Ornella Hernandez

<div id="highlights-block_62fcdb453f067" class="highlights">
 <ul>
 <li>NFTfi is to become the first NFT lending platform to offer its users NFT rights management enabled loans</li>
 <li>Gnosis Safe recently rebranded to Safe following $100M raise</li>
 </ul>
 
</div>



The NFT lending protocol NFTfi and digital asset manager Safe, formerly Gnosis Safe, partnered to develop a new product for non-fungible token owners intended to provide added value to digital assets.



Usually, an NFT owner’s rights — to display an NFT, access token-gated content, sign transactions with it or receive an airdrop, for example — are tied to the blockchain address associated with the wallet holding the NFT.&nbsp;



When that digital asset is transferred out of that wallet, such as in the case of an NFT-collateralized loan or NFT rental, the holder may essentially be giving up physical ownership.&nbsp;



The challenge is to improve NFT rights efficiency. The solution proposed by NFTfi and Safe is an NFT Rights Management Wallet to allow Safe Ethereum wallet users to segregate and delegate certain rights and permissions associated with an NFT to other Ethereum addresses.&nbsp;



As part of the partnership, Safe announced an investment of an undisclosed amount in NFTfi, which will become part of the Safe product suite. Gnosis Safe recently rebranded to Safe following a <a href="https://snapshot.org/#/gnosis.eth/proposal/0x5187694133abfb3d140acce3b9ac2ecf033c657c816a18dc25d2e0c1a2a29ec7" target="_blank" rel="noreferrer noopener">community vote</a> to spin-off and a <a href="https://cms.blockworks.co/gnosis-spinoff-safe-gets-100m-to-further-ecosystem/" target="_blank" rel="noreferrer noopener">$100 million injection of capital led by 1kx</a> crypto fund.  



Web3 development studio BootNode led the technical implementation of the open-source NFT Rights Management Wallet product.



<h3 class="wp-block-heading">What are the benefits of a NFTfi NFT wallet?</h3>



Stephen Young, CEO of NFTfi, told Blockworks that the Rights Management Wallet is not use case specific, and that the long-term vision is to “usher in a new era of utility” and “unlock tremendous value for the entire NFT space.”



The immediate benefit for NFTfi, according to Young, is that it makes loans more convenient and cheap. If an NFT is used as collateral in a secured NFT loan, it is moved to an escrow third party wallet for the duration of the loan.&nbsp;



Programmable NFT assets plus rights management technology, on the other hand, would permit the NFT owner to delegate transfer rights to NFTfi, instead of transferring the asset for the loan period, while still retaining full NFT ownership.&nbsp;



As NFT financial products such as loans, liquidity tools and derivatives become more robust, NFTfi aspires to become the leading settlement layer for NFT financial transactions, added Young.&nbsp;



“It pursues a platform strategy in which external developers and teams can build agreement types, such as rentals or options, and use NFTfi&#8217;s existing distribution and liquidity to build profitable services on top” Young said.



Lukas Schor, the co-Founder of Safe, confirmed that the investment in NFTfi was not financed through the recent funding round because it occurred before the official spin-off from Gnosis and before the funding round was concluded.



When asked why Safe is focusing on NFT rights management, Schor said that Safe has already “gained significant traction with big treasuries” and that NFTs are an “important driver for retail users to adopt more secure self-custody setups.”&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“With NFTs we think the awareness of retail to seek out more robust options is much higher. Besides the monetary value, NFTs also have emotional, sentimental and cultural value which make them irreplaceable in case they’d get lost,” Schor added. </blockquote>



In a statement shared with Blockworks, Manu Garcia, the CEO and co-founder of BootNode said that the project will enable rights efficiency, “which is to NFTs what capital efficiency is to DeFi.”



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NFTfi Partners With Safe To Create First NFT Rights Management Wallet

<div id="highlights-block_62a8c3cc3fc60" class="highlights">
 <ul>
 <li>NFT-backed loan risk is higher amid falling NFT floor prices and ETH’s price</li>
 <li>Bored Ape Yacht Club NFTs have the highest cumulative total loan volume on NFTfi</li>
 </ul>
 
</div>



Celsius Network’s <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">move</a> to pause withdrawals, swaps and transfers has shaken up the crypto lending market. And, when the wider crypto market takes a downturn, the NFT market follows.&nbsp;



If an exchange as large as Celsius, which registered 1.7 million customers and reported over $20 billion in assets under management in 2021, can have liquidity issues, it emphasizes the importance of maintaining a tradable portfolio.&nbsp;



