How Does an NFT Lending Protocol Handle Partial Loan Repayment?
An NFT lending protocol handles partial repayment by updating the borrower's outstanding debt and recalculating the loan-to-value ratio within the smart contract. This reduces the risk of liquidation for the borrower and lowers the total interest accrued.
The NFT collateral remains locked in the contract until the full principal and interest are repaid.
Glossar
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.
Principal and Interest
Principal ⎊ Principal and Interest constitute the two fundamental components of a crypto loan obligation, where the principal represents the initial amount of cryptocurrency or stablecoin borrowed by the user.
Partial
Fraction ⎊ In cryptocurrency derivatives, a fraction denotes a proportional share of an underlying asset or contract, frequently encountered within collateralized debt obligations (CDOs) or tokenized real-world assets.
Lending Protocol
Service ⎊ A Lending Protocol automates the process of connecting providers of capital (lenders) with users requiring capital (borrowers) through smart contracts that enforce collateralization and interest rate mechanisms.
Repayment
Obligation ⎊ The concept of repayment, within the context of cryptocurrency derivatives, options trading, and broader financial derivatives, fundamentally denotes the transfer of assets or funds from a party obligated to fulfill a contractual commitment to the counterparty entitled to receive them.
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.