🎙 "There's Going to Be a DeFi Universe Geared Towards Non-Fungible Assets:" NFTfi's Stephen Young

In this week’s episode I speak with Stephen Young, the founder and CEO of NFTfi, a platform for enabling NFT-backed loans. For some people, decentralized finance and nonfungible tokens sit on two separate worlds; DeFi on one end with its different lending, boring, and trading applications, and NFTs, with their digital art, music royalties and collectibles. Entrepreneurs like Stephen sit at the intersection, with a platform that uses NFTs to provide a financial product.

Stephen believes there will be a growing ecosystem of financial applications built specifically for NFTs, from lending to insurance products. We talk about how NFT-backed loans work; what are the rates, the terms and what happens in the eventual case of a liquidation. Stephen says, unlike loans backed by fungible tokens like ETH, many lenders on NFTfi are hoping the borrower defaults so they are able to keep the Bored Ape or the CryptoPunk securing it. He says volume on the platform is booming, as many new NFT owners find they can now get liquidity from digital property they don’t want to sell, while lenders can get more attractive rates for their crypto. Stephen believes this is just the beginning, and that eventually, real-world assets will also become digital property incorporated in the growing world of NFT and DeFi.

This episode of the podcast was recorded for the Blockchain Summit Latam conference.

The podcast was led by Camila Russo, and edited by Alp Gasimov. Transcript was edited by Camila.

🎙Listen to the interview in this week’s podcast episode here:

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Stephen Young: So I've been building software products for almost 20 years now. Originally in the finance space but my original background was I was an artist but also computer programmer and then had to decide between becoming a starving artist or a computer programmer where you can pay the bills. So decided to do it the way that paid. And, but I've always been kind of painting and doing art in the background. I've been doing some generative art over the years too. So I'm originally from South Africa. My first job I was working in London and in 2016 I worked out that I was earning more in my first job than I was in my current job because of the drop in the purchasing power of the Rand, so that I got interested in crypto very quickly as a way to kind of escape the spiraling currency.

So then in 2017, 2018, I started full-time into crypto was mostly on the exchange and trading side. But then left there. And in late 2019, I was having a conversation with one of my best friends and he's been a very early CryptoKitty and NFT collector. And we were talking about the NFT markets and Ethereum and so on. And he was saying that they were looking for ways to do loans essentially. So there was a whole bunch of them that were on spreadsheets, they were lending money to each other and keeping track of if you owed what to who on the actual spreadsheets. And I said like, can we do this as a smart contract? And basically that's where we started.

Camila Russo: So people were already lending out their NFTs, but keeping track of everything in just like in a spreadsheet?

Loans on Spreadsheets

SY: Yeah. So as a group of guys, who'd all been like trading together for a long time. A lot of the names you'd probably recognize now as the big NFT influences, I won't dox them in public today, but yeah, so they were, they knew each other. So they'd been kind of friends for two or three years and they'd sometimes need liquidity for different projects. So they were just in a friendly way, keeping track of who owed what, which assets that you used as collateral, and then just kind of on a friendly way between friends do it. And then we essentially wanted to figure out how do you expand that outside of, you know, a trust group, which is obviously what blockchains are made for. So we really just took almost exactly what was in that spreadsheet and then designed a smart contract system that would work that way.

“So we really just took almost exactly what was in that spreadsheet and then designed a smart contract system that would work that way.”

CR: Okay. So the basics of it is, the reason to do this is basically you have an NFT collection and you don't want to sell it, but you need liquidity to trade more crypto or, I don't know, potentially buy stuff with crypto. So the way to get that liquidity without having to cash out on your NFTs is lending those NFTs in exchange for crypto, and then paying an interest rate to whoever is lending you that crypto and holding your NFT.

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