NFT lending (NFTfi)

Two main models exist. In peer-to-peer lending, a borrower lists an NFT and lenders offer terms such as amount, interest and duration; if the borrower repays, they get the NFT back, and if not, the lender keeps it. In peer-to-pool lending, a protocol lends from a shared pool against collections, valuing collateral with floor price oracles and liquidating loans that fall below a threshold through auctions.

NFT lending, often called NFTfi, gives holders liquidity without selling, lets traders lever up on collections they believe in, and gives lenders yield. A popular 2023 design offered perpetual loans that last until a lender calls them, integrated directly into a trading marketplace, and lending became a significant share of blue-chip NFT activity.

Risks are high. NFT prices are volatile and illiquid, so a falling floor can trigger liquidations that find no buyers, as in August 2022, when a major lending pool faced a crisis after auctions failed and lenders rushed to withdraw. Floor-based valuation ignores rarity, oracles can be manipulated, and borrowers can lose prized NFTs over small shortfalls.