How to lend & borrow NFTs

Swell Network is decentralized liquid-staking for Ethereum. Get in on ground-floor now.

Join the Swell Discord community

Dear Bankless Nation,

When NFTs took over crypto late last year, almost no one expected it.

Who wouldve thought that JPEGs of monkeys and pixelated punks would be worth thousands (or millions) of dollars?

Regardless, NFTs are coming a long way from being digital memes. Theres now billions of dollars of capital in the space.

As a result of this massive inflow of capital, people in the NFT sector are not only interested in collecting these NFTs, but also financializing them in different ways.

Thats what NFT-Fi (the intersection of NFTs and DeFi) introduces.

William shows us today how to take your first steps into this burgeoning ecosystem, starting with borrowing & lending NFTs.

– Bankless team

Join us for Converge22, Circles first annual crypto ecosystem conference, taking place September 27th-30th in San Francisco! Featuring wide-ranging demos and developer workshops, plus high-powered guest speakers including Ethereum’s Vitalik Buterin, Aaves Stani Kulechov, Mary-Catherine Lader of Uniswap Labs, Anatoly Yakovenko of Solana, and many more.

Register with code Bankless to receive $100 off your ticket!

Bankless Writer: William M. Peaster, Bankless contributor and Metaversal writer

Graphic by Logan Craig

One of the hottest areas in DeFi right now is the crossroads of DeFi and NFTs, also known as NFTfi.

Within this NFTfi category, one of the largest sectors currently is the NFT borrowing and lending arena. This Bankless tactic will show you how to lend and borrow NFTs using the top projects in the field.

Theres DeFi, theres NFTs, and then theres NFTfi, where the two fields intersect.

In the current NFTfi ecosystem, there are already all kinds of categories.

The largest right now are NFT marketplaces and liquidity protocols like OpenSea, LooksRare, Zora, NFTX, and Sudoswap. People buy and trade NFTs first, right?

Yet there are also NFT derivatives projects, NFT infrastructure projects, NFT pricing projects, and beyond. People are exploring the frontiers of NFTs so each of these sectors are growing fast, but the largest NFTfi category outside of marketplaces right now are NFT borrowing and lending protocols.

That said, NFT borrowing and lending projects come in different shapes and sizes.

For this tactic, well walk through how to use the largest peer-to-peer NFT lending project, NFTfi, and the largest peer-to-pool NFT lending project, BendDAO. Lets dive in!

  • Difficulty: Intermediate

  • Cost: +

NFTfi is a P2P marketplace for NFT-collateralized loans.

In other words, this project lets borrowers put forth prospective NFT loan parameters and then crypto lenders can choose to accept the terms on an individual-to-individual basis.

The advantage of this approach is that it lets you totally customize and opt-in to your NFT loan parameters. The downside is that it may take a long time, if ever, to find someone willing to take up the other side of your loan.

  1. Go to app.nftfi.com/lend/assets and connect your wallet

  2. Click on an NFT loan proposition that interests you

  1. To proceed click on the Make Offer button and choose to accept the borrowers proposed terms or customize and request your own unique terms (amount, repayment, schedule, etc.)

  2. Next click the Grant button and use your wallet to approve NFTfis use of your funds (this is a one-time transaction)

  3. Then finalize your loan offer with your wallet, and voila! Your counterparty has seven days to consider your offer before the proposition expires

  4. See 3 lending strategies on NFTfi for more info on how to smartly proceed

  1. Go to app.nftfi.com/borrow/assets and connect your wallet

  2. Use the provided filters to find the NFT in your wallet that you want to put up as collateral

  3. Use the ensuing interface to specify your desired loan amount, loan schedule, interest rate, etc.

  4. Then use the List as Collateral button to finalize your listing

  5. Wait to receive a bite from a lender that accepts your terms!

  • Difficulty: Intermediate

  • Cost:

BendDAO is an NFT borrowing and lending protocol that uses a peer-to-pool approach.

In other words, BendDAO depositors provide ETH into liquidity pools to earn interest, and then the projects borrowers can get instant NFT-backed loans through these pools.

  1. Go to benddao.xyz and connect your wallet

  2. Sign a transaction to verify your address

  3. Click on the Liquidity tab and then click on the Deposit ETH button

  4. Input the amount of ETH you want to deposit and then press the Deposit button

  5. Complete the transaction with your wallet and then sit back and wait as you earn yields – the current lending rate is 8.5% APR

  1. Go to benddao.xyz/liquidity/batch-borrow and connect your wallet

  2. BendDAO currently accepts deposits of Azuki, BAYC, CloneX, CryptoPunks, Doodles, and MAYC NFTs – if you have one of these and want to proceed, press the Deposit NFT button

  3. Fire off two approval transactions to start, one to approve the debt token and one to approve the NFT

  4. Enter your desired borrow amount and then press Borrow ETH

  5. You can then pay down your loan as needed through BendDAOs borrowing dashboard

When Bitcoin and the first cryptocurrencies appeared, you could send them from address A to address B and so forth.

It took the arrival of Ethereum, a smart contract platform, to make digital tokens composable, expressive, and able to be used in all sorts of different ways.

Were seeing a similar trajectory from simple to advanced in NFTs. At first, you could basically just buy and sell NFTs, and while thats a start, its just the beginning of whats possible.

The rise of DeFis NFTfi sector is beginning to pave way to all sorts of more advanced use cases, like NFT derivatives, NFT loans, NFT pricing protocols, and beyond.

Today, NFT borrowing and lending projects like NFTfi and BendDAO make it easier for people to get capital against their ETH or to earn by supplying ETH against NFTs.

These are early pioneers in this field, but in the years to come I expect well see many more NFT borrowing and lending protocols arrive and that theyll be increasingly user-friendly. Familiarizing yourself with this space now can pay dividends going forward.

William M. Peaster is a professional writer and creator of Metaversala new Bankless newsletter focused on the emergence of NFTs in the cryptoeconomy. Hes also recently been contributing content to Bankless, JPG, and beyond!

Subscribe toBankless. $22 per mo. Includesarchive access,Inner Circle&Badge.

Join us at Converge22 Circles first crypto ecosystem conference. Use code bankless

Want toget featuredon Bankless? Send your article to submissions@banklesshq.com

Write for Bankless

Not financial or tax advice.This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This newsletter is not tax advice. Talk to your accountant. Do your own research.

Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here.