Despite most NFTs (non-fungible tokens) being illiquid, NFT lending has become a popular solution to accessing more cash. Essentially, NFT owners can collateralize their NFTs in exchange for cryptocurrencies or fiat, and the lenders who invest in NFT-backed loans may earn higher returns as compared to traditional crypto-backed loans or peer-to-peer (P2P) loans.&nbsp;



The two largest peer-to-peer NFT lending marketplaces are NFTfi and Arcade. The latter has disbursed $20 million in loans since it launched in January this year.&nbsp;



Among Arcade’s most recent deals: crypto lender Nexo, which issued a 1,200 ETH loan worth more than $3.3 million, via Arcade to an anonymous borrower who put up two CryptoPunks Zombies NFTs as collateral. The 60-day loan carries a 21% annual percentage rate (APR), <a href="https://www.bloomberg.com/news/articles/2022-05-03/crypto-lender-nexo-issues-loan-backed-by-cryptopunks-zombies#xj4y7vzkg" target="_blank" rel="noreferrer noopener">according</a> to Bloomberg.



At a time when NFT prices are under pressure both from falling floor prices and ETH’s price, “if the underlying collateral drops in value more than the loan value, the lender might incur a loss of principal,” a Nexo representative told Blockworks. Or the lender might not be able to sell the collateralized NFT at full market price in the event of a default.



Adverse market conditions led Nexo to hedge loan risk through partners such as investment manager Meta4 Capital that agreed to purchase the NFTs at a set price, the company said.&nbsp;



Brandon Buchanan, Meta4’s founder and managing partner, told Blockworks he remains long-term bullish on the NFT market.&nbsp;



While top-tier projects such as Bored Ape Yacht Club see regular daily activity, “liquidity has dried up for some projects, as there had already been several months of consolidation into blue-chip NFTs,” according to Buchanan, adding default rates in the lending market have increased slightly, but remain fairly low.&nbsp;&nbsp;



The largest NFT-backed loan to date was issued to 0x650d, the pseudonymous collector who withdrew at the last minute his lot of 104 CryptoPunk NFTs at Sotheby’s in February, for <a href="https://cms.blockworks.co/nft-whale-who-ditched-auction-of-104-cryptopunks-lands-8m-loan/" target="_blank" rel="noreferrer noopener">8.3 million DAI stablecoin on his CryptoPunks in April</a>. The loan, which was facilitated by NFT lending protocol MetaStreet on the NFTfi marketplace, has a 10% APR with a 90-day duration.



In the <a href="https://cms.blockworks.co/in-largest-ever-nft-backed-loan-101-cryptopunks-put-up-as-collateral/" target="_blank" rel="noreferrer noopener">second-largest NFT-backed loan at 8 million DAI stablecoin</a>, an anonymous borrower collateralized their collection of 101 CryptoPunks at an APR of 10% and a 30-day duration, also facilitated by MetaStreet on NFTfi.



NFTfi has handled about $165 million in NFT-backed loans so far in 2022 and has a cumulative loan volume of $206,911,303 across 12,119 loans since its 2020 inception, <a href="https://dune.com/rchen8/NFTfi" target="_blank" rel="noreferrer noopener">according</a> to Dune Analytics.&nbsp;



The firm <a href="https://twitter.com/NFTfi/status/1536412783398494208?s=20&amp;t=by-2-l6Tq61QSFveJOEvHw" target="_blank" rel="noreferrer noopener">tweeted</a> Monday that NFTfi users have unlocked over $30 million in loan volume using CryptoPunks.



When asked about its NFT lending strategy, Nexo said it will “fully hedge our exposure with partner desks” and focus on ETH lending, “where NFT prices incur lower drops and are more correlated with ETH prices.”&nbsp;



As for its outlook on the NFT market, the company expects many projects to drop their roadmaps and “a decimation rate of over 90% with Yuga Labs being the notable survivor.”



