3 lending strategies on NFTfi

We get lots of questions about lending and borrowing using NFTfi still, so in this new mini-series we’re going to dive a bit deeper on each side of the marketplace and explore some strategies and things for you to consider.

Lending first.

Lending on NFTfi is ultimately about providing liquidity to another user, the borrower. In our contract you as a lender exchange your loan in wETH for a claim to their NFT, which is used as collateral in the transaction.

As a lender you set the loan value, the interest and the duration of the loan. That means we are in full control of our own risk, for good and bad. This piece aims to explore some of those factors in more detail and see how they play a role in different lending strategies.

Lend for Profit style offer

The first one is the most obvious. Lend to other people to make a financial return. We think of this strategy as a competitive alternative to, say, being a liquidity provider on Uniswap. On the one side you avoid the risk of significant impermanent loss in smaller pools and on the other side NFTfi offers a significantly better return on your funds than any of the larger pools.

This approach has driven much of the initial usage of the platform, so it is also the one we understand best. Most loans on NFTfi so far has been agreed in the 40–100% APR range, demonstrating that lending to other users potentially offers very lucrative returns to increase your ETH (or DAI) stack over time.

Of course there are risks involved too, but managed well, NFTfi offers lenders a way to get outsized returns compared to other DeFi platforms, while at the same time retaining full control over their own risk. Unlike other loans we, as an example, don’t have to actually trust the borrower.

The key to making this strategy work is;

Lend to Acquire style offer

2. Lend to acquire

This approach has been used by a few of our users that are also extensive NFT collectors, but it could also be a very powerful way for e.g. a larger NFT DAO’s to acquire NFTs in an extremely cost-effective manner over time.

All the same risks apply, so we will have section 1 in mind while trying to explain how this approach to lending is different.

The key to making this strategy work is;

Interest free loans between friends are easy and safe on NFTfi

3. Lend safely to friends and people you want to support

A little known and described element of NFTfi is friendly lending. Due to the nature of the platform, you can make any loan offer you want.

The key to making this strategy work is;

All loans on NFTfi are subject to a 5% success fee on the interest paid by the borrower to the lender, but if there was no interest paid due to the loan being interest free or the borrower defaulting, the platform doesn’t take a fee at all.

There are over 400 NFTs listed on NFTfi right now waiting for loan offers.

NFTfi’s main lend interface for users looking to make loan offers

Next weekend we’ll explore the borrowing side of NFTfi in more detail, in the meantime please let us know your thoughts and feedback. Feel free to also join us in our Discord and ask questions in the Offers-and-Appraisals channel if you need help valuing an NFT or evaluating a loan offer.

We’re keen to continue to improve the knowledge of both lenders and borrowers and ensure a responsible and rewarding use of the marketplace.

Disclaimer: None of the content is intended as investment advice, it is only for information and entertainment purposes. Please do your own research on individual NFTs or projects before offering loans or engaging in borrowing.

A simple marketplace for NFT collaterized loans. Put your own NFTs up as collateral for a loan, or offer loans to other users on their non-fungible tokens.