Navigating into NFTs Lending: Exploring your asset potentials with Zexus
(The views and comments mentioned in this article are the author’s personal opinions and do not constitute any investment advice.)
Table Of Contents
(1) What is NFT lending
(2) Zexus lending pool
(3) User benefits
(4) Short-term gains cover borrowing costs- A possible option.
(5) TakeawaysNFTs represent a promising blockchain technology, providing holders with intrinsic value that is seamlessly integrated into application business models and tradable in the market. We see particular potential for NFTs in gaming, art, and real-world assets. In these applications, NFTs function as core assets, offering attributes such as recognition, accumulation, value transfer, and the potential for financialization.
Due to their non-fungible nature, NFTs possess scarcity and collectible value, making them suitable for mid to long-term investment holdings. Leveraging the established consensus prices in the NFT market, thanks to the presence of a floor price, we believe NFTs play a meaningful role as anchored assets in financial products. However, the non-fungible characteristics of NFTs may pose liquidity challenges in the market.
Therefore, as the demand for solutions addressing NFT liquidity issues grows, NFT lending protocols play a crucial supporting role in the expanding NFT market, adding financial value along the way.
What is NFT lending?
In simple terms, NFT lending refers to borrowers using their NFTs as collateral to secure loans. This concept is similar to traditional practices like home mortgages, car loans, or stock-backed loans, where the loan amount is determined based on the fair market value of the assets and is provided by the lender. However, in the context of Web 3, there are advantages such as transparent asset pricing and decentralized financial transactions, enabling borrowers and lenders to operate with greater flexibility and without the constraints of traditional financial institutions.
The category of NFT lending
According to the chart above, the current NFT lending market can be broadly categorized into four types, with Peer-to-Peer accounting for the largest share at 66.5%.
Zexus Lending protocol
In continuation of the previous section, we believe that a peer-to-peer model aligns best with the characteristics of NFTs and maximizes user demands. Therefore, the Zexus protocol is designed based on this concept. Our aim is to assist Web 3 users in unlocking greater possibilities from their digital assets.
Key Features:
1. Instant Loan: Liquidity providers can promptly process listed collateral.
2. NFT Bundling: As a borrower, you can request a loan by bundling multiple NFTs together.
3. Collateral Custody: Custody of collateral ensures the interests of both lenders and borrowers.
4. Data Insights: Transparent disclosure of NFT floor prices, valuations, and users’ transaction history provides valuable information for decision-making.
Intuitive Design
We prioritizes user experience, featuring a simple and intuitive interface with a clear and easy-to-understand layout of functionalities. This user-friendly design allows even beginners unfamiliar with NFT lending to quickly grasp the platform’s operations and engage in lending activities effortlessly.
Supports Wide Range of NFT Collections
We focus on embracing a diverse range of NFT assets as supported collateral, not restricted to specific blue-chips, to support a wider range user base.
User Benefits
Below we elaborate the benefits of NFT lending from the perspectives of both NFT holders and crypto holders.
From a NFT holder perspective:
Issue: Unrealized Losses Resulting in a Lack of Liquid Cash
Many NFT holders currently find themselves in a state of unrealized losses. Due to emotional attachments to these unique assets or confidence in the future rebound of their value, they are unwilling to sell and realize losses at this stage. Consequently, they face the cost of prolonged waiting and significantly reduce the turnover rate of their investment positions and potential profitability.
Solution: Becoming an NFT Loan Borrower
1.Leverage NFT for liquidity: Access liquid funds without selling your existing NFTs.
2.Emergency fund acquired: You can obtain funds in emergency situations without selling your NFT assets. This capability serves as a tool to address unexpected expenses or market volatility, allowing you to flexibly utilize your assets when needed.
3.Diversified portfolio: You can achieve the goal of a diversified investment portfolio by securing NFT loans, helping enhance your returns in the ever-changing crypto market.
From a crypto holder’s perspective:
Issue: Seeking investments with higher APR returns
Obtaining a high annual percentage rate (APR) is a goal for many cryptocurrency investors, especially those planning to hold certain crypto positions for the medium to long term. Incrementally increasing crypto holdings through a staking strategy is a common approach.
