Binance, the world’s largest crypto exchange by transaction volume, has launched a new feature for non-fungible tokens (NFTs). These unique assets represent anything from art, music, and gaming items. Binance is now allowing users to borrow crypto using their NFTs as collateral. This feature aims to provide a new dimension to NFT use cases.
One of the benefits of using NFTs as collaterals is that users can access liquidity without having to sell their valuable digital assets. Users can keep their NFTs and enjoy their appreciation while also borrowing crypto to fund their other needs or investments. Another benefit of using NFTs as collaterals is that users can diversify their portfolios and exposure to different types of assets
Included NFT Projects
The new feature, called Binance NFT Loan, is currently available for borrowing Ethereum . At the moment, only blue chip NFT projects are allowed to be used as collateral such as Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), Azuki and Doodles. More NFT projects are expected to be included in the future.
How Much Can Be Borrowed?
The new Binance feature will give quick crypto loans without surrendering the borrower’s NFT. For a secure experience, Binance NFT will act as the loan pool, in a feature called “Peer to Pool”. The amount of Ethereum that can be borrowed depends on the NFT collection’s floor price. The floor price is calculated by Binance’s Oracle Pricing using data from different sources like OpenSea and Chainklink.
Binance Just Added a New Use Case for NFT Projects
According to a survey by Coingecko, NFT holders buy their digital assets for utility and expectation of profit. Binance NFT just gave them both. Using an NFT as collateral will give it both utility and a tool to make profits. The user is free to do whatever he wants to the loaned ETH, but we can expect it to be used for trading or staking,
NFTs has many use cases and it is good that we are finding new ways to utilize them A lot of NFTs are now being used as representations of real-world assets like diplomas and even court summons. Using it as collateral for a loan means that it is now being used as a store of value. This puts NFT at the same level as real estate properties, vehicles, artworks, and jewelry. Not bad for an asset class that started as jpegs.
Read the Binance announcement here.
Featured Image from Pixabay
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