​Bringing liquidity to NFTs (and what that actually means).

Today’s cool and interesting article came out a little nerdy...but, we’re excited to talk about it all the same!

Alright, here goes.

The founder of DefiLlama, anonymous Twitter user, @0xngmi - has just announced a new project.

It's a borrowing and lending protocol, dubbed 'LlamaLend,' that lets NFT holders gain liquidity without selling their collection.

‘Protocol,’ ‘liquidity,’ - that’s hardly plain English.

True…lettuce explain.

At the moment, if someone who owns an NFT needs money fast, they typically sell their NFT.

But that sucks - now they can’t get access to the utility associated with the NFT (e.g. their community) or the appreciation if the value goes up.

That's the problem LlamaLend is trying to solve.

The platform promises to allow users to borrow Ethereum (ETH) up to 1/3 of their NFT collection’s floor price (the value of the cheapest one in the whole collection).

The money comes from liquidity pools, meaning people will put their ETH in, LlamaLend will loan it out to NFT holders, and liquidity pool contributors will get a fixed return on their money.

Here’s what’s cool about this:

This new mechanism could let more people have access to funds; which could result in more trading volume and strengthen demand for NFTs.

Here’s what could go wrong:

If enough borrowers can’t repay their loans, or the value of an NFT collection goes down significantly, suddenly borrowers are paying back a steep loan relative to the collection’s price.

If they can’t, they may simply forfeit their NFTs instead of paying back the loan, which would further push the value of the collection down (and that has the potential to spiral).

Then again, that’s the case with all debt. This just happens to be unique because it’s new.

Here’s hoping people know what they’re getting into