The global art and collectible markets have been considerably more liquidity-starved than equity, gold and other traditional assets.
This problem is even more evident in the nascent NFT market. It may take a fairly long time before buyers and sellers or lenders and borrowers are able to quickly engage in optimal and mutually-beneficial transactions.
Without access to sufficient liquidity, NFT owners may have no choice but to sell their valuable assets at a very low price if they require funds at any time.
An innovative project called Drops enables these NFT owners to secure funds by putting their NFTs up as collateral. Lenders are able to get an opportunity to make sizable returns without having to worry about repayment issues, because all loans via Drops are backed by an NFT that equals or exceeds the loan amount (in aggregate value).
As noted on its website, Drops.io has been developed to facilitate loans for NFT and DeFi-focused assets. The initiative intends to offer users with options that allow them to benefit from more leverage on their assets for loans and yield farming activities.
With Drops, traders may borrow against DeFi and NFT-based assets. You can significantly lower the opportunity cost of holding governance or liquidity tokens by providing them as collateral to generate substantial yield.
Investors also have the option to use NFTs as collateral in order to acquire “trustless” loans. Lending through Drops is supported by permissionless NFT lending pools. Platform users may also make sizable returns with their “idle” assets by providing stablecoins and governance tokens to fungible or non-fungible token lending pools and generate competitive APYs.
There’s also considerably more utility for NFTs as Drops provides “DeFi-style” infrastructure to NFTs, adding utility to parked NFT assets. Users can leverage their NFTs to get quick loans and earn substantial yield, thus “reducing the opportunity cost of holding NFTs long-term,” the platform’s developers explained.
Drops Infrastructure May Become Systemically Important
The development team also mentioned that the Drops infrastructure may become systemically important as we all witness the emergence of “financial” NFTs, which will serve as a logical extension of the space beyond just digital artwork into tangible financial instruments.
The Drops team further notes that NFT lending pools on their platform are suited for a diverse group of users. Anyone is able to create an NFT Lending Pool by simply “specifying accepted NFTs and amounts that can be borrowed against them,” the Drops website states.
Users who may be interested in earning yield consistently may provide liquidity through Drops to NFT lending pools and start backing assets they “believe in,” the Drops team explains. Collectors may provide NFTs with stablecoins and get matched up with the best rates lending pool, the Drops website notes.
Working Cooperatively with Major Crypto Stakeholders
Drops’ crypto industry partners include Polygon, Quantstamp, 0xb1, Biconomy, KYROS Ventures, Petrock Capital, and Blockstar Technologies.
As mentioned on its official website, Drops’ investors include AXIA8 Ventures, AU21 Capital, Bitscale Capital, D64, Blocksynce Ventures, Drops Ventures, Genblock Capital, and x21,
Having access to adequate liquidity is essential for any financial market, because buyers and sellers are always looking to trade on platforms that provide the best opportunities. The DeFi space is growing at an exponential rate, currently valued at more than $83 billion, according to data from DeFi Pulse.
For this emerging market to really thrive, we need a lot more liquidity than what’s currently available. Institutional investors have very high expectations, which means that the existing DeFi ecosystem must work on initiatives that will enable access to sufficient liquid. This is required to support frequent and large-volume trading.
That’s why projects that offer greater liquidity for DeFi and NFT-focused assets, such as Drops, will play a key role in helping this space mature and become more accessible to mainstream investors.