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NFT financialization: Mortgage lending unlocks NFT liquidity

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At present, NFT is still in the early stage of development. In the future, the trading of NFT assets will form segmented financial markets, index funds, Floor Perp, fragmentation, etc.

Source: A& T Capital

NFT 为人熟知的用例有很多：游戏、PFP、元宇宙、音乐、域名等等。除此以外，NFT 在金融领域中，更是可以让数字资产发挥更大的作用。NFT 一级发行的竞争日益激烈，NFT 的二级市场的流动性，但是因为 NFT 本身的独特不可替代性导致无法直接把针对 NFT 的 DeFi 玩法套用在 NFT 上。

作为 NFT 的持有者只能将 NFT 作为收藏或者头像, 获得流动性的方法仅有出售, 如何将这些 NFT 产生更多的价值并且为持有者提供更好的流动性呢? 常见的办法是用 DeFi 的工具, 比如将 Cryptopunk 作为抵押品借入流动资产, 同时 liquidity provider 可以从贷款中赚取利息. 但是目前 NFT 市场缺乏有效的定价机制、可持续性的流动性解决方案. 如何解决非标属性和低流动性? 目前有以下几种方案: NFT 抵押借贷、NFT 租赁、NFT 碎片化、指数基金、NFT 跨链、INO。该篇解读 NFT 抵押借贷的两种模式和抵押借贷目前面临的难题。

NFT mortgage lending & NBSP;

Market demand for NFT lending - liquidity release

Today, NFT is booming and its market value is soaring, from 400M in January last year to 17B this year. The rapid growth of the NFT sector, with projects springing up in the NFT primary market and record sales, has produced handsome returns for investors, but at the same time NFT investors are increasingly concerned about liquidity. Compared with the NFT trading platform, which can carry out trading with the purchase order, purchase or market price, the low liquidity results in the NFT trading platform can only choose three modes: put order, market price and auction. When you're selling NFT for an unpopular project on Opensea, finding the right seller can be time-consuming and laborious. For now, financial markets are an immature part of the NFT ecosystem. The NFT ecosystem needs a mature financial system that allows users to pledge their NFT assets as collateral for loans, or lease unused NFT assets, rather than letting those assets accumulate in their wallets. The role of NFT lending is especially important when the owner of a valuable NFT needs funds in the short term.

There are two models of NFT mortgage lending

At present, NFT's lending mode is mainly divided into two types:

Peer to Peer negotiation pricing lending

The first is the peer-to-peer (P2P) negotiation of NFT lending. The NFT holder pledges the NFT and fills in the desired interest rate, amount and time. In P2P mode, both parties have the right to bargain. However, P2P mode needs to wait for others to quote, matching transactions, generally this stage takes a long time. The premise of the loan transaction is that both parties agree on the value of the mortgage NFT and the loan treaty, which initially solves the problem of the fuzzy value positioning of NFT in the loan market. However, the difficulty of P2P lending transactions makes it difficult to match borrowers with the same goals and needs. Therefore, in order to provide rapid NFT lending services to lenders and demanders of funds, the construction of NFT capital pool mortgage lending, namely the second mode, has become the direction of the current TRANSFORMATION of NFT lending platforms.

P2P parties negotiate NFT lending -- XCarnival 1.0

XCarnival1.0 is a peer-to-peer (P2P) negotiated NFT lending method and a time-limited auction clearing mechanism, which are two innovative mechanisms not available on current P2P lending platforms and all dapps on the market. The time-limited auction clearing mechanism enables the NFT of the mortgage to be settled at the highest price that the buyer is willing to pay in the current market, making up for the interest of the fund provider if the loan is not repaid on time. P2P lending mode gives the bargaining power to both lenders and borrowers. The fund provider and NFT mortgage set the repayment interest and repayment date according to their own market judgment and expected return.

Pools of capital lend against collateral

Pool mortgage lending, that is, the NFT holder chooses the pool to deposit into the NFT, based on the floor price of the series as the price reference for the NFT. On the other hand, capital providers who want to earn interest can put their Stablecoin or ETH into the pool to generate interest. The amount of interest paid by the NFT owner depends on the amount of loan capital and NFT supply of the pool. If the NFT owner fails to pay or the NFT price falls to the clearing line, The NFT is auctioned off and the money is returned to the provider.

Services that allow users to borrow quickly: Build pools of loans and limit assets to specific assets certified by the platform, which takes into account key factors related to the project and assets, such as project volume and liquidity, community and team, as well as other metrics related to the due diligence process on the project. Much of the NFT community has long debated how to value NFT assets, but there is no such thing as absolute objectivity when it comes to valuing assets, so how loan pools work is open to debate.

Pool mortgage Lending -- XCarnival 2.0

XCarnival 即将在 ETH 上推出 NFT 资金池模式借贷方案. 资金提供方可以将以太坊和 Stablecoin 注入 XCarnival 的池子中赚取稳定的 APY; 资金需求方，将 NFT 资产放入相对应的资产的借贷池中，根据 XCarnival 的预言机报价可直接获得以太坊或 Stablecoin 。

The conundrum of NFT mortgages

在 FT 借贷中, 大多数平台只提供主流币或少数流动性高的 Token 借贷, 通过接入 Chainlink 等预言机为所有 Token 价格提供实时价格数据或时间加权平均价格 (即 Time-Weighted Average Price) 来规避价格操控攻击, 同时在智能合约中建立 Token 价格监控机制, 对于可能产生巨大波动性。当抵押时价格接近市场价格时贷款价值比达到平台设定的阈值, 将自动触发清算。在这种机制下，借贷人和平台永远不会亏损。

However, in the NFT market, this point cannot meet its long-term development, because NFT projects are diverse, and the actual asset attributes in the project are different, most of them are unique, and the actual valuation is mostly subjective. The value supply and demand of NFT takes time to prove and form. The price fluctuation of early digital assets is huge, which is not suitable as collateral. As time goes on, the community becomes more aggressive for NFT assets, and many blue-chip assets like BAYC and Punk emerge.

At present, NFT is still in the early stage of development. In the future, the transaction of NFT assets will form a segmented financial market, such as index fund, Floor Perp, fragmentation, etc., so as to realize the secondary investment of the collection TYPE NFT through lending, and increase the efficiency of the use of NFT assets.