- A holder of Mutant Ape Yacht Club NFT took an NFT loan.
- They borrowed 1000 ETH which amounts to nearly $1.3 million.
- The loan repayment terms are 1044 ETH in 90 days on 18% APY.
NFT loans are gaining rapid popularity in the community. Though it is a new concept, we are slowly witnessing people taking out small and large NFT loans by collateralizing their NFTs.
In a recent incident, Fragment, the makers of Applied Primate Engineering, took a loan of 1000 ETH on his Mutant Ape Yacht Club NFT. Applied Primate Engineering is a storytelling project inspired by the BAYC NFTs.
As per the ETH market statistics, the loan value is currently approximately $1.3 million.
1000 ETH was borrowed against two mega mutants today on @arcade_xyz! The payback is set to be 1,044 ETH in 90 days (18% APY). Additionally the borrower (@fragmentxyz) has bought a third mega mutant from @machibigbrother pic.twitter.com/0dkWIVOGYo— 0xTIGΞR (@PltTiger) September 27, 2022
The borrower, Fragment put his Mutant Ape Yacht Club NFT #4318 as collateral for the loan. The loan has been issued for 90 days on 18% APY. The lenders behind this loan are Nexo and Meta4 NFT Lending.
It is a non-recourse loan, meaning that the lender can seize the collateral asset, which is the NFT, in case the borrower fails to make the payment in 90 days.
NFT lending is a financial concept that was introduced to increase the liquidity of NFTs and encourage people to capitalize on their digital assets.
In NFT lending a borrower puts up his NFT or multiple NFTs as collateral for the loan. The NFTs are locked in an escrow account powered by a smart contract for the duration of the loan. The entire loan process, agreements, terms, and conditions are executed through programmed and automated smart contracts.
The borrower gets back his collateral on successful repayment of the loan amount and interest within the set date as per the terms of the contract. If he fails to do so, the lender gets his collateral as payment.
Gabe Frank, CEO of NFT lending platform Arcade said,
It’s awesome to see these loans getting funded in this market climate, and more so that it’s happening all on-chain via DeFi,
Commenting on the loan, Fragment founder PTM said,
We’re building IPs around [Mega Mutants], starting with @AppliedPrimate, so we’re looking to have more Megas to participate in our universe,
The idea here was how do we get some cash fast to take advantage of an opportunity. Lending was the right call for what we needed,
As per the Arcade NFT lending platform, NFT lending has increased since June 2022. NFT borrowing activity reached $2.5 million in September 2022.
Experts observe that owners of blue chip and expensive NFTs like in this case Mutant Ape Yacht Club NFTs are opting for NFT loans. They are opting for NFT borrowing rather than selling to resolve their fund requirements and retain the ownership of valuable NFTs.