With technology evolving to higher levels, game-changing innovations have gained amusing reception from the global population. Non-fungible tokens (NFTs) and decentralized finance (DeFi) especially have garnered popularity among digital-savvy people. As newer use cases come into existence, the need for applications that intermingle such diverse streams increases. NFT P2P lending platform is one such business model that combines these various streams. This model opens new opportunities for people to utilize NFTs and make the NFT market more liquid. We will see about NFT P2P lending software development in this blog with insights from our experts.
Problems the Current NFT Market Faces
The current NFT market has a capitalization exceeding 2.5 billion dollars, which has served as an encouraging sign for market growth. But, a problem has been plaguing the NFT space ever since its inception, which made a visible impact during the 2022 crypto bearish season.
We are talking about Liquidity, which holds a significant role in making any economy active – whether it be real-world or virtual. While most NFT ventures come out there with the aim of solving a problem or providing exclusively accessible content, not every one of them could succeed in their mission. Selling NFTs based on such collections becomes an arduous task, as there are not many people willing to be part of lesser-known projects.
Hence, NFTs get stuck into a person’s wallet forever, which results in market illiquidity. While such conditions can even occur if an individual purchases an NFT and puts it to good use, they will have to conduct transactions of some sort that balance the spectrum.
The Solution: NFT P2P Lending Software
So, what is the solution for the NFT market’s illiquidity? While many answers could pop up in your mind, NFT P2P lending software is closer to serving the purpose diligently. This platform lets people borrow crypto loans by exchanging NFTs as collateral.
This works just like a collateral-based loan in the real world, with the difference that cryptocurrencies and NFTs replace fiat currency and physical assets. Also, the loan contract in these platforms is placed between peers or programmable contracts (more about that in a bit) rather than a centralized banker. The demand for these applications has been growing steadily since the NFT boom several years ago.
Types of NFT Lending Implementation
Peer to Peer Lending
Peer-to-peer lending enables an NFT lending application’s users to work directly on loan agreements. This means the borrower will receive the loan from a fellow user in the platform, to whom the collateral should be submitted. The collateral, though, is held in an escrow smart contract that governs the loan’s terms and conditions and sends it to the borrower (if the loan is paid) or the lender (if the loan is defaulted).
Peer to Protocol Lending
This kind of NFT lending implementation taps extensively into the power of smart contracts. Peer-to-protocol lending involves users getting a loan from the lending platform governed by smart contracts. A unique contract is created once users agree to the terms set by the platform. This program serves as the bridge between the lending application and the borrower by processing all repayments and responding to any other requests (such as accelerated repayment). The protocol will be funded by liquidity providers (LPs), who will be rewarded for their participation.
Characterizing Elements of an NFT P2P Lending Platform
- Friendly UI/UX – An NFT P2P lending platform should have an extremely friendly user interface, offering a seamless user experience to attract people with all levels of technical expertise.
- Matching Engine – The P2P lending platform powered by NFTs should have a powerful matching engine that matches borrowers and lenders per their requirements.
- Smart Contracts – The platform uses smart contracts extensively to monitor loans and execute settlements accordingly. Conditions they use are decided externally on the platform between peers.
- Collateral Evaluation – Evaluating the NFT collateral’s price is essential to monitor its value and risks. Decentralized data oracles are used for this purpose to create an outline of the NFT market trends and prices.
- User Verification – For an NFT P2P lending application to function without concerns of malicious actors, user verification protocols such as Know-Your-Customer (KYC) are mandatory.
- Security Provisions – The NFT-based lending app is built with top-grade security elements to ensure NFTs and cryptocurrencies are stored and transacted safely. Features are implemented on both the user-end and platform end.
- Statistical Dashboards – Statistical dashboards in the platform allow lenders and borrowers to view various parameters that they can use to make informed decisions.
Benefits of NFT P2P Lending Software Development
- Increased Liquidity – NFT lending software development offers increased liquidity for NFT assets as it offers a new way for NFTs to gain monetary value. Earlier, the only way to liquidate NFTs was to sell them, and selling NFTs is usually challenging.
- Quick Processing – NFT lending platforms utilize smart contracts to the fullest, which enables loan transactions to be processed much faster than conventional loans.
- Global Reach – These applications offer a global scope by connecting borrowers and lenders from across the world. With the NFT space rapidly growing, the prospects for NFT loans are only getting bigger and bigger.
- Portfolio Diversification – Users borrowing using NFTs as collateral can diversify their portfolio, which ramps up market activity to new levels. With added security powered by blockchain technology, users can enjoy great levels of transparency.
The Process to Develop an NFT Peer-to-Peer Lending Platform
- Planning – Here, we frame the P2P lending software development campaign’s comprehensive idea, including technology, working model, features, and market scope.
- Designing – Our experts design the UI and UX elements of the lending platform per your unique business requirements for different end users.
- Backend Development – Our developers come into the campaign by building the core infrastructure for security, storage, and authentication to handle the web-based backend of the platform.
- External API Integration – We integrate the platform with external Web3 APIs associated with NFT marketplaces, data oracles, metadata storage, and blockchains.
- Smart Contract Development – Our smart contract developers code the programs necessary to execute all operations inside the lending application, including loans and repayments.
- Collateral Evaluation Mechanism – Now, it’s time to develop the mechanism that helps to evaluate the NFT collateral’s market worth and risk. Integrate provisions for risk assessment and due diligence for optimal results.
- Matching Engine Creation – Our expertise in developing matching engines lets us build programs that facilitate seamless matching between borrowers and lenders.
- Security Measures – The platform is now fitted with military-grade security reinforcements to safeguard against hacking attempts and fund draining.
- Testing – Our skilled QA testers put the platform through extensive checks to find and resolve errors. The process is repeated several times to eliminate most defects.
- Launching – Finally, we launch the NFT P2P lending portal for public use on the blockchain(s) of your choice. We also assist you with periodic maintenance and upgrades to keep your application up-to-date and fully functional.
We have seen how NFT P2P lending platform can be ideal as a business option with all the expansive features and benefits. With a working model benefiting everyday users, entrepreneurs, NFT ventures, and the broader market, an NFT lending platform can be the ideal solution for anyone aspiring to make an impact in the evolving Web3 space. If you want to build your own application for peer-to-peer lending powered by NFTs, working with our experts can be the perfect kickstarter. Our NFT P2P lending software development company can provide you with ample support to launch your own venture, harnessing the advantages of decentralized digital technology. Fill out the form below to speak with one of our professionals today!