NFT-backed loan are becoming more popular, just like DeFi loans. A CryptoPunk anonymous owner was able to borrow over $3.3million using two of his avatars.

Nexo, a crypto lending platform issued the loan at an interest rate of 21% annually. The loan was arranged by several parties including DeFi, NFT lending platform Arcade as well as investment manager Meta4Capital. “With this multi-lateral partnership, we are demonstrating the merge between traditional, decentralized, and crypto finance,” said the chief of DeFi strategy at Nexo, Kiril Nikolov.

Bloomberg reported that this transaction is a demonstration of how sophisticated NFT-lending markets have become.

This complex arrangement was made with Nexo. Nexo is a central crypto lender. Arcade is a peer to-peer marketplace that facilitates NFT lending.

NFT-backed loans can be compared to traditional loans. The digital asset is used as collateral. Nexo users have instant liquidity to receive between 10% and 20% from their CryptoPunk, Bored Ape yacht Club NFT.

The liquidity will be in stablecoins and ETH. NFTs cannot be liquidated, even though their value decreases after funds are borrowed. The rates in NFT markets are often lower than traditional finance. These rates vary based on whether the NFT is being offered and market conditions.

The lender can recover the NFT from a borrower who fails to repay the loan or interest within the time period.

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