A new Aavegotchi lending mechanism has been introduced. Effectively, this means users can rent NFTs from others on the platform, generating a new revenue stream for owners.
The system uses entirely on-chain functions, so there’s no human involvement in the process. Aside from the fact someone has to own an NFT in the Gotchiverse, and decide to loan it out, of course. So, just how does this work?
Well, the system is pretty simple. Two parties agree to a loan contract. This will include the duration of lending, a fee, and — potentially — a split of any resulting rewards. All of which sounds pretty fair and reasonable to us.
It is also possible to put a limit on who can apply to you for a loan. For example, you might want to restrict your NFT collection to those in your social circles. Alternatively, maybe you are eyeing up this as a more serious income source. As such it might make more sense to open loans up to anyone and everyone in the known universe. Or, more specifically, the Gotchiverse.
Aavegotchi Lending isn’t the Only News
Aavegotchi’s lending system isn’t the only big news from the platform. A second Gotchiverse Land Sale is set for Thursday 2nd December 2021 at 3PM UTC. This will comprise 7000 parcels of land, and will run until 5th December.
It’s important to note the sale will use a unique bid-to-earn mechanism, although 3000 parcels will also be given away in a raffle. Even if you don’t win, anyone participating will earn GHST just for placing a bid. The raffle will take place after the auction itself, running from 10th to 13th December.
NFTs and Collateral
Aavegotchi is one of the biggest names in the non-fungible world to roll out a lending system. However, it is far from the only platform doing this. In October, we wrote about HodlGod introducing a mechanism where NFTs can be lent through scholarships.
Elsewhere, NFTfi raised an impressive $5million recently. That money has been used to establish a system to grant loans, using NFTs as collateral. Meanwhile, at the beginning of this month, we also published an overview of an emerging financial sector in which NFTs are backing loans in different currencies, from dollars to Bitcoin.
Of course, all this raises some serious questions. As we pointed out in early November, this year has seen a number of important legal battles impact the non-fungible industry. Few more so than the NBA Top Shot lawsuit, which relates to whether or not NFTs are counted as securities — investments where there is an expectation of profit. Crucially, as more and more tokenised collateral is used, it gets harder to argue NFTs do not come with the expectation of increased value over time — i.e. profit.
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This article is educational material.
As always, make your own research prior to making any kind of investment.