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The rise of unofficial NFT credit scores

May 4, 2022
Illustration of an open briefcase full of coins.

Illustration: Aïda Amer/Axios

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.

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.

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