NFTs have transcended from being just digital collectibles to becoming collateral for million-dollar loans. This week, a CryptoPunk holder secured a $2.75 million loan using the digital collectible. The non-custodial decentralized NFT lending platform GONDI was used to facilitate the deal.
CryptoPunks is one of the earliest NFT collections, created by software developers Matt Hall and John Watkinson in 2017. It comprises 10,000 unique 24×24 pixel art characters, each with distinct features and attributes, such as hairstyles, accessories, and facial expressions. Each CryptoPunk is a digital asset stored on the Ethereum blockchain.
The borrower, Seedphrase, used CryptoPunk #8348, a digital collectible with seven attributes (the only Punk with this many attributes), as collateral to secure the loan. Seedphrase bought the Punk in May 2020 for 85 ETH, valued at $18,102 at the time of purchase, and has not sold the collectible since then.
The loan has a six-month maturity and a 20% interest rate. Failure to repay the loan by the deadline entails the lending platform liquidating Seedphrase’s Punk collectible.
Expressing excitement for the latest loan and explaining how the loan will be used, Seedphrase stated:
“By collateralizing CryptoPunk 8348, I was able to secure $2.75 million in capital without relinquishing ownership of this historic NFT. This liquidity enables me to strategically deploy funds into the crypto markets, particularly as I potentially approach my fourth crypto bull cycle.”
Occurrences of NFT-powered loans are not a new trend in the industry. Other platforms and collectors have explored this feature to get the most from their digital collectibles. Last year, the Binance NFT marketplace incorporated a loan feature into its platform, enabling users to take crypto loans using NFTs.
Some months ago, Animoca Brands’ co-founder Yat Siu took a multi-million dollar loan using a 316-year-old violin he acquired for $9 million. The loan issuer, Galaxy Digital, created an NFT version of the stringed instrument.
Moves such as these prove that NFTs have diverse utilities and real-world applications. In the long run, this feature could attract more people into the NFT realm.
