There are people who either lend or borrow the NFT. The lender can freely set and specify the lending conditions of the NFT, such as the collateral amount, rental, fee, and duration. The lender decides the risks that may occur during this time.
However, we considered the risk of high volatility when it comes to ETH or KLAY as there may be negatives for future lenders. Therefore, in Phase 1, oUSDT and USDT can be used as collateral and for rental fees.
The lender of the NFT must understand the value of the NFT and set the appropriate collateral and rental fee, taking into account that the borrower may not return the NFT. The risks and benefits that may arise are as follows:
[When the price of the NFT goes up:]
Borrower: When the value of the NFT rises, there may be opportunities for them to obtain benefits of higher value than the existing value of the NFT.
Lender: If the NFT is returned, an increase in the value of the NFT and additional fixed income such as rental fees are generated, resulting in higher profits.
Borrower: If the collateral is the same price as the floor price for the NFT, the borrower has lost to chance to "flip" the NFT, being a lost Opportunity Cost.
Lender: When the borrower borrows the NFT at a low price and the price or value of the borrowed NFT increases, the borrower may choose not to return the NFT and give up the collateral that was originally put to sell the NFT for a profit.
Lender: If the value of the NFT has risen and the NFT hasn't been returned, the lender will only receive the collateral and rental fee, which is also a Lost Opportunity Cost for the lender as the lender could have profited by selling the said NFT during this period.
[When the price of the NFT goes down:]
Borrower: Although the price of the NFT has decreased, you won't have any losses as your NFT is rented, not bought.
Lender: Although the price of the NFT has decreased, you can receive passive income and interest through NFT lending.
Borrower: When the price of the NFT goes down, the opportunity cost of renting or buying at a lower price no longer exists.
Lender: If the price of the NFT is expected to fall, there may be cases where the NFT can't be quickly recovered and sold.