How a lender received an NFT of $ 340,000 after a loan was not repaid


In a combination of crypto’s two biggest buzzwords, Ethereum innovators are starting to combine DeFi with NFT – and that’s right lost someone an NST of $ 340,000.

DeFi stands for decentralized finance and refers to any type of financial tool built on a decentralized platform, while NFTs are tokens that represent images (and can have exorbitant values).

In this case, traders have started to set up NFTs as collateral when borrowing money using DeFi lending platforms. The idea is, you could set up an NFT worth 10 ETH, for example, and that would allow you to borrow 5 ETH as a loan. And if you don’t pay off the loan on time, you lose the NFT.

This is exactly what happened here.

Set up an NFT to take out a loan

About three months ago, an NFT collector borrowed 3.5 ETH (currently worth $ 12,600) on the NFTfi platform. To make the loan, they set up an “Elevated Deconstructions” NFT – which is part of the Art Blocks Curated set – which was selling for around 11 ETH ($ 39,600) at the time. Although the last sale price of this NFT was 3.25 ETH ($ 11,700), which was less than the loan value.

During this period, the value of these NFTs has skyrocketed. This was largely triggered by endorsements de Punk 6529 (a Twitter account maintained by the owner of this CryptoPunk) and Cozomo de ‘Medici, a pseudonymous art collector. Soon after, they were selling for between 85 and 200 ETH ($ 306,000 – $ 720,000).

Yesterday the 3.5 ETH loan ended and the borrower did not repay the loan during those three months. As a result, the collateral was passed on to the lender, who ended up losing their 3.5 ETH but won the NFT Elevated Deconstructions.

The current floor price – the cheapest available NFT on the market in this collection – is 95 ETH ($ 342,000). In theory, that puts the lender at around $ 329,000. Although, despite the high floor price, this does not necessarily mean that the lender can sell the DTV.

In fact, there has not been a sale of an NFT Elevated Deconstructions for 18 days. As a result, it is possible that the borrower chose to forgo the loan in order to obtain immediate liquidity. This is unlikely, however, as they could have drastically lowered the NFT price and likely still sold for over 3.5 ETH.

Not for the first time

A curious twist in this story is the fact that this NFT has been pledged twice in its history – and both times the borrower has defaulted.

As historical data shows, this NFT was part of a loan that defaulted in April on a 3 ETH ($ 10,800) loan, this is how the previous owner got it before giving it up. over the weekend.

The previous owner was involved in a few other NFT-backed loans. In April, they tasted their first liquidation, receiving an Arago NFT as a 3 ETH loan was not repaid. In May, they received 1 ETH (with interest) on a loan they made that was backed by a plot of Decentraland land.

But since they closed the sale at the end of June, they haven’t been particularly active. According to blockchain records, the last transaction in the portfolio dates back 58 days.

© 2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.

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