After the NFT boom: is NFT lending bringing fresh money to the declining NFT trade?

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Forex in this article

• DeFi and NFT: The combination opens up new possibilities
• Lending as a game changer in the NFT market
• Lending in-game items in play-to-earn

Non-fungible tokens experienced a real boom in 2022 and everyone was talking about them. But after individual digital works of art achieved record prices, interest initially seemed to level off and trading volumes have decreased significantly since May 2022. However, competition in the NFT market at the end of February drove trading turnover on the Ethereum blockchain above the one billion US dollar mark for the first time since May 2022. In addition to OpenSea, NFT trading is dominated by the NFT marketplace Blur, which was only launched in October last year and caused a stir with an airdrop campaign for its own coin BLUR.

Another factor behind the renewed popularity of the NFT market among investors could be the new, rapidly growing opportunities offered by combinations of decentralized finance applications and NFTs.
A new trend on the crypto market is NFT lending, which has already been celebrated in media reports as a game changer for the NFT market. Here, the NFTs are lent out at interest or used as a reserve for a loan. NFTs can therefore be deposited as collateral with the appropriate platforms in order to obtain a crypto loan, for example in Ethereum or other coins. The borrower pays appropriate interest to the platform and gets their NFT back once the loan is repaid. If this is not repaid in accordance with the contract, the crypto lending company can retain the NFT to offset the losses through the sale.

NFT lending boom: the dominant platforms

The two platforms ParaSpace and NFTfi currently dominate the NFT lending market, which is still quite small with a daily user count of just over 2,000, but should not be underestimated. ParaSpace, which advertises on Twitter with the slogan “borrow anything against everything”, was able to increase its sales the most and launched a successful campaign. With the help of the “Buy Now, Pay Later” principle, users can buy well-known NFTs, for example those listed on OpenSea and supported by ParaSpace, on credit.

Wondering how Buy Now, Pay Later (BNPL) works on ParaSpace? 🤔

We aggregate listings from other marketplaces like @openseaand let you take leverage your collateral credit line to snag your favorite Blue Chip NFTs supported in our marketplace 🔥 pic.twitter.com/aHePXE091n

– ParaSpace (@ParaSpace_NFT) April 17, 2023

According to BTC ECHO, the majority of sales are generated with NFTs from Bored Ape Yacht Club, Mutant Ape Yacht Club and Cryptopunk, i.e. the blue chip NFTs. This is certainly also the case, since many platforms only lend to known NFTs or valuable collections due to the lower risk.

Crypto Games: A Growing Market

However, investors can also use the value of their digital assets in crypto games, for example if they lend in-game items to other players for a fee. Platform DappRadar compares the idea of ​​using idle digital assets to add value to the principle of Airbnb, which became the world’s largest booking platform without ever owning a hotel room.
The play-to-earn sector has now reached over $1 billion in NFT trading volume and continues to grow in popularity. In numerous play-to-earn games, such as Axie Infinity, however, players must first make financial advance payments, which can prove to be a major hurdle. Using apps, players can borrow appropriate weapons for a fee in order to reach the next level. This development was pushed even further by rising energy prices, and so-called guilds were formed in the Philippines, for example, which set up lending services for in-game goods.

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