Preface

Do you have a few high-quality NFTs sitting idle in your wallet—neither sold nor used—but don’t want to leave them unused? If so, you should know that NFT lending is no longer a thing of the future but a reality happening on-chain. In the past, NFTs were mostly seen as collectibles, but now more and more protocols allow holders to use NFTs as collateral to borrow crypto. This transforms a JPEG into a liquidity tool, enabling you to access funds without selling your beloved NFT.

What is NFT lending?

NFT lending works similarly to traditional DeFi lending: holders pledge assets to borrow stablecoins or other crypto assets, then repay the loan before the due date to retrieve the collateral. The difference is that traditional DeFi lending (like Aave, Compound) mainly accepts highly liquid tokens such as ETH or WBTC, whereas NFT lending uses high-value NFTs like Bored Ape, Azuki, DeGods, Pudgy Penguins as collateral. The purpose is clear—to unlock the value of NFTs and allow holders to access funds without selling their collectibles. For long-term holders, it’s a low-friction way to gain capital without losing the potential for future appreciation.

How does NFT lending work?

Currently, there are two main modes of NFT lending, with slight differences depending on the operation mode of the platform:

1. Peer-to-Peer Lending Mode

In this model, both lenders and borrowers are individuals, and the platform is just an intermediary.

• The borrower lists their own NFT and sets the desired loan amount, interest rate, and term.
• Lenders can choose projects to invest in on their own
• The contract is established as soon as both parties agree, and the NFT is locked in the platform’s smart contract.

Representing platforms: NFTfi, Arcade, Zharta

2. Pooling Mode (Peer-to-Pool Lending)

This method involves the platform pre-establishing a liquidity pool, allowing users to borrow funds instantly after pledging NFTs.

• Borrowers choose a pool that meets the criteria and lend funds immediately
• The platform determines the loan amount based on the floor price, automatic valuation model, etc.
• Reclaim NFT after repayment, otherwise it will be liquidated and sold upon maturity

Representing platforms: BendDAO, JPEG’d, Astaria

NFT Lending Process

The basic logic of the major NFT lending platforms is similar. The following are the operation steps:

Step 1: Connect your wallet

Connect to the platform using wallets supported by MetaMask, WalletConnect, etc.

Step 2: Choose the NFT you want to stake

The platform will display which NFTs support mortgage (usually limited to blue-chip projects with active trading and stable floor prices).

Step Three: Confirm Borrowable Amount and Interest Rate

The lending amount of each NFT varies, usually ranging from 30% to 60% of the floor price, depending on the platform’s risk control strategy.

Step Four: Sign the transaction, mortgage borrow coins

After confirming the conditions, sign and pledge the NFT, and the platform will immediately issue stable coins (such as ETH, USDC).

Step Five: Repayment and Redemption

Repay the principal + interest within the borrowing period to retrieve the NFT; it will be liquidated if overdue or if the collateral value is too low.

NFT Lending Risk Tips

Although the operation seems simple, the potential risks of NFT lending cannot be ignored, including the following points:

• Liquidation Risk

In a highly volatile market, if the NFT floor price drops too fast, it could trigger early liquidation.

• Variable interest rates

In particular, in the pool mode, interest rates will fluctuate with market demand, and may even suddenly soar.

• Wallet Security

All operations are based on smart contracts and self-managed wallets. If you accidentally connect to malicious websites or authorize risky contracts, there may be asset losses.

• NFT Market Liquidity

Even blue-chip projects can be affected in valuation and loan success rate if the market is tepid.

To avoid borrowers from being liquidated and losing money, use idle NFTs, control leverage, and select projects with high liquidity as collateral assets.

Conclusion

NFT lending is a common and real practice in the on-chain world. Holders don’t need to wait for the bull market to cash in their NFTs—they can use reasonable strategies to convert them into liquidity tools. But every collateral is a form of leverage; every loan is a risk decision. It’s essential to fully understand the logic behind it, choose platforms carefully, and set risk protections to ensure asset safety.