South African Startup NFTfi secures $5M Seed Funding
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NFTfi, a South African firm, recently raised $5 million in a seed round to expand its non-fungible token (NFTs) collateralization business.
US actor Ashton Kutcher’s Sound Ventures led NFTfi’s $5 million financing raise. Maven 11, Scalar Capital, and Kleiner Perkins were among the other participants in the investment round.
NFTfi was formed by Stephen Young in February 2020, and it already operates as a marketplace where customers may acquire a cryptocurrency loan on their NFTs and provide loans to people who are seeking it on their NFTs.
NFT shareholders will be able to release liquidity without trading by collateralizing their tokens, according to the statement.
Since its initial loan in May 2020, NFTfi professes to have facilitated over 1,500 similar transactions on its network.
Young described how the loan and borrowing process begins, as well as what happens when a default occurs. Young also discussed the mechanics of bargaining between lenders and borrowers on NFTfi in the report.
Lenders, he added that lenders want some wiggle room between the asset’s price and the amount they’re willing to lend.
This is because, if someone defaults, they must be able to sell for less than market value, and the price may have declined in the interim. As a result, they require such a large buffer between the loan value and the actual capital value.
Though 20% of loans on the NFTfi network fail, these are mostly lower-value loans, according to Young. Young further expressed that, this is due to the fact that high-value NFTs are rather rare and tough to obtain. As a result, users will fund loans in the hopes that the borrower will default and therefore relinquish the NFTs.
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