Overview of How NFT Lending Works

Presentation Script on NFT Loan
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Overview of How NFT Lending Works
The concept of decentralization is common in modern financial technologies. It is best to look at NFT lending as a decentralized platform where borrowing is based on non-fungible tokens. The NFT digital assets are uniquely designed and have blockchain technology at the backbone (Popescu, 2021). The following is an overview of how the NFT lending platform works. The first step is that the borrower creates an account on the platform. After creating the account, a smart contract can be initiated where a customer deposits their NFTs into the platform. The second step involves the lender going through the platform. The lender can then select some NFTs that they can lend against. The general principle applied in lending is that the lending must be equal to or greater than the value of the NFT.
The third step involves the disbursement of the loan. Once the loan issuance happens, the transaction becomes locked according to the details coded in the smart contract. The last step involves repaying the loan. Here, the borrower must pay the loan and the interest charged. Once the loan has been repaid in full, the ownership of non-fungible assets is transferred back to the borrower. In light of these observations, the NFT loan platform is a decentralized method of offering loans using blockchain technology. This fintech technology employs the use of smart contracts, which is an increasingly common phenomenon in the modern finance industry.
Key Discussion Points
Peer-to-peer model
Peer-to-peer network refers to the concept of individuals carrying out financial transactions over a network without the involvement of an intermediary. In the context of the NFT platform, a borrower can receive money from a lender without selling their NFT (Moringiello & Odinet, 2022). Therefore, the NFT is only used as a collateral. Consequently, this form of loan can be greatly helpful in situations where a borrower needs short-term funding. It may also help in situations where a borrower gets an emergency, as they can gain funding without letting go of their NFT. As with many digital assets, however, there are some risks associated with these digital assets. One of the risks is that they may lose value quickly (Canepa et al., 2022). Such loss of value may force the borrower to sell their NFT at a loss in order to settle their loan obligations. 
Perpetual Peer-to-Peer
The perpetual peer-to-peer concept introduces an exciting twist to NFT loans. Perpetual P2P lending describes a model where the lending is indefinite. There is no predetermined duration for the loan to be repaid (Blockworks, 2023). Therefore, the borrower can take an indefinite duration provided that they continue servicing their loan according to the contract terms. Consequently, this model is great for borrowers who need long-term financing. It is also an excellent way for lenders to accumulate passive income for an extended time. Two main risks are involved here. The first is that the collateral may decrease in value over time. The second is that the borrower may default. This form of lending was introduced by Blur (Blockworks, 2023). In this model, the lender can sell the loan or even trigger liquidation in cases where they may be convinced that their principal is at risk. If the lender decides to sell the loan, the...