Solana NFT Lending: Exponential Growth

Data shows exponential growth across the sector.

Summary

• Introduction

• What is NFT Lending?

• Lending Volume is Skyrocketing

  • How will NFT Lending perform in a Bull Market?

• Why is the market growing so quickly?

• Main Platforms

  • The first Solana NFT Lending Aggregator

• Conclusion

Introduction

Solana is where most of the experimentation around NFT-DeFi is due to its technological superiority, which enables fast, low-cost transactions on the blockchain. NFT-DeFi is a relatively new concept in the crypto sphere. It started a little over a year ago, although the growth phase began in September with NFT Lending and Borrowing.

Today, NFT Lending volume represents 30% of the total daily volume of the NFT ecosystem. In this newsletter, we will look at the numbers of NFT-DeFi, the most used platforms and how the trend points to a continuation of the ecosystem’s growth.

What is NFT Lending?

NFT lending is a growing practice where individuals pledge their NFTs as collateral to obtain loans on platforms like Sharky. This form of lending allows investors or lenders to earn interest on their investments. NFT lending offers the potential for higher returns compared to staking and standard crypto-based lending. In NFT lending, borrowers secure their loans by locking their NFT assets as collateral.

NFT lending is possible through decentralized finance (DeFi) applications. DeFi platforms use smart contracts to govern the lending terms and rates for NFT loans. As NFT lending is a relatively new trend, it is expected to evolve further as more individuals and capital participate, and regulatory measures may come into play.

Lending Volume is Skyrocketing

The Solana NFT Lending ecosystem is rapidly growing. In the last 30 days, Lending Volume corresponded to 50% of the Solana NFT Trading Volume.

Sharky, Solana's biggest NFT DeFi platform, surpassed Magic Eden and Tensor’s monthly volume. Sharky recorded over 1 million SOL volume, followed by Magic Eden’s 940K SOL and Tensor’s 850K SOL. Data shows the NFT market is maturing and growing beyond trading.

How will NFT Lending perform in a Bull Market?

The lending market is growing exponentially, showing no signs of stopping anytime soon. In addition, the growth took place in a bear market, suggesting that the ecosystem is here to stay and evolve over time.

How will NFT Lending perform in a raging bull market? No one knows, however, one thing is certain: demand for collateral will be massive, considering that the value of good NFTs will be higher than it is right now, in dollar terms.

Why is NFT Lending growing so fast?

There are several reasons why the market is growing at a fast pace. One of the main reasons why is that lending allows a less risky way of earning SOL when compared to NFT Trading. Although loans may default, the risk of losing money is theoretically lower than with NFT Trading. Even though it is arguably far riskier, many users prefer to lend their SOL on such platforms instead of staking SOL on a validator, stating that the yield compensates for the risk taken.

The NFT Lending market attracts a new group of users, which are somewhere in between the high-risk and low-risk profiles. There is a segment of the ecosystem which neither likes NFT Trading due to being high-risk, nor staking their SOL as they do not see yield worth the risk of delegation. These users likely have their SOL in hot wallets and can now have a chance to earn high yields for a lower amount of money invested.

Those with a risk profile between high-risk and low-risk may be interested in lending their SOL on platforms such as Sharky and Citrus.

Main Platforms

The main lending platforms on Solana are Sharky, Citrus, Frakt and RainFi. Sharky holds a 76% dominance of the lending market, followed by Citrus with 16%, Frakt with 7% and RainFi with 1%. Note that these percentages may differ as mentioned by the Lending Aggregator WolfCap.

The first Solana NFT Lending Aggregator

The Solana ecosystem is known for speedrunning narratives and its innovative hub of developers and projects. The NFT Lending space on Solana is no different. Wolf Capital is an NFT project which recently released its platform, allowing users to have a transparent and aggregated view of the various lending platforms and their data.

Conclusion

NFT lending allows NFT holders to use their non-fungible assets as collateral to secure loans, providing new monetization possibilities, but challenges such as market volatility and financialization concerns raise questions about the sustainability of borrower demand and favourable loan terms. The NFT Lending market is growing exponentially, and data suggests that it may eventually become larger than NFT Trading.