NFT Mortgages on Drops: Finance Your JPEGs

What are NFT Mortgages?

How it Works: The Basics

  • A user selects the NFT they want to purchase (any NFT with liquidity is eligible for a mortgage)
  • The loan amount you can obtain depends on the asset’s LTV — you can take out up to 60% of the NFTs value for up to a 40% downpayment
  • The higher the amount you pay down your loan, the lower your risk of liquidation will be
  • Payments come with no duration or timelines — the loan will remain solvent as long as the user doesn’t exceed their liquidation threshold
  • If a user exceeds this threshold, their NFT will be liquidated and will either be released on the open market for a discount or be placed up for auction
  • All rules and interest rates apply, as this feature is built on top of Drops lending pools

Key Mechanics: Under the Hood

  • A proxy contract is created between the user and lending pool once an NFT mortgage transaction is initiated, which deposits the mortgaged NFT into the Drops lending pool
  • The proxy contract owns the NFT and the user owns the proxy contract (the proxy contract is the middleman)
  • Users receive the NFT asset and can begin paying down the debt
  • NFT mortgages can be sold/transferred to other users — the new owner would own the proxy contract

Benefits & Limitations

Development Phases

What’s Next?

About Drops DAO

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