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Borrower Secures $35,000 DeFi Loan with Luxury Watch-Backed NFT as Collateral

11 July 2023
in News, NFT
Reading Time: 4 mins read
108 2
Home News

Luxury watches are now being used as collateral for DeFi loans via the integration of non-fungible tokens (NFTs). CirrusNFT, a pseudonymous NFT collector, shared a story on July 11, 2023, that highlighted how an anonymous borrower successfully secured a $35,000 loan on Arcade, a DeFi protocol for NFT lending.

Coolest thing I saw on chain this week was a lender giving a stranger a $35,000 loan at 12% APR using a Patek Phillipe as collateral

Borrower sent the watch to an escrow company who then sent back an NFT that represents ownership of the watch

Borrower then listed the NFT on… pic.twitter.com/RZnIHX1DGQ

— Cirrus (@CirrusNFT) July 10, 2023

According to CirrusNFT, the borrower approached, 4K Protocol, a physical asset authenticator and escrow company, with a valuable Patek Phillipe watch, seeking a DeFi loan. 4K Protocol accepted the watch as collateral and issued an NFT symbolizing ownership of the timepiece.

Using the NFT as collateral, the borrower turned to Arcade to list the NFT and attract potential lenders who then competed to offer the best loan terms. After careful consideration of the offers, the borrower selected the highest bid.

After the deal was finalized, the NFT representing the luxury watch was transferred to an escrow wallet that held it until the loan was fully repaid. In the event of default, it was agreed that the lender would take possession of the NFT and claim ownership of the physical watch.

CirrusNFT noted that the lending process was anonymous and that both lenders and borrowers could participate without disclosing their identities. The NFT collector expressed his belief that this technique could increase access to global liquidity and foster more competitive interest rates.

Many community members were impressed and endorsed this Web3 lending process. Some even suggested that this lending model could be applicable to other assets, such as real estate. 

Really like what you guys are doing, this can do almost with real estate in the near future as well, I guess have to send in title and pictures for that kind of thing.

— CryptoBeast32 (@Cryptobeast32) July 11, 2023

However, concerns were raised about potential issues of excessive centralization and the introduction of NFTs in situations where they may not be necessary.

It’s creative but seem very centralized to me. This is basically a pawn shop but adding NFTs where it’s not needed.

— David (@ChalupaBatmanGG) July 10, 2023

This recent development demonstrates the expanding potential of NFTs beyond the digital realm. It also raises expectations about how this innovative technology will transform traditional financial systems and empower individuals in new and unique ways

 

If you want to read more news articles like this, visit DeFi Planet and follow us on Twitter, LinkedIn, Facebook, Instagram, and CoinMarketCap Community.

“Take control of your crypto portfolio with MARKETS PRO, DeFi Planet’s suite of analytics tools.”

 

 

 

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Durotimi Aribisala

Durotimi Aribisala

Durotimi is a writer who is interested in writing about emerging technologies such as blockchain, Web3, crypto, and AI. He studied business administration and management. He desires to be an entrepreneur and movie director sometime in the future.

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