The non-fungible token (NFT) market has come a long way in recent years, and nothing symbolizes this more than the rapid growth of the NFT lending market. Several projects have taken on the task of building up infrastructure that unlocks liquidity for highly illiquid NFTs, and as a result, borrowing against NFT collectibles has now crossed the $1 billion mark.
According to Dune Analytics, the $1 billion mark comes from eight NFT liquidity providers, with NFTfi in the lead at over $392 million borrowed on its platform as of April 13th. BendDAO is closely following with over $300 million in second place, and Paraspace is in third with just over $241 million. Although a relatively new entry into the NFT liquidity market, Paraspace is promising to shake up the establishment.
The number of borrowers has also increased over the past few months, currently sitting at over 40,000 cumulatively. Still, as more NFT holders learn of the existence of these platforms, the figure is expected to grow exponentially.
It’s a sentiment that is shared by Andrej Skraba, CMO at NFTfi. Speaking to the press, he notes, “At present, many digital asset holders are either unaware of the existence of credit markets or are unfamiliar with the various types of lending protocols available.” Therefore, the industry has much work to do to raise awareness by educating the market. “This increased understanding will pave the way for new NFT verticals and integration opportunities,” he said.
According to Derrick Nguyen, Marketing, and Community Lead at JPEG’d, another liquidity platform, the desire to unlock value from digital collectibles without selling them is the key driver of the increased interest in NFT lending protocols. He goes on to add that decreased volatility within the market has also made borrowing against collections viable for lenders.
All in all, the process of borrowing against NFTs resembles that of borrowing against crypto coins like Bitcoin, but in this case, using NFTs. Some platforms allow one to borrow up to 60% of the value of the NFT, and interestingly, some of these protocols will also allow a user to buy an NFT on credit by paying a small fraction upfront and the rest over time. This feature makes highly valuable NFTs more accessible to the average collector.
As more people maintain faith in the value of NFTs, and the use cases for them continue to grow, the NFT market is expected to experience even more adoption. Up until recently, many still believed that NFTs were a fad that would fizzle out quickly, but the market has continued to gain traction, and the numbers speak for themselves. With more investors coming on board, NFTs could very well be paving the way for the next big thing in the world of digital assets.
The NFT market has already proven the concept of scarcity, which is crucial to economics, and it is set to expand with time. In addition to lending, NFTs hold great potential in various other areas, including gaming, art, music, and more. Artists, athletes, musicians, and other content creators can leverage NFTs to sell their unique digital creations, and this opens up an entirely new world of possibilities for creators worldwide.
Overall, the NFT market is growing and showing signs of maturity with the rise of the NFT lending market. With the numbers continuing to grow, it’s clear that the industry has potential, and education around NFTs will play a vital role in unlocking further opportunities. Consequently, we can only expect the industry to evolve and provide more use cases that will drive users to explore the potential of NFTs even further in the future. So, if you’re still unsure about NFTs, now is the best time to learn more and join the growing community.