The NFT lending space is blooming, and reviews are mixed. NFTfi, which encompasses a range of tools that offer broader utility and liquidity for NFTs, has recently exploded in popularity. Major Web3 players have entered the market, such as Blur’s Blend, Binance’s NFT Loan, and Astaria. Scores of traders have flocked to these platforms to begin “pawning” their tokens to earn yield.
While there are pros to participating in NFT lending, the activity also comes with risks. Some traders have called Blend’s lending mechanics into question and urged newer traders to educate themselves on how to borrow NFTs safely before diving in. Additionally, there is the risk of liquidation and concern over platform-specific lending mechanisms and decentralization among these platforms.
The current market conditions have made NFT lending platforms attractive to many NFT holders who purchased their tokens during the bull run and are looking to earn some extra ETH in down markets. Polygon director of growth Hamzah Khan, who playfully describes his approach to NFT trading as “lazy,” sees value in lending assets beyond the highly sought-after blue-chip NFTs.
Mason Cagnoni, Chief Operating Officer of NFT lending platform Wasabi Protocol, and Karan Karia, Vice President of Business Development at Wasabi, noted that while the primary risk of NFT lending is early liquidation if a token’s price falls, Blend’s “down payment” feature can be tricky for traders new to trading NFTs.
Karia suggested that the emerging platforms must put decentralization at the forefront of their mission to keep NFT lending as close to DeFi as possible. “I think that we’re all in this Web3 space because we believe in decentralization,” said Karia.