How Does the Concept of "Interest Rate" Apply to NFT-backed Loans? ▴ Learn

How Does the Concept of “Interest Rate” Apply to NFT-backed Loans?

The interest rate is the cost of borrowing the fungible cryptocurrency, paid by the borrower to the lender. Due to the higher risk and illiquidity of the NFT collateral, interest rates for NFT-backed loans are typically much higher than for loans backed by highly liquid fungible tokens.

The rate can be fixed (peer-to-peer) or variable (pool-based), reflecting the supply and demand for capital.

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