level, but the high level of loan-to-value ratio (LTV). Borrowers get a massive 70% compared to 30% or 40% from other “leading” platforms.
Completely on-chain, run by a DAO and having liquidations not only means that the platform is attractive to borrowers who want to leverage their NFT value but for lenders also who deposit ETH in its pools.
There Has to be a Catch, Right?
Nothing’s perfect and this applies to NFTuloan too. However, the cons seem not to be due to the shortcomings of the platform or the developers, but more to technical and other reasons.
Take the evaluation, for example. The on-chain and automated analysis, though offering instant valuation, may offer less than what the owner expects and there is no way to counter the offer. However, this is pretty much negated by the high LTV of 70%.
Another drawback is that the platform is currently running on the Ethereum chain. With other blockchains gaining NFT traction, a lot of the NFT community is not able to tap into the services. This might change with future plans to integrate other chains such as Solana.
Our verdict? NFTuloan is a sound platform to unlock the frozen liquidity of unique tokens. At the same time, users can also tap into the services by becoming lenders and earning the accrued interest for passive income.