In fact, NFTfi reported last week that Bored Ape Yacht Club (BAYC) NFTs have the highest cumulative total loan volume on its platform, with an average loan size of 38.39 ETH. May registered the highest number of BAYC loans on NFTfi at 95 loans. The largest borrower put his BAYC #591 as collateral for 122.9 ETH.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true"><a href="https://twitter.com/hashtag/BAYC?src=hash&amp;ref_src=twsrc%5Etfw">#BAYC</a> <a href="https://twitter.com/hashtag/NFTs?src=hash&amp;ref_src=twsrc%5Etfw">#NFTs</a> officially have the highest cumulative total loan volume on our platform! <a href="https://twitter.com/BoredApeYC?ref_src=twsrc%5Etfw">@BoredApeYC</a> holders have borrowed more than $41M in wETH and DAI by collateralizing their <a href="https://twitter.com/BoredApeYC?ref_src=twsrc%5Etfw">@BoredApeYC</a> NFTs! Here is a 🧵about <a href="https://twitter.com/BoredApeYC?ref_src=twsrc%5Etfw">@BoredApeYC</a> on <a href="https://twitter.com/NFTfi?ref_src=twsrc%5Etfw">@NFTfi</a> so far👇 <a href="https://t.co/SkuiGb3Qr0">pic.twitter.com/SkuiGb3Qr0</a>&mdash; NFTfi.com (@NFTfi) <a href="https://twitter.com/NFTfi/status/1535328442224369666?ref_src=twsrc%5Etfw">June 10, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Nexo extended a formal <a href="https://cms.blockworks.co/nexo-knew-celsius-was-in-trouble-before-lenders-withdrawal-freeze/" target="_blank" rel="noreferrer noopener">offer to buy assets from Celsius</a> on June 13, claiming it was already aware of the lender’s troubles.



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NFT Lending Market Reveals a Need for Liquidity

Morgan Chittum

<div id="highlights-block_624b5f8e3bf06" class="highlights">
 <ul>
 <li>NFT financialization verticals include: lending, fractionalization, rental, pricing and aggregation</li>
 <li>NFT-backed loans could​​ “allow people more flexibility with how they use their capital,” Arca portfolio manager Sasha Fleyshman told Blockworks</li>
 </ul>
 
</div>



Rising sales volumes and adoption is the prevailing NFT market trend. But behind the explosive growth lies a bottleneck in the nascent space, which industry participants such as Matrixport Ventures’ Daniel Yan say could be alleviated by new financial layers.



Large brands such as Nike, Adidas and Louis Vuitton are jumping in on the blockchain-based collectibles trend, and the number of NFT (non-fungible token) buyers hit an all-time high of 895,000, according to data tracker <a href="https://cryptoslam.io/nftglobal" target="_blank" rel="noreferrer noopener">CryptoSlam</a>. But that’s not the whole story, Yan told Blockworks.



“When we talk about growth in the NFT market, we&#8217;re talking about the trading volume in marketplaces, primarily OpenSea,” Yan said.



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“Volumes are substantially higher [than a year ago], but what is not really growing concurrently with this is liquidity of NFTs.”</blockquote>



Take CryptoPunks. There are about 10,000 on the peer-to-peer market, each with its own price. “It&#8217;s pretty difficult to aggregate that liquidity,” he noted.



NFT financialization verticals such as lending, fractionalization, rentals, pricing and aggregation of the assets could help solve this, according to a <a href="https://www.matrixport.com/article/NFT-Financialization-Trends-and-Opportunities-" target="_blank" rel="noreferrer noopener">recent report</a> from digital asset firm Matrixport.



Peer-to-peer NFT lending platforms and liquidity providers include NFTfi, Arcade and MetaStreet. Since 2020, NFTfi has underwritten more than 5,000 loans and recorded $80 million in cumulative loan volume, per the report.



Arca portfolio manager Sasha Fleyshman told Blockworks that NFT-backed loans could​​ “allow people more flexibility with how they use their capital.”&nbsp;



Such loans, according to Fleyshman, could help people access the value of assets that have sharply appreciated but without selling them and potentially triggering taxable events. Many also become attached to their NFTs and don’t want to part with them.



Last week, MetaStreet and NFTfi facilitated the largest NFT-backed loan at $8.32 million for 104 CryptoPunks. The loan has a 10% interest rate (APR) with a 90-day duration, Blockworks exclusively <a href="https://cms.blockworks.co/nft-whale-who-ditched-auction-of-104-cryptopunks-lands-8m-loan/" target="_blank" rel="noreferrer noopener">reported</a>.



Nexo, a major crypto lender, also <a href="https://cms.blockworks.co/nexo-to-launch-nft-backed-lending-bitwise-debuts-an-nft-index-fund/" target="_blank" rel="noreferrer noopener">announced</a> it was launching an NFT-backed lending desk last year. The service, however, accepts only blue-chip collections such as Bored Ape Yacht Club (BAYC) and CryptoPunks right now.



