Overview
Using NFTs as collateral for loans is enabled by lending protocols and NFT valuation. It lets owners borrow against their assets without selling. It increases NFT capital efficiency.
How It Works
A borrower deposits an NFT into a lending protocol and borrows against its appraised value. If the loan is not repaid, the NFT is liquidated. Valuation and liquidity are the main challenges.
Why It Matters
NFT collateral unlocks the value of NFTs for DeFi, expanding use cases. It carries valuation risk and illiquidity. It is a growing intersection of NFTs and lending.
Related Concepts
NFT Collateral relates to NFT Liquidity, Lending, and Fractionalization. It brings NFTs into the DeFi economy.