NFTFi Launches as the ‘Pawn Shop for NFTs’

As non-fungible tokens, more commonly known as NFTs, become more popular, investors are finding new ways to leverage money from them.

One of those ways is NFTFi, a peer-to-peer lending platform that analysts have referred to as a “pawn shop for NFTs.”

It works like this: People who own NFTs can essentially mortgage them in exchange for other cryptocurrencies that they can sell for cash. All the while, the NFT is protected, provided the borrower can pay the loan.

NFTFi has apparently handled over $12 million in volume since it launched last June, with loans averaging $26,000 and reaching as high as $200,000. These loans do come with some risks, with default rates in the neighborhood of 20%.

In one instance, a trader borrowed 3.5 ETH (about $12,000) on NFTFi using an NFT that had sold for 3.25 ETH as collateral.

But over the next three months, the value of NFTs from the same collection jumped to $340,000. When the borrower failed to repay the loan on time, the NFT, now worth much more than the initial loan, was seized.

Read more: Coinbase Creating NFT Marketplace

This week also saw the cryptocurrency exchange Coinbase announce it will launch a marketplace for non-fungible tokens that will let users mint, collect and trade the coins.

Coinbase’s NFT marketplace, called Coinbase NFT, will also include what company leaders refer to as “social features” and will tap into what’s known as the creator economy, people who earn revenue posting videos and other content online.

The NFT market surpassed $10 billion in transaction volume in the third quarter of this year.