Although industry participants are quickly exploring more financial layers of the asset class, NFT-backed lending makes up less than 1% of its total addressable market (TAM).



“The first step along that path is finding a solid baseline in the derivatives markets, which has been worked on right now — fungible representations of collections,” Fleyshman said. “And as that market expands — typically it&#8217;s 5 to 10 times bigger than spot markets…and solidifies, we&#8217;ll have a more liquid observable price, which protects the lending desks, which then allows them to offer more attractive rates.”



That, Fleyshman expects, will bring in more buyers.



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Solving NFTs’ ‘Liquidity Problem’: Can Financialization Help?

<div id="highlights-block_6247165f3c005" class="highlights">
 <ul>
 <li>The loan has a 10% APR with a 90-day duration period</li>
 <li>MetaStreet, which helped facilitate the loan, previously announced an NFT-backed loan of $8 million</li>
 </ul>
 
</div>



The pseudonymous consignor who <a href="https://cms.blockworks.co/sothebys-cryptopunk-auction-canceled-after-seller-withdraws/" target="_blank" rel="noreferrer noopener">withdrew</a> his lot of 104 CryptoPunk NFTs at Sotheby’s in February has taken out an $8.32 million loan backed by the same blockchain-based collectibles, Blockworks has exclusively learned.



The loan, which was facilitated by NFT (non-fungible token) lending protocol MetaStreet on marketplace NFTfi, has a 10% annual percentage rate (APR) with a 90-day duration.



The group of Punks, which were first acquired together in a single transaction by anon collector “0x650d,” have an estimated value of $20 million to $30 million, per a release from Sotheby’s <a href="https://cms.blockworks.co/sothebys-set-to-auction-off-104-cryptopunks-valued-at-20m-to-30m/" target="_blank" rel="noreferrer noopener">announcing the auction</a>.



The consignor pulled his lot minutes before the sale was slated to begin at Sotheby’s, shocking those in the New York auction room at the time.



Derek Parsons, senior press officer of Sotheby’s Americas, told Blockworks in a Feb. 23 email that the lot was withdrawn before the sale after “discussions with the consignor.”



“Shortly after pulling the Sotheby’s auction last month, I began looking for a way to retain my CryptoPunk exposure while simultaneously unlocking liquidity,” 0x650d told Blockworks in a statement.



Released in 2017 by studio Larva Labs, CryptoPunks currently have a floor price of $231,196 or 68 ether, according to blockchain data dashboard <a href="https://nftpricefloor.com/cryptoPunks" target="_blank" rel="noreferrer noopener">NFT Price Floor</a>.



&#8220;The demand for NFT loans keeps soaring and is testimony to the fundamental value borrowers and lenders ascribe to NFTs as a new asset class here to stay,” Stephen Young, founder and CEO of NFTfi, told Blockworks.



Collectors want to free up capital “more efficiently” and don’t want their assets to accumulate “virtual dust,” according to MetaStreet co-founder and CEO David Choi.



“I think [NFT] borrowing markets will just grow bigger and bigger, which means its purchasing power will increase,” Choi previously told Blockworks. “It’s like instead of putting all of your money into buying a house, you get a mortgage, which means you don’t have to pay that 90% until later. [With MetaStreet], I think we’re extending the purchasing power of the entire industry.”



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NFT Whale Who Ditched Auction of 104 CryptoPunks Lands $8M Loan

<div id="highlights-block_621e4c2b85abc" class="highlights">
 <ul>
 <li>The loan was completed by NFT liquidity scaling startup MetaStreet on lending platform NFTfi</li>
 <li>“By having an active borrowing and lending market [in NFTs], you create productive assets that are otherwise viewed as unproductive,” Conor Moore, co-founder of MetaStreet, told Blockworks</li>
 </ul>
 
</div>



In what has been billed as the largest-ever NFT-backed loan, an anonymous borrower just took out an $8 million loan <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/#Crypto-Collateral">collateralized</a> by their collection of 101 CryptoPunks.



The loan has an APR of 10% and a 30-day duration. It was facilitated by liquidity scaling solution MetaStreet on peer-to-peer lending platform NFTfi.



The financing is seen by industry participants as a bellwether of the future of lending secured by digital collectibles — a market expected to grow as institutional interest in the sector continues to build.



Conor Moore, co-founder and chief operating officer of MetaStreet, told Blockworks the loan is “orders of magnitude larger” than previous NFT (non-fungible token) financing. MetaStreet helped to complete another record-breaking loan last year — a $1.42 million loan collateralized by an Autoglyph.



