The art and collectible markets are considerably more “liquidity-starved” when compared to the global equity, gold markets, and other assets.
And this problem is even more prevalent in the NFT market, which is its early stages of development. It might take a long time to reliably match buyers and sellers or lenders and borrowers. Without adequate liquidity, NFT owners may have no choice but to sell their assets at extremely low prices should they require funds at any time.
A project called Drops enables such non-fungible token (NFT) owners to raise capital by putting their NFTs up as collateral. Lenders are able to take advantage of an opportunity to earn decent returns without being concerned about repayment issues, since the loan is reportedly being backed by an NFT that equals or exceeds the loan amount (in total value).
As mentioned on its official website, Drops.io aims to facilitate loans for NFT and DeFi assets. The project intends to provide users with options that give them more leverage on their assets for loans as well yield farming.
With Drops, users may borrow against DeFi and NFT-related assets. As noted by its developers, you may reduce the opportunity cost of “holding governance, liquidity tokens by supplying them as collateral to earn additional yield.”
You can also use NFTs as collateral to “obtain trustless loans.” Lending via Drops is being powered by permissionless NFT lending pools. Additionally, users can earn with their “idle” assets by supplying stablecoins, governance tokens to fungible or NFT lending pools and “earn attractive APYs.”
There’s more utility for NFTs as Drops brings “DeFi-style infrastructure” to NFTs, adding utility to idle NFT assets. Users are able to leverage their NFTs to “obtain loans and earn real yield, reducing the opportunity cost of holding NFTs long-term.”
As explained by its developers, the Drops infrastructure could become “increasingly important as we witness the rise of ‘financial’ NFTs – an expansion of the space beyond digital artwork into more tangible financial instruments.”
As noted by its development team, NFT lending pools on Drops are beneficial for a wide range of users. Anyone may create an NFT Lending Pool by “specifying accepted NFTs and amounts that can be borrowed against them.”
Users that may be looking for yield may supply liquidity via Drops to NFT lending pools and “back assets they believe in.” Collectors may supply NFT with stablecoins and “get matched with the best rates lending pool,” the developers noted.