Arcade Facilitates $1.1M Loan Against Supreme T-Shirt Collection

Real-world assets have been a recurring theme in DeFi this year, and investors are now looking beyond private loans and tokenized Treasuries.

On Sep.1, 4K, a decentralized protocol for bringing physical assets on-chain, validated a complete collection of Supreme box logo T-shirts spanning from 1994 to 2020, to serve as collateral for a $1.1M loan on lending platform Arcade.xyz.

Symbiotic relationships such as that between Arcade and 4K show how decentralized protocols are architecting trustless systems for participants to leverage RWAs in the digital asset ecosystem. Arcade has consistently processed over $10M in monthly loan volume since March, according to a Dune query.

The rising loan activity indicates the increasing appeal of RWA-backed digital assets. Platforms like 4K are spearheading this trend, enabling owners of luxury goods to obtain digital representations of their items that can be traded or collateralized on-chain. For Arcade, loans against verified luxury goods in the form of NFTs are becoming a key product.

Arcade has already featured other high-end merchandise, such as Rolex and Patek Philippe watches.

Accessing Global Liquidity

Owners of fine products that previously had nowhere to turn are now seeing liquidity opportunities where none existed, according to Arcade Co-founder Gabe Frank.

“Pawnshops would never loan against an item like the box logo collection. It’s too esoteric. And there aren’t enough buyers for it. The blockchain is perfect for these types of assets, being able to plug the NFT into DeFi’s global liquidity,” Frank told The Defiant.

RWAs on Arcade now account for a $1.5M portfolio across 19 loans, just over 10% of the platform's total outstanding loans of $14M.

“The more difficult piece of the RWA equation is custody and authentication. Which is basically what a pawn shop does,” said Frank. “If you solve that, blockchains and DeFi are amazing tools for financialization and capital efficiency. You’re clicking two buttons to get a million-dollar loan without any middlemen.”

When it comes to RWA NFT lending on Arcade, 4K handles custody and authentication.

“We need somebody who can hold the item, who can validate that the item is as it is, who can authenticate the item,” Steven Gonzalez, Chief of Staff at 4K told The Defiant.

4K handles physical assets and validates any supporting documentation to ensure that the physical goods it receives are authentic. The service also takes care of storing the goods until a token holder opts to redeem them.

“I think it's just beginning because the pieces are still being built as we speak,” said Gonzalez.