‘$ 25 million in loan for monkey pictures’: Arcade wants you to provide security for your NFT

NFT collectors, who are no longer content to just use tokens like NFTs as status symbols, are finding a way to leverage their favorite digital art as collateral for loans. One platform that makes this possible is Arcadea peer-to-peer liquidity protocol for NFTs.

NFT collectors use platforms such as Arcade, NFTfi and Drops to leverage the value of their holdings to unlock short-term liquidity instead of selling it for a one-time payment.

“Put your NFTs to work,” encourages Arcade’s website. “Loans and loans against valuable NFT assets.”

Arcade founder and CEO Gabe Frank told Decrypt how it works in an interview at the Consensus in Austin, Texas. “If you own an NFT that is 100 ETH in value, we have a team that will evaluate it and value it, “said Frank.” Then a lender will decide on a loan rate on an APR rate and a duration. “

Frank is a third-generation mortgage lender from Texas who turned his attention to NFTs and Web3 in 2016, so he knows a thing or two about valuing an object. NFTs are the blockchain-based tokens that show ownership of digital or physical assets, and it has largely been difficult and controversial to value them.

According to Frank, the loans Arcade arranges for non-recourse loans. A non-recourse loan is a loan where a lender can seize the loan security in the event of default.

If security for NFTs sounds like a bad idea, Arcade is aware of the risk of default by borrowers. “If the borrower defaults, the lender has a chain claim on the security of the protocol,” Frank says. “So the lender can claim the assets, unpack it and then sell it if they have to, or keep it on the balance sheet.”

Frank says that Arcade cannot access the NFTs, and everything happens through smart contracts. “We’re just the software,” Frank says. “We believe the best way to get liquidity out of this asset class is in a peer-to-peer way because lenders have different risk profiles, want different assets and have different risk appetites.”

Frank says that there is a growing market for security for NFTs, and adds that Arcade has “blue chip” NFTs worth 25 million dollars locked in deposit. He estimates that the NFT industry has seen $ 200 million in loans taken out against NFTs.

And if you follow NFTs a little more, you can probably guess which collections are secured: “We’ve made $ 25 million in loans for monkey pictures. That’s what NFTs look like today. It’s Bored Apes, it’s CryptoPunks. “

Do you want to become a crypto expert? Get the best from Decrypt right to your inbox.

Get the biggest crypto news + weekly summaries and more!