NFTFi Explained

What are NFT Staking and Listing Pools? Is NFT Lending safe? NFTFi represents new opportunities to capitalize on your NFTs and to trade seamlessly and earn while doing so, but there are certain pitfalls that need to be navigated to ensure a safe experience. logo
@enter.artPUBLISHED 10TH JULY 2023

NFTFi is an innovative concept that combines the concepts of DeFi we know and love with NFTs. Situated in the intersection of DeFi and NFTs, NFTFi presents several ways to use your NFTs to lend, earn and trade, but it also brings with it certain pitfalls that need to be avoided if you are to navigate NFTFi safely. In this article, we dive into the concept of NFTFi and examine some of the major services that can help you lend, earn and trade seamlessly.

NFT Staking allows you to earn additional rewards by participating in DeFi protocols. By staking your NFTs, you can contribute to a deflationary supply pressure for the collection, leading to potential price appreciation. In return, you receive rewards in the form of additional NFTs, governance tokens, or other assets. This mechanism incentivizes engagement, fosters active participation, and can contribute to positive price development. However, you ought to evaluate and understand the pitfalls associated with smart contract vulnerabilities and the inherent volatility of the NFT market. For example, malicious or unsafe smart contracts could put your NFTs at risk or drain your wallet. You can already now safely stake select NFT collections in the enterverse to earn token rewards.

NFT Listing Pools provide a decentralized platform where users can collectively list and trade their NFTs. By listing your NFTs in a pool within a specific price range, often close to the floor price, you can earn rewards for the duration of the listing. This approach allows you to earn rewards until the NFT is sold or the pool expires. NFT listing pools benefit sellers, buyers, and the wider NFT ecosystem by facilitating trading and ensuring a larger number of NFTs are available near the floor price. 

Nonetheless, you should exercise caution regarding potential risks, such as platform security, and make informed decisions before participating in NFT listing pools. When considering whether to list your NFT in a listing pool or not, it’s prudent to examine the platform, whether it has an audit from a reputable auditor, as well as the rewards for the listing pool itself. When NFT Listing Pools go live in the enterverse, the enter community will designate the exact pools via governance votes.

NFT Lending allows NFT owners to leverage their assets' value without selling them. By using your NFTs as collateral, you can borrow against them and obtain short-term liquidity while retaining ownership. This mechanism can be advantageous for individuals seeking immediate funds, as it provides a means to unlock the value of NFTs without selling them. However, borrowers should carefully consider the risks associated with interest rates, the potential loss of the NFT in case of default, and the reputation of lending platforms. High interest rates could mean that it’d be more expensive for you to retrieve your NFT and a sudden drop in the floor price of the collection your NFT belongs to could result in a margin call, forcing you to add extra collateral to the loan or lose your NFT.

In summary, NFTFi brings benefits to the wider NFT ecosystem, but participants must exercise caution when engaging in it. The increased liquidity, rewards, and expanded trading opportunities it offers can be enticing for NFT holders. You should be mindful of the risks, such as smart contract vulnerabilities, market volatility, and platform security. Conducting thorough research, choosing reputable platforms, and understanding the potential pitfalls are vital steps to navigating the NFTFi space and maximizing its benefits for NFT holders.

NFTFi and the NFT Market

NFTFi, with its various components, brings both benefits and challenges to the wider NFT market. On the positive side, NFTFi enhances liquidity and allows holders to access the value of their NFTs without selling them. It democratizes participation, allowing a broader audience to invest in and benefit from the NFT market. Additionally, NFTFi fosters engagement, collaboration, and community building among NFT enthusiasts.

The NFT market, although vibrant and innovative, can be highly volatile and subject to sudden price fluctuations. NFT values can experience significant swings, and this volatility also affects NFTFi. Participants in NFT Lending especially must carefully assess the risks associated with potential losses in the value of NFT assets since this can lead to margin calls and worse.

Moreover, the developing nature of NFTFi introduces uncertainties and regulatory challenges. The evolving regulatory landscape surrounding NFTs and DeFi may impact the operation and legitimacy of NFTFi platforms. You should remain vigilant and ensure compliance with applicable regulations to mitigate potential legal and regulatory risks.

Additionally, the security of NFTFi platforms is crucial. Smart contract vulnerabilities and hacking incidents can threaten participants' assets significantly. It is essential for users to conduct thorough due diligence on the platforms they engage with, including assessing the security measures, auditing processes, and track records of the platforms.

Despite these challenges, NFTFi offers a compelling value proposition for the wider NFT market. It introduces innovative mechanisms for unlocking liquidity, accessing diversified investment opportunities, and engaging with the NFT ecosystem beyond simple ownership. It allows NFT holders to leverage the value of their assets without sacrificing ownership and empowers a broader community to participate in the NFT market.

NFTFi represents an exciting convergence of NFTs and DeFi, offering new opportunities for NFT holders and enthusiasts. NFT Lending, Staking, and Listing Pools provide avenues for liquidity, rewards, and diversification within the NFT ecosystem.

As the NFTFi landscape continues to evolve, it is crucial for individuals to stay informed, conduct thorough research, and exercise caution when engaging in NFTFi activities. By understanding the benefits and pitfalls of NFTFi in relation to the wider NFT market, you can make informed decisions and navigate this exciting and transformative space more effectively.

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