Solution: Becoming a NFT Loan Lender
1. Lend out idle Crypto positions to earn interest income: As an NFT loan lender, you have the opportunity to lend out idle tokens to other cryptocurrency holders and earn interest income.
2. The opportunity to acquire high-value NFTs at a lower cost:
By becoming an NFT loan lender, you have the chance to acquire high-value NFTs at a relatively lower cost. When other holders use their NFTs as collateral for loans, you can participate in auctions or acquire these NFTs through other means. This not only helps expand your NFT collection but also creates more opportunities for future value growth.
Short-term gains cover borrowing costs- A possible option.
One of the appealing aspects of the crypto market lies in its high short-term yields, especially during bullish trends, offering various avenues and themes for profit. Using NFTs held for the medium to long term as collateral for lending and then utilizing the funds for short-term investments can be an investment strategy as long as the short-term returns cover the short-term borrowing costs.
For instance, borrowing at an APR of 15%, for 14 days, translates to a cost of approximately 0.58%. Therefore, engaging in short-term trades that yield more than this cost presents a trading opportunity. Whether it’s trading cryptocurrencies, flipping NFTs, or short-term investments in GameFi, these are all viable investment options.
Why GameFi?
In Q3 2023, GameFi projects averaged 786,766 unique active wallets daily, a 12% growth from the previous quarter. The revenue of Web3 gaming projects in this quarter reached an impressive $600 million, bringing the total annual revenue to $2.3 billion. While this represents only 30% of the funds raised last year, it is crucial to closely monitor the unique market dynamics of 2023.
Looking at the performance in recent months, GameFi has shown the most competitive growth among all Dapps, surpassing projects in DeFi, NFT, and SocialFi. Additionally, according to the GameFi Project Number compiled by Footprint, there are over 3,000 GameFi projects in the market, with the majority on the BNB chain (30%) and ETH chain (25%), and this trend continues to grow.
A Simple GameFi gameplay example：Thetan Arena
Note: This is a simple calculation based on past prices, discussing the feasibility of earning short-term profits in GameFi. It is not investment advice.
- THETAN ARENA is a MOBA game that can be played on iOS, Android, and PC. In its first week of official release, it attracted an impressive four million players. As a blockchain game, this is considered a remarkable achievement. Players earn gTHC by winning in PvP matches, and another fast way to recoup investment is by selling rare NFTs directly on the secondary market when obtained from opening blind boxes.
- Estimate the lowest initial cost of purchasing NFTs to begin the game is 100 BUSD. With a win rate of around 50%, playing 100 games per week (average game time 5 minutes), you can earn an average of 10 gTHC per game.
- The exchange rate at the time is 0.4 THC/BUSD, allowing you to break even in a week. By selling NFTs at 657 BUSD, the total return is approximately 300%.
- In brief, as mentioned earlier, there are various short-term investment methods, and GameFi is a potentially viable option. Gamers can use short-term borrowing against NFTs to cover costs, targets quickly recouping the initial investment, and generating profits.
Takeaways
Through NFT lending, NFT loan borrowers can activate their idle NFT assets in exchange for short-term liquidity to fund new investments. As long as short-term gains can cover short-term borrowing costs, the transaction itself could hold potential profit. This strategy is an option, but lending comes with increased risks, requiring careful assessment of investment targets.
By becoming an NFT loan lender, you can earn fixed income as a way to accumulate funds for mid to long-term crypto investments. Since loans are secured by NFT collateral, you also have the opportunity to acquire NFTs at a lower cost and potentially earn capital gains upon future disposal.
We are optimistic about the applications of NFTs in various fields such as gaming, art, and the RWA sector, along with the increasing demand for peer-to-peer lending. This platform provides a marketplace to help digital asset holders unlock their asset potential and increase returns. Currently, the product is in the Beta testing phase. If you are interested in early access or have any questions, feel free to join our Discord and ask.
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