Backed Protocol: Unlocking NFT Liquidity Through Tokenized Credit

Popular lending protocols like Compound and Aave have had tremendous success in recent years but are still relatively constrained in the classes of assets they can serve. In general, automated money markets mainly support liquid collateral which can be sold in large quantities near spot in the event of a liquidation event. These challenges become particularly apparent for NFTs, which are typically difficult to borrow against and do not have deep markets to sell into. 

Currently, the largest NFT lending protocols are BendDAO, JPEG’d, and NFTfi. BendDAO is a peer-to-pool liquidity protocol that enables borrowing of ETH using NFTs as collateral. The DAO provides a curated list of NFT collections that can be used as collateral along with accompanying risk parameters.