The DeFi borrower took out a 3.5 ETH loan that’s currently worth $12,600 three months ago and placed their NFT as collateral. After failing to repay t he loan, the lender was now. handed the NFT which is worth $340,000.
It’s a unique case where crypto enthusiasts are beginning to marry two of the Ethereum network’s buzzwords – DeFi and NFTs –, one of them just earned a cool $340,000 NFT. The borrower had placed their Elevated Deconstruction NFT worth 11 ETH worth $39,600 at the time of the deal as collateral for a 3.5 ETH worth $12,600.
The Elevated Deconstructions NFT was automatically passed to the DeFi lender
That was three months ago, and since then, the value of the NFT surged, mainly due to endorsements triggered by Punk 6529, a Twitter account run by the owner of CryptoPunk and pseudonymous art collector Cozomo de’ Medici.
Since the borrower failed to repay the loan, the Elevated Deconstructions NFT has automatically been passed to the DeFi lender. The lowest price of the NFT on the market is now 95 ETH, worth $342,000. This theoretically means the lender is worth the amount if they can sell the NFT for that figure.
Decentralized Finance (DeFi) refers to an Ethereum-based financial tool that’s built on a decentralized platform. Non-fungible tokens (NFTs) are Ethereum-based crypto tokens representing images that can be sold for high prices. DeFi lenders have started accepting NFTs as collateral from borrowers seeking liquidity on DeFi lending platforms.
The NFT’s previous owner had been involved in several other NFT-backed loans
The process of DeFi borrowing allows borrowers to borrow after placing collateral. For instance, you could place an NFT valued at 20 ETH and borrow at least a 10 ETH loan. The NFT could revert to the lender if you fail to repay the loan at the pre-determined time.
Data from blockchain records show that this NFT has been part of a 3 ETH worth $10,800 loan defaulted in April. Records show the NFT’s previous owner had been involved in several other NFT-backed loans. The borrower placed an Arago NFT as collateral for a 3 ETH loan and returned 1 ETH with interest. However, blockchain records show the wallet has remained inactive during the last 60 days.