How Does a “Peer-to-Peer” NFT Lending Protocol Work?
In a peer-to-peer NFT lending protocol, individual lenders offer loan terms (interest rate, duration, loan-to-value) against a specific NFT offered as collateral by a borrower. The smart contract acts as an escrow, holding the NFT until the loan is repaid.
If the borrower defaults, the smart contract automatically transfers the NFT to the lender, bypassing any centralized intermediary.
Glossar
Smart Contract
Code ⎊ The contract is fundamentally self-executing code deployed on a distributed ledger, embodying the terms of the agreement in an immutable format.
Lending Protocol
Collateral ⎊ Lending protocols within cryptocurrency represent a paradigm shift in capital allocation, functioning as decentralized marketplaces facilitating loan issuance and acceptance against deposited digital assets as security.
NFT
Provenance ⎊ Non-Fungible Tokens, within cryptocurrency markets, represent a unique cryptographic token linked to a specific digital or physical asset, establishing verifiable ownership and authenticity.
Nft Lending
Collateral ⎊ Nft Lending represents a novel approach to liquidity provision within decentralized finance, utilizing non-fungible tokens as underlying assets securing loan positions.