The rise of unofficial NFT credit scores
Nexo, a crypto exchange and lender, announced it had issued a $3 million NFT-backed loan on Wednesday — one of the largest of its kind.
Why it matters: Using NFTs as collateral is risky because valuations are unpredictable. But a growing number of companies and projects are trying parse through the noise in the industry and financialize the burgeoning market.
Driving the news: For collateral on the loan, Nexo, which launched an NFT lending desk late last year, took two CryptoPunk Zombies — one of the best-known NFT collections out there.
- Metastreet has also done work in this space.
What this all means: Responsible lenders will have to be extremely selective about which NFTs they are willing to take as collateral.
- Once acquired for $2.9 million, an NFT of Twitter founder Jack Dorsey's first ever tweet received a bid for just $277 in April — making it pretty useless as collateral.
- On the other hand, a Bored Ape Yacht Club NFT sold for $3 million in January.
Thought bubble: This is all effectively creating an unofficial, early NFT collection credit ratings system.