NFTfi has raised $5 million in a seed round to continue advancing the financialization of NFTs.
NFTfi intends to use the new funding to expand its team, launch new product features, expand the platform to other blockchains, invest in its community, and fund its decentralization.
The round was led by 1kx, with participation from Ashton Kutcher’s Sound Ventures, Maven 11, Scalar Capital, Kleiner Perkins, and others.
NFTfi is a marketplace where users can acquire a cryptocurrency loan on their NFTs and give loans to borrowers on their NFTs. It was founded by Stephen Young in February 2020. In other words, on the decentralized and peer-to-peer system, users can use their NFTs as collateral to borrow money from other users.
NFTfi users employ a typical process in the traditional art world, where banks, big galleries, and auction houses offer loans to artists, to decide whether or not an NFT is worth a loan.
In the traditional market, loans are often around 50% of the artwork’s value. Lenders use NFTfi’s platform to evaluate borrowers and award them up to 50% of their NFT value as a loan principal.
Currently, about 20% of loans on the platform are defaulted on, although most are lower-value loans, according to Young. The reason for this is that high-value NFTs are extremely rare and difficult to come by, thus users fund loans in the hopes that they will default, allowing them to obtain the NFTs.
Young claims in terms of loan volume, NFTfi has grown at an annual rate of 80 percent month on month, with a total value of more than $26.5 million. According to the company, lenders have earned over $500,000 in interest.