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Lesser-known Blockchain Assets you Can Use as Collateral

 

When people think of crypto loans, they usually only think of standard cryptocurrencies such as Bitcoin or Ethereum. However, the blockchain lending industry has expanded beyond mere coins. Nowadays you can also use other blockchain assets as collateral for a crypto loan.

 

Here are four assets other than standard cryptocurrencies that can be used as collateral to help secure you a loan:

 

Liquidity Provider Tokens (from DeFi projects such as Uniswap)

 

Some DeFi


projects give out special tokens to people who provide liquidity to them. These are known as liquidity provider tokens (or LP tokens), and they are distributed to people who add funds to liquidity pools. Uniswap is a popular exchange that issues LP tokens, with each token being representative of the amount of money a user has handed to the pool. LP tokens are designed to incentivize users to add liquidity and help keep DeFi projects running. Some lenders take LP tokens as collateral, as they can be exchanged for the coins and tokens that they represent if returned to the project that issued them.

 

NFTs (including fractional NFTs)

 

Like with physical art or goods, NFTs can be used as collateral. The worth of an NFT can be tough to determine, as some applications may under (or over) valuate them, so using them for collateral can be a struggle at times, but nevertheless, there are lenders who will gladly accept them as collateral. This includes NFTs from applications like CryptoKitties, assets in games, or even digital art that is not created using an algorithm. If users own fractional NFTs (meaning they own a part of an NFT), those can also be used as collateral.

 

Privacy Coins

 

Coins like Monero and PIVX can be used for collateral, just like any other cryptocurrency. Many people automatically assume that privacy coins cannot be collateralized as they are regularly shunned by governments and regulatory bodies. But make no mistake: privacy coins are legal in most parts of the Western world, and so they can very much be used as collateral for a crypto-backed loan.

 

Synthetics

 

Synthetic assets that run on a blockchain are perfectly acceptable forms of collateral. A synthetic asset is an asset that is represented on a blockchain, that is not usually traded on a blockchain. Popular synthetics consist of precious metals, commodities, and stocks; none of these are usually found on blockchains, but they can still be represented on the blockchain.

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