Lending platform Arcade has launched on Pawn Protocol in a bid to bring liquidity to the non-fungible token (NFT) market, the company announced Monday.
The platform is a peer-to-peer marketplace that allows users to access fixed-rate loans collateralized by their Ethereum-based NFTs, using an escrow system.
Arcade says it currently has more than $15 million locked up in blue chip NFTs and $6 million in loan volume, with average loans being around $350,000, a representative told CoinDesk. (Blue chip NFTs are considered to be those among the highest valued in the market, like Bored Ape Yacht Club, CryptoPunks or Doodles.)
The launch comes just a month after Arcade announced a $15 million Series A in December led by Pantera Capital.
“Right now, most of the value is locked up in the top 1% of assets, so the platform is curated to certain collections,” Gabe Frank, CEO of Arcade, told CoinDesk in an interview. “Once we start integrating Layer 2s and other blockchains we can get into some of the lower value assets but just because of gas costs. It’s currently quite restricted and only makes sense for these higher value loans.”
Arcade’s launch comes at a time when confidence in blue chip NFT projects has never been higher. Despite an overall market downturn in recent weeks, the floor price for projects like Bored Ape Yacht Club have soared to all-time-highs, with trading volume on the popular marketplace OpenSea doing record sales volume in January.
Frank said he sees the future of the NFT lending market extending beyond just PFPs – the platform has seen a growing interest in collateralized loans for metaverse assets on games like The Sandbox, and recently issued a loan to a DAO against 48 plots of the games virtual land.
Read more: Arcade Raises $15M to Offer NFT-Backed Loans
While the NFT lending market is still in its infancy, competition in the space does exist. PawnFi raised $3 million in November for a similar venture, backed by big name investors Digital Currency Group (the parent company of CoinDesk), Animoca Brands and Dapper Labs.