Moore did not disclose the identity of the borrower, who he referred to as “whale,” or someone who holds large amounts of cryptocurrency.



MetaStreet, which has eight full-time employees, <a href="https://mirror.xyz/0x66ceac5EE8F093059C4BC9628C06e63076505B15/kpweCex6kclTrtbO-lkoPdu0jgl3B0IBLdjRbvsV4j8" target="_blank" rel="noreferrer noopener">secured</a> $3 million in seed financing and $11 million in initial protocol liquidity earlier this year. The firm provides a layer of financial infrastructure to NFTs, specifically lending protocols such as NFTfi and Arcade.



“It’s sort of like how Fannie Mae works in the US housing market. You&#8217;ve got a big aggregation vehicle through which originators can sell loans that then get batched up and split into different tranches,” Moore said. “Those different tranches allow for more optimal capital efficiency.”



NFT collectors, co-founder and CEO of MetaStreet David Choi said, want to free up capital more efficiently and don’t want their cryptoassets to accumulate “virtual dust.”



“I think [NFT] borrowing markets will just grow bigger and bigger, which means its purchasing power will increase,” Choi said. “It&#8217;s like instead of putting all of your money into buying a house, you get a mortgage, which means you don&#8217;t have to pay that 90% until later. [With MetaStreet], I think we&#8217;re extending the purchasing power of the entire industry.”



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In Largest-ever NFT-backed Loan, 101 CryptoPunks Put Up as Collateral

<div id="highlights-block_6202cca5fc708" class="highlights">
 <ul>
 <li>Bitcoin hit a three-month low of $33,708 Jan. 24, according to Messari</li>
 <li>OpenSea notched a record-high single-day trading volume last month of $261 million, according to Dune Analytics</li>
 </ul>
 
</div>





NFTs missed the memo that crypto markets were due for the doldrums to start in 2022.



Stephen Young, founder of NFT (non-fungible token) marketplace NFTfi, told Blockworks that typically people believe that “everything in crypto grinds to a halt” when markets dive.



But NFTs are now about “more than just financials,” Young said, adding that the digital collectibles are no longer tied to fluctuations in the price of ether.



Trading volumes for blue-chip NFT collections have remained steady, including <a href="https://cms.blockworks.co/bored-apes-dao-mulls-closing/" target="_blank" rel="noreferrer noopener">Bored Ape Yacht Club</a>, <a href="https://cms.blockworks.co/sothebys-set-to-auction-off-104-cryptopunks-valued-at-20-to-30m/" target="_blank" rel="noreferrer noopener">CryptoPunks</a> and Mutant Ape Yacht Club.



Noelle Acheson, head of market insights at Genesis, told Blockworks that NFTs now “move to a different investment thesis” than other cryptos.



“NFT investors are looking for more than price appreciation,” Acheson said. “The lack of tangible valuation parameters on NFTs make the investment more emotional, and that does not ebb and flow with risk sentiment.”



That is, in part, why the non-fungible market held steady as bitcoin notched a three-month low Jan. 24, trading at $33,708, according to crypto dashboard <a href="https://messari.io/" target="_blank" rel="noreferrer noopener">Messari</a>. Ethereum followed suit, hitting its cycle low the same day at $2,179.



Both cryptocurrencies are down more than 30% from all-time highs in November.


[stock_market_widget type=&#8221;accordion&#8221; template=&#8221;chart&#8221; color=&#8221;#5D25E5&#8243; assets=&#8221;BTC-USD,ETH-USD&#8221; start_expanded=&#8221;true&#8221; display_currency_symbol=&#8221;true&#8221; api=&#8221;yf&#8221; chart_range=&#8221;1mo&#8221; chart_interval=&#8221;1d&#8221;]



NFT marketplace OpenSea, meanwhile, hit record-high single-day trading volume last month at $261 million of ether, according to data from <a href="https://dune.xyz/rchen8/opensea" target="_blank" rel="noreferrer noopener">Dune Analytics</a>. The exchange eclipsed 546,000 active users last month in another historic high.



The nascent space is bound for a market correction within the next year, Young said, adding that the “money grab projects will die,” but the broader market will not.



“[NFT] prices are a bit crazy, so we are in [a] kind of bubble and frothy stage of the market,” he said. “[NFTs] are just disconnected from the bubble in the crypto markets. The [number of NFTs] will just continuously increase. At some point, there&#8217;s not going to be enough new people buying to be able to absorb that supply.”



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