People in crypto no longer rely on banks to get loans. With DeFi, they can borrow money using their tokens and now, even NFTs. Borrowing against crypto assets like ADA is already common. But the idea of using NFTs, your digital art like collectibles, or gaming avatars as collateral is still new. Yet, it’s gaining traction fast. Platform like Levvy Finance now let traders borrow ADA with NFTs or tokens, opening up fresh ways to access liquidity without selling valuable assets.
Key Takeaways
- You can now borrow ADA without selling your NFTs or tokens.
- NFT lending helps you stay liquid and still keep full ownership of your assets.
- Levvy Finance makes this possible for Cardano community in a fast and simple way.
Understanding NFT Collateral Lending
Many NFT holders today face the same problem, they own valuable assets but lack liquid funds. Instead of selling their NFTs, they now have the option to unlock reward by using those assets as collateral. This process is called NFT backed lending.
In simple terms, NFT lending allows you to get a loan while keeping your NFT safe in a smart contract. Once you repay the loan, the NFT returns to you. If you fail to repay, the lender takes the NFT. That’s how it works. This model gives more people access to capital without losing ownership of what they value.
Unlike fungible tokens like ADA, NFTs are unique. That makes pricing and risk assessment more complex. However, lending platforms have started building systems to handle these challenges using things like floor price data, historical trading volume, and demand scores.
How NFT Lending Works Step by Step
This process mirrors how you can borrow against tokens like ADA, but it adds the extra challenge of pricing unique assets. That’s why some platforms use valuation algorithms or integrate with NFT marketplaces to assess value before issuing loans.
- When you deposit the NFT into a smart contract. It remains there until the loan is repaid.
- Lenders offer different amounts of ADA, based on the value of your NFT. You choose the best one.
- Once you agree, the loan amount goes straight to your wallet. The smart contract holds the NFT.
- If you repay on time, you get your NFT back. If not, the lender takes it. No third party involved.
Using Your NFTs and Tokens as Collateral with Levvy Finance
Levvy Finance is a peer to peer lending platform built on Cardano. It allows you to borrow ADA by using either your NFTs or tokens as collateral. You don’t need to sell your assets to get liquidity. Instead, you lock them in a smart contract and receive a loan instantly. This approach gives you access to funds while keeping ownership of your assets.
Unlike traditional DeFi platforms that focus only on large or popular collections, Levvy opens the door to everyone. If you’re holding a well known NFT or a less popular token, you can use it to borrow. This focus on inclusion makes Levvy unique and valuable, especially within the Cardano ecosystem.
Now that you understand how NFT collateral lending works, let’s look at Levvy Finance, a platform built on Cardano that brings this entire model to life. It lets you borrow ADA using your NFTs or fungible tokens as collateral. Even better, it does this with fair interest rates, manual foreclosure rights, and support for all kinds of assets.
How to Borrow ADA with NFTs or Tokens on Levvy Finance
When you want to borrow on Levvy Finance, the process is simple and fast. First, you choose whether to use a token or an NFT. Then, you lock that asset into Levvy’s smart contract. After that, you’ll see loan offers from lenders. These offers include the loan amount, the interest rate, and the loan duration.
Once you accept a loan, you receive the ADA directly in your wallet. Meanwhile, the platform holds your collateral securely. You can repay the loan anytime within the agreed period. If you fail to pay, the lender has the right to foreclose and claim your collateral. However, this foreclosure doesn’t happen automatically, the lender must trigger it manually, giving you a chance to fix the situation.
To make things even better, Levvy Finance offers a feature called Levvy Pro. With it, you can extend your loan term or renegotiate it before the lender forecloses. This adds more flexibility and reduces risk for borrowers who need a little extra time.
Use Levvy Platform to Lend ADA and Get Passive Income
If you want to earn passive income, you can become a lender. Levvy Finance lets you offer loans with your own ADA. You set the amount you want to lend and the Loan to Value (LTV) ratio you’re comfortable with. Then, you just wait for a borrower to accept your offer.
One great thing about Levvy Finance is that your ADA remains staked in your own pool until someone accepts your loan offer. So you continue earning staking rewards in the meantime. Once a borrower accepts your offer, your ADA gets sent to them immediately through the smart contract.
You’ll get your full loan amount back, plus interest, when the borrower repays. If the borrower defaults, you receive their NFT or token as compensation. This setup makes lending on Levvy Finance both profitable and secure.
How Interest Rates Are Determined
Levvy Finance sets interest rates using an internal system that balances risk and demand. The team looks at factors like trading volume, price history, liquidity, volatility, and supply and demand trends. For fungible tokens, they also consider circulating supply and maximum supply. For NFTs, they focus more on floor price and activity.
As a result, borrowers see interest rates that match the asset’s risk level, and lenders can compete to offer the best terms. This creates a fair, transparent lending environment for everyone involved.
Fee Structure and Rewards for $ANGELS Holders
Levvy Finance fee system splits charges between borrowers and lenders. Each side pays 12.5% of the total interest, making the combined fee 25% of the interest rate. For example, if the total interest on a loan is 10 ADA, the platform takes 2.5 ADA, split between both parties.
Here’s where it gets interesting. Levvy redistributes 75% of all fees from token backed loans. These fees go to $ANGELS token holders and the Angels Treasury, with rewards paid in ADA on the 15th of every month. This means you can earn just by holding $ANGELS tokens, making the token itself a yield generating asset.
Levvy Finance offers one of the easiest and most flexible ways to borrow ADA with NFTs or tokens on Cardano. It gives borrowers fast access to cash, lets lenders earn passive income, and rewards token holders through real ADA distributions.
