Global art and collectibles markets have been considerably more cash-strapped than stocks, gold, and other traditional assets.
This problem is even more evident in the nascent NFT market. It may take some 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 need the funds at any time.
An innovative project called Drops allows these NFT owners to secure funds by putting their NFTs as collateral. Lenders have the opportunity to generate large returns without having to worry about repayment issues, as all loans through Drops are secured by an NFT equal to or greater than the loan amount (in aggregate value).
As stated on its website, Drops.io was developed to facilitate loans for assets focused on NFT and DeFi. The initiative aims to provide users with options that allow them to benefit from greater leverage over their assets for loans and yield farming activities.
With Drops, traders can borrow against DeFi and NFT based assets. You can significantly reduce the opportunity cost of holding governance or liquidity tokens by providing them as collateral to generate a substantial return.
Investors also have the option of using NFTs as collateral to acquire “no trust” loans. Loans through Drops are taken care of by NFT loan pools without authorization. Users of the platform can also generate significant returns with their “idle” assets by providing stablecoins and governance tokens to fungible or non-fungible token lending pools and generate competitive APYs.
There is also much more utility for NFTs as Drops provide “DeFi style” infrastructure to NFTs, adding utility to parked NFT assets. Users can leverage their NFTs to get quick loans and earn a substantial return, “thus reducing the opportunity cost of owning NFT for the long term,” the platform developers explained.
Drip infrastructure can become of systemic importance
The development team also mentioned that Drops’ infrastructure could become of systemic importance as we all witness the emergence of ‘financial’ NFTs, which will serve as a logical extension of space beyond simple digital works of art in tangible financial instruments.
The Drops team further notes that the NFT loan pools on their platform are suitable for a diverse group of users. Anyone can create an NFT loan pool by “simply specifying which NFTs are accepted and the amounts that can be borrowed against them,” the Drops website states.
Users who may be interested in a consistent return can provide liquidity through Drops to NFT loan pools and start supporting assets they “believe in”, says the Drops team. Collectors can provide NFTs with stable coins and be matched with the best pool of interest rate loans, notes the Drops website.
Work in cooperation with key 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, as buyers and sellers are always looking to trade on platforms that offer the best opportunities. DeFi space is growing at an exponential rate, currently valued at over $ 83 billion, according to data from DeFi Pulse.
In order for this emerging market to truly thrive, we need a lot more liquidity than is currently available. Institutional investors have very high expectations, which means that the existing DeFi ecosystem must work on initiatives that will allow access to sufficient liquid. This is necessary to support frequent and high 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 traditional investors.