Defi Proves Worthy After One Lender Recieves $340k Nft

In a combination of crypto's two biggest buzzwords, Ethereum innovators are starting to combine DeFi with NFTs — and it just lost someone a $340,000 NFT.

DeFi stands for decentralized finance and refers to any kind of financial tool that's built on a decentralized platform, while NFTs are tokens that represent images (and can have exorbitant values).

In this case, traders have started putting up NFTs as collateral when borrowing money using DeFi lending platforms. The idea goes: you could put up an NFT worth 10 ETH, for example, and that would enable you to borrow 5 ETH as a loan. And if you don't pay back the loan in time, then you lose the NFT.

That's exactly what happened here.

Around three months ago, an NFT collector borrowed 3.5 ETH (currently worth $12,600) on the NFTfi platform. To make the loan, they put up an “Elevated Deconstructions” NFT — part of the Art Blocks Curated set — which were selling for about 11 ETH ($39,600) at the time. Although the last sale price for that NFT was 3.25 ETH ($11,700), which was below the value of the loan.

Over that timespan, the value of these NFTs shot up. This was largely triggered by endorsements from Punk 6529 (a Twitter account run by the owner of that CryptoPunk) and Cozomo de' Medici, a pseudonymous art collector. Not before long they were selling for 85 – 200 ETH ($306,000 – $720,000).

Yesterday, the 3.5 ETH loan ended and the borrower had not repaid the loan during those three months. As a result, the collateral was passed to the lender, who ended up losing their 3.5 ETH but gaining the Elevated Deconstructions NFT.

The current floor price— the cheapest available NFT on the market in this collection — is 95 ETH ($342,000). In theory this puts the lender up about $329,000. Although, despite the high floor price, this doesn't necessarily mean the lender can sell the NFT for this much.