For NFT to be used as a collateral asset, it must meet:
- Sufficient value consensus.
- Sufficient demand side and transaction volume.
There are seven series with more than 100,000 ETH volume on Opeasea, CryptoPunks / BAYC / MAYC / Art Blocks / Clone X / Decentraland / SandBox. These seven series alone are already a $10 billion market, and they are also NFT mortgage lending projects. part of the market size.
The biggest problem with NFT as collateral is pricing and liquidity. Each NFT has different rarity, which leads to different prices. Therefore, the current NFT mortgage loan is mostly a Peer-to-Peer model, which allows NFT owners and fund providers to In the agreement, the price acceptable to both parties is communicated, and the project acts as a platform to facilitate transactions.
P2P logically does solve the problem of NFT price differences, but the inefficient use of funds, long transaction time and high interest are obvious shortcomings.
Fund pool model
Do TWAP (time-weighted average price) according to the data on the chain, remove extreme values and use the price for a period of time as the average price,
The transaction is completed quickly and the loan amount is clear. Low and stable interest, the funds can stay on the agreement.
Disadvantages and risks of the fund pool model:
Price manipulation or sharp drop, such as borrowing and deliberate liquidation after raising the price, smart contract risks, etc.