Borrower Gets a $35,000 Loan Using an NFT-Backed Patek Phillipe Watch as Collateral
An anonymous individual gave a stranger a $35,000 loan. The latter used an NFT-backed Patek Philip watch as collateral.
The individuals will receive the Patek Philip watch back once the corresponding non-fungible token is burned. In case the borrower defaults, the lender can claim the item.
This use case shows the possibilities enabled by the proof-of-ownership of Real World Assets (RWAs) backed by NFTs.
On June 25, an anonymous individual gave a stranger a $35,000 loan. The latter used a Patek Philip watch as collateral. The chronograph, reportedly a 5960/01G-001 model, costs between $54,000 and $79,000 in 2023.
Notably, the lender does not know the borrower’s name or address and has never met them. However, thanks to the proof-of-ownership enabled by NFT-backed Real World Assets, this was not a big deal.
To list a watch as collateral, the borrower sent it to an escrow company, which then sent the borrower a non-fungible token representing the ownership of the item. Following this, the borrower listed the token on Arcade, a p2p loan protocol for NFTs. The individual then accepted the best loan offer. After this, the non-fungible token was transferred to an escrow wallet, where it will stay until the borrower repays the sum or until the lending period ends.
The borrower took $35,000 for two months at an annual percentage rate of 12%. So, by August 26, they are obliged to repay $35,690,411. The individuals will receive the Patek Philip watch back once the corresponding non-fungible token is burned. In case the borrower defaults, the lender can claim the item.
This use case shows the possibilities enabled by the proof-of-ownership of Real World Assets (RWAs) backed by NFTs. Even though the market is very young, in 2023, RWA is becoming a hot topic. The tokenization of Real World Assets is an innovative way to bridge DeFi (Decentralized Finance) and TradFi (Traditional Finance). As of today, we have seen watches or real estate represented on-chain by non-fungible tokens – however, the market has the potential to grow in the nearest future.
There are several decentralized exchanges that support the trading of tokenized Real World Assets. Among these is Pearl, a Polygon-based exchange with deep liquidity for tokenized RWAs and premium digital assets.
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