Here’s What You Need To Know About P2P NFT Lending in GameFi
There’s no question that GameFi has changed the world of gaming forever. The idea of play-to-earn (P2E) revolutionizes the inherent relationship between developers and players from the traditional pay-to-play or play-for-free gaming models. With more than 50% of all cryptocurrency wallets now connected to GameFi apps, the shift towards GameFi speaks for itself.
After assuming center stage in the blockchain gaming world with its revolutionary P2E gaming model, GameFi’s potential has been further bolstered by NFT-enabled P2P lending. That’s probably enough acronyms to make your head spin, right? Simply put, P2P NFT lending is creating more financial opportunity for gamers by allowing them to monetize unused in-game resources.
P2P NFT Lending — A Secondary Loan Market
Just when blockchain gamers started discovering the power of GameFi, decentralized P2P NFT lending took the industry a step further by offering gamers a secondary loan market.
P2P NFT lending is the practice in which gamers can access loans by collateralizing their valuable in-game NFT assets such as avatars, land, costumes, weapons, gold, pets, and more. Gamers acquire these items through gameplay and typically have a few options available to convert their unused assets into income:
- Players can put their assets to use in play-to-earn games, thereby generating more NFTs or leveling up their current assets.
- Players can trade their NFT assets on marketplaces for cryptocurrency. This can then be traded for other tokens or exchanged for fiat currency.
- Players can hold onto assets in the hope that its value will increase over time.
- Players can lend their assets to less powerful players in exchange for interest payments. After the lending period reaches maturity, the NFT will be returned to the lender who can then continue to lend the NFT or choose another monetization option.
Now that we’ve laid out the options, let’s go ahead and explore how P2P NFT lending actually works.
How P2P NFT Lending in GameFi Works — The Kyoko Example
Kyoko.Finance offers a peer-to-peer (P2P) lending platform for NFTs for both guilds and players. Kyoko’s guild-to-guild lending, P2P NFT lending, and cross-chain asset lending platforms aim to solve the most pressing issues challenging the GameFi market, including the rising cost of entry and siloed in-game assets across different blockchains.
On Kyoko’s P2P lending platform, players can deposit in-game NFT assets as collateral and customize the lending terms for the NFT. Borrowers can then come to the platform, find their desired asset, and strike an agreement with the lender to borrow the asset in exchange for interest payments.
How It Works
Let’s consider the following example. Alex has one Bored Ape Yacht Club, which is currently worth about 100 ETH. Alex needs funds right now but doesn’t want to sell the Bored Ape Yacht Club right away, because he believes the future value of the Ape will be higher. Alex can place an order on the P2P platform, collateralize the Bored Ape Yacht Club, and then borrow 60 ETH for a period of one week at an interest rate of 12%. As the borrower, Alex has the ability to customize his loan terms according to his needs — albeit the more beneficial the terms are for him, the less likely his loan is to be picked up by a lender.
Let’s say another user, Bob, has spare money and thinks that the interest rates seem attractive. Additionally, he expects that the price of Bored Ape Yacht Club will not fall below 60 ETH in the short term. Therefore, he accepts the order and lends 60 ETH to Alex.
Alex will pay back 60 ETH plus interest a week later, and in return he will take back the Ape. Bob receives the funds and interest. If Alex fails to pay the money back after a week, the system will directly transfer the Bored Ape Yacht Club to Bob.
How Is P2P NFT Lending in GameFi Different from Crypto P2P Lending?
GameFi P2P NFT lending and its predecessor, P2P crypto lending, surely aren’t apples and oranges. Though, despite the fact they are often used interchangeably, P2P NFT lending is different from P2P crypto lending. The underlying principle in both models is the same: they are both blockchain-based lending protocols in which borrowers can use assets as collateral to come to an agreement with a lender. This means they build on the same timeless peer-to-peer model, which leverages smart contracts to make the entire process more seamless by reducing delays, eliminating the need for middlemen, and ensuring greater transparency.
The key difference lies with the collateral — in this case, cryptocurrency vs. NFTs. While cryptocurrency could be directly exchanged for other tokens via centralized and decentralized exchanges, NFTs offer a different kind of value because markets are not as liquid, and they cannot be easily traded for each other. NFTs are unique representations of real-world assets, albeit in the form of in-game items. Because of this, NFTs are typically harder to use in a productive manner, while cryptocurrencies can be staked, lent, or otherwise put to work to generate yield through other means. It is precisely because of this that NFT lending markets find their value and are quickly becoming a more popular way to create additional income for play-to-earn gamers, as players can exchange their illiquid NFTs for liquid cryptocurrency and put those tokens to work.
And, Kyoko is here for any and all that wish to do so.
Kyoko.Finance is a cross-chain GameFi NFT lending market for guilds and players. Kyoko’s Guild-to-Guild lending, P2P NFT lending, and cross-chain asset lending platform aims to solve the most pressing issues challenging the GameFi market, including the rising cost of entry and siloed in-game assets across different blockchains. Kyoko’s metaverse will also allow Guilds to display their history, progress, and other accomplishments, while players can connect with others in a world that can be built in, developed, and sold off.
Follow Kyoko at the links below to stay up to date on upcoming events, releases, and news.