The largest crypto exchange in the world (in terms of trading volume), Binance, is launching a new program that makes it possible to borrow Ethereum (ETH) with non-fungible tokens as collateral. How much Ethereum you can borrow depends on the bottom price of your NFTs.
Binance gets the data for the system from various sources.
Four collections
Logically, Binance does not accept just any NFT for this program and your collection must be specifically selected. For example, currently the platform only supports four collections.
Only expensive collections like the Bored Ape Yacht Club (BAYC), Mutant Ape Yacht Club (MAYC), Azuki and Doodles are currently available for Binance’s program.
Changpeng Zhao’s exhibition platform expects to add more collections in the near future. Binance launched its own NFT platform in June 2021, during the hype that arose that year around this special form of tokens.
In March, it launched a beta version of an artificial intelligence-based image generator called Bicasso.
Smart move
Giving users the option to pledge their NFTs and get a loan in return seems like a very smart move by Binance. After all, this frees up more capital on their platform. The only tricky part is that they have to properly estimate how much Ethereum they can lend based on the value of the collections.
The value and certainly the bottom price of NFT collections can vary greatly. In that respect, Binance will build in a considerable margin, so that it is almost certain that they will not make a loss on this.
People looking for capital can get extra Ethers this way, without having to sell their own NFTs. The risk is of course that the value of the tokens drops sharply and that they have to pay back those Ethers at the wrong time.