While some people applauded the decision, others said it was too centralized and put NFTs where they weren’t needed.
A nonfungible token (NFT) collector related how a luxury watch was used as security for a decentralized finance (DeFi) loan, and how the transaction was made possible via an NFT that represented the item.
On July 11th, anonymous CirrusNFT, a DeFi project adviser, described how a user was able to borrow $35,000 from another user by utilizing an NFT that represented a tangible object as security for the loan.
The executive claims that a user delivered a pricey Patek Phillipe watch to 4K Protocol, an escrow company that handles NFTs backed by tangible objects. After that, the business returned an NFT signifying ownership of the watch.
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The DeFi lending protocol Arcade then listed the NFT. Lenders presented their bids to the borrower after advertising the item. The user subsequently decided to take the greatest loan offer they could locate. The NFT was then transferred to an escrow wallet, where it would remain up until the loan’s complete repayment or until the borrower defaulted. The lender will receive the NFT if the borrower defaults on the loan. The watch can then be claimed by burning the paper.
According to CirrusNFT, this approach allows users to lend and borrow money completely anonymously. The process can be completed without the lenders and borrowers exchanging names. Additionally, the executive thinks that by facilitating access to greater global liquidity, rates may become more attractive to consumers.