If you’re an NFT collector, then borrowing ADA against your NFTs might be a desirable option to help free up some liquidity that may not be normally available to you.
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Borrowing Use Case with NFT Collateral
For example, your NFT collection may be worth 100,000s of ADA according to the floor price of the NFT marketplaces, but it requires someone to actually purchase the NFT to realise that value. In doing so, you also could trigger a taxable event and you no longer have the NFT.
The alternative that Fluid Tokens provides is the ability to lock the NFT into a smart contract and borrow ADA against the current floor value of that NFT. This unlocks the value of that NFT without needing to sell the asset.
Benefit for the Lender
The party that is lending the ADA gets to earn extra interest on top of the ADA they have lent to you, and in the situation where the loan isn’t paid, they will gain ownership of your NFT to be able to recoup the funds on a marketplace.
As long as the value to loan ratio is favourable to the lender, they are safe to lend the ADA knowing they can sell the NFT in the event of an unpaid loan to recoup their lose from the unpaid loan and even potentially make a profit for doing so.
Benefit for the Borrower
The borrow gains access to extra liquidity for staking, DeFi plays, purchasing of NFT or other assets which may be flipped on secondary markets for a profit. Being able to free up liquidity with the unrealised value of NFTs is very appealing to NFT collectors.
How To Borrow ADA Using an NFT as Collateral
Follow these steps to borrow ADA on Fluid Tokens using an NFT as collateral. You can also use popular and verified fungible tokens such as $HUNT, $FLDT or others that are available on the platform.
It is important to keep in mind the floor price of the NFT or average token price of the collateral that is being used as it can become a risky loan as prices do fluctuate.
Click Borrow under Liquidity
Select an Asset
Read over the loan details
Confirm the asset
Set Your Loan Details
Confirm Your Transaction
Success
