@gwendolynais
How do NFT lending and collateralization work?
NFT lending allows users to use their NFTs as collateral to borrow cryptocurrency. Platforms like NFTfi and BendDAO enable this by assessing the NFT’s value and issuing loans based on a percentage of that value. If the borrower fails to repay, the lender can claim the NFT. This system provides liquidity without selling the NFT, allowing holders to access funds while retaining ownership. However, fluctuating NFT prices pose risks, as volatile markets may lead to liquidations. Proper risk management and choosing reputable lending platforms are essential for safe participation in NFT lending.
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