Binance Launches Its NFT Lending Initiative
In Brief
Binance has introduced a new program allowing for the lending of Ethereum NFTs.
Through this initiative, NFT owners can secure loans by placing their NFTs as collateral in a peer-to-pool lending system. It's important to note that loans must be backed by collateral that exceeds the total borrowed amount.
Binance, as the premier crypto exchange by trading volume, has officially announced a lending program geared towards Ethereum non-fungible tokens. Utilizing NFTs as collateral, users can take advantage of a peer-to-pool loan structure to access necessary ETH.
Holders of non-fungible tokens are required to over-collateralize their loans, ensuring that the combined worth of their NFTs is greater than the sum borrowed. These loans do not have a fixed repayment term, allowing for extended borrowing periods.
A loan may be subject to liquidation based on a metric referred to as the 'health factor.' Binance defines this as: 'Health factor = (floor price of NFT * liquidation threshold) / total debt plus interest.'
If the combined value of the floor price of an NFT collection and the liquidation threshold equals or falls below the outstanding debt plus interest, it triggers a liquidation event. This process occurs through a Dutch Auction mechanism when the health factor hits the value of '1.'
Currently, this program accommodates prestigious NFT collections such as Bored Ape Yacht Club, Mutant Ape Yacht Club, Doodles, and Azuki, which are considered blue-chip.
"With our low fees and the reliability of Binance, the introduction of NFT Loans presents a fresh avenue for liquidity. This allows NFT holders to engage in the market without relinquishing their valuable digital assets,\" remarked Mayur Kamat in a press announcement.
The operational model of this lending program shares similarities with that of NFT marketplace Blur, particularly in terms of user experience. Borrowers may find the unlimited loan duration particularly advantageous.
Read more related articles:
- The renowned NFT project Azuki has launched the Physical Backed Token.
- Magic Eden has rolled out its Ethereum NFT marketplace, ETH Genesis, which is currently in beta.
- Vivienne Tam is showcasing blue-chip NFTs during New York Fashion Week.
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