What Is the Challenge of “Liquidation” for Unique NFT Collateral?
The main challenge is the lack of a deep, instantly liquid market. Unlike fungible tokens, a unique NFT cannot be sold immediately at a known price.
Liquidation requires finding a specific buyer, which can lead to significant price slippage or a failed sale, potentially leaving the lending protocol with a loss. This risk necessitates high overcollateralization ratios for NFT loans.
