How to Borrow Ethereum Using Your NFT Collection

  • As with any investment, always do your research first before buying bitcoin…

Non-fungible tokens have overtaken the financial world, enabling artists to monetize their otherwise undervalued work. Binance, the leading cryptocurrency exchange worldwide offering products from pioneering Bitcoin to the hottest releases, has developed a service to meet this demand. It has always supported innovation in blockchain, cryptocurrency, and non-fungible tokens, developing different programs to enable participants to take advantage of new opportunities to improve their financial portfolios. One example the world is witnessing today is the newly-launched feature of NFT lending, aimed at enabling cryptocurrency enthusiasts to invest in Ethereum with their non-fungible tokens while continuing to own the digital artifacts instead of selling them outright.

The popular cryptocurrency exchange provides a far-reaching suite of offerings designed to enable customers to have a user-friendly and seamless experience using the platform, with the Binance NFT Loan joining the products. At the moment, you can only invest in Ethereum, the second cryptocurrency by market capitalization after Bitcoin, so if you deem the price and performance of the leading digital token more appealing, you can opt for other investment ventures. Another noteworthy mention is that the provider only currently accepts several non-fungible tokens. However, as the service improves, more offerings may be considered.  

So, what should you know about NFT loans, and how can you add Ethereum to your holdings without powering money into them?


What do NFT loans bring new?

Ethereum has caught the eye of millions of investors due to its potential to provide significant earnings and act as an excellent store of value in the long term. It comes as no surprise that this lucrative investment would gain the attention of increasingly more individuals seeking to profit from the new technology, blockchain, thus making cryptocurrency exchanges find new ways to allow users to add it to their portfolio without paying money for the specific amount directly. Therefore, NFT owners can now turn their digital artifacts into cryptocurrency without converting them into money. Simply put, if you own non-fungible tokens but want to trade them easily and in a timely-saving manner, you can resort to this option and reshape your investment portfolio in a few simple steps after registering on the platform.

Binance enables NFT owners to leverage their investment as collateral to borrow Ethereum from lenders. The service basically empowers anyone who holds the specific NFT accepted to unlock their value without converting them into money. This way, loans can be secured quickly and made available to NFT creators and collectors who don’t want to miss Ethereum’s underlying appreciation since prices are in a good spot and should continue to behave well. The freshly released service combines DeFi and NFTs so that both borrowers and lenders benefit from the endeavor.


How can you invest in Ethereum through NFTs?

There are several easy steps to take in order to borrow Ethereum through your non-fungible tokens. First, you’ll have to access the platform and create a free user account, in case you don’t already have one. Make sure to use a strong and complex password unrelated to any personal date or name to improve the security of your account. A good example should include letters, numbers, and symbols chosen randomly. Secondly, you’ll connect your wallet and select the non-fungible token you’re willing to use as collateral.

At the moment, borrowing Ethereum on Binance is only accessible through four NFT collections: Doodles, Azuki, Mutant Ape Yacht Club (MAYC), and Bored Ape Yacht Club (BAYC). The list of NFT collections accepted may be expanded in the future, as the global company stressed plans to include more assets on the list of borrowable assets.

The whole process of lending NFTs for Ethereum is intended to be simple and intuitive, giving you the gift of time so that you can deposit and retract funds whenever you wish.


How is the interest rate for the loan calculated?

The platform’s protocol will calculate the floor price of your asset and will establish the maximum amount of Ethereum you can get. The receivable amount is further calculated through the NFT floor price and the Loan-To-Value ratio. The platform uses Oracle Pricing, an OpenSea and Chainlink system, to determine the right value of digital assets. Afterward, you’ll be provided the interest rate, which relies on the platform’s internal algorithm and is vulnerable to fluctuations depending on the market’s performance and risk parameters.

The interest rate changes daily, so make sure you’re up to date with the latest transformations by accessing the related webpage left at users’ disposal. When the interest rate grows, so does your overall cost of the loan.


What are the advantages of Binance’s NFT loan?

As stated above, the whole scope of the company’s move is to enable users to unlock the value of their digital artifacts at any desired moment without putting them on the marketplace outright. There are several advantages that the company delivers through the service, like the possibility to cash in on the non-fungible token held as they rise in value. Using them to secure a loan gives you an advantage in cryptocurrency and NFT. At the same time, the borrowing process occurs within seconds, providing NFT owners with quick liquidity. The developed feature aims to improve platform security while conducting transactions easily and quickly.

Binance, a platform known for having low fees, has punched well above its weight and includes no fees for users borrowing Ethereum with NFTs. Besides attracting and retaining users, The feature aims to improve the platform’s efficiency, as it helps decongest the network when the traffic is abundant, preventing gas fees from soaring excessively and impacting the investments’ profitability.


Last words

Binance brings something new and exciting to the table through the recently-released NFT loan service. However, just like with cryptocurrencies and everything else in this immature market, you should completely understand the risks and advantages and balance them before proceeding. Some of the most prominent risks you’re exposing to with this approach are the price volatility and fluctuations in the interest rate.


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