The Future of Web3 Borrowing: Tokenizing Physical Assets with 4kprotocol And Arcade
The future of web3 lending and borrowing with real world Assets is gradually shaping out with 4KProtocol and Arcade leading the pack and into a whole new digital era in the lending space. This new open source protocol and application, designed by 4KProtocol and Arcade, is unique as it allows individual to turn their physical Assets into an NFT to obtain a loan on the blockchain which can be retrieved back when the borrower refund the money borrowed with the interest accrue on the loan, or when defaulted.
These combined protocols allows web3 users to use their real world Assets to obtain loans by having the Assets minted into NFTs on the blockchain which can be used a real representation of the physical Assets, hence the name “tokenizing physical assets”. This new application is unique as it solves the problem of trust, protecting the borrower for the trading of digital assets and credits using NFTs and Asset Exchange APIs.
Moreover, the applications also eliminate the problem of distance, because the borrower and the lender doesn't need to know each other or meet physically since everything is done on the Blockchain. The lender do not need to see the physical Asset before lending money, the NFT serves as an authentic digital representation of the Asset which has detailed instructions for the lending and the borrowing, therefore, by doing away with physical accessibility it creates a new and different decentralized peer to peer lending environment that is secure and frictionless.
A real world asset used to be a trade credit or for a borrower to obtain loans. The banks and lending market is also seen as problematic, as there was no platform for lenders to easily assess borrowers' credit risk for making a lending decision, thus making the process time consuming and prone to fraud and error.
4KProtocol is a very innovative and secure platform and application where users can link up their assets on the Blockchain to mint them into NFTs and get a loan in fiat or crypto money. Arcade the lending and borrowing platform is where borrowers meet lenders, and where borrowers can list and manage the NFTs that represent their assets for getting loans.
How the system works
The starting point is for an individual who wants to get a loan with his physical Asset to mint the Asset into NFTs. To do that, the person send the Assets to an escrow company which in this case is 4KProtocol. The Asset are then turned into an NFT that represents ownership of the Asset and sent it back to the person.
The person list the NFT on Arcade to get a loan that he needed. Lenders can bid for the borrower's NFT asset, and the best offer accepted. Once the loan is facilitated, the NFT is then transferred to an escrow wallet until the borrowing term is up for repayment. The borrower can then redeem the asset back from the escrow wallet after repaying the loan.
However, to get the asset back in it physical state, the NFT has to be burnt and the owner can collect the asset from the escrow company. But, if the borrower defaulted, the lender can collect the physical asset and sell it anywhere and make their money back.
A current lending that took place on Arcade can be used as an example here. A user needs a loan of $35k at 12% APR for his Patek Phillipe watch as collateral. He therefore sent the watch to