How NFTs will aid in the collateralization of real world assets for loan contracts

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When you look at all the technologies in the crypto industry you'd realize how a lot of it just makes sense to exist. At first, people didn't understand NFTs, frankly most people still think NFTs are all about art but that isn't quite the case. The utilization of NFTs at this time is pretty thin, which is understood given that not a lot of people are fond of it, but NFTs hold a lot more potential than the current market it has, which is far from what it will be really worth.


Interoperable technologies, flexible economy


In the past, I've talked about the importance of interoperability of blockchain networks. If we apply the same concept with products being developed within the ecosystem, we should be able to create something quite revolutionary.

The purpose of blockchain is to bring efficiency into every human operating sector, this is finance, education, agriculture, sports, music and so much more. So far, can we for sure say that it has done just that? Quite frankly, yes, cross border payments are at the cheapest and fastest the world has ever seen with blockchain technology. With NFTs and Metaverse projects, musical artists are able to connect more easily with their fans, same with sports men and many more. What was envisioned is being deployed as the day goes by.


NFTs, aiding easy collateralization of real world assets for loan acquisition


I was thinking about the polycub loan feature that was to be deployed on the DeFi ecosystem of LeoFinance, this was to be an overcollateralized loan contract where the borrower typically has to provide more collateral than the loan some he or she is willing to take. This method of lending is so as to closely manage the risk associated with the volatility of crypto.

That said, I gave it more deeper thoughts and realized how tokenization of real world assets allows it to be so flexibly utilized.

For example, one buys a house as an NFT or maybe chooses to tokenize an already bought house by making the documents perhaps minted as an NFT. If officially recognised by the owner of this house, that minted NFT becomes a "proof of ownership" meaning that anybody that holds it, owns or has control over the house.

Considering this, the NFT allows the holder to easily transfer ownership of the said property or leverage it in the blockchain ecosystem. But how?

One way to utilize this tokenized property would be to use it as a collateral to take a loan. So basically, a property owner is able to use his house as collateral to take out a crypto loan simply because the house has been tokenized as an NFT. The NFT is what will be placed as collateral for acquiring this loan without much need for paperwork. This proves that real world assets and products with blockchain integration can really accelerate the way business operations are done, more flexibility, more security and more added value.

The opportunities are quite enormous and the utilities are just substantially much.

Do leave a comment if any.

Posted Using LeoFinance Beta



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2 comments
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NTF certainly had an initial success and then normalized, I think they have great potential as there are many applications and I'm sure there will be great developments in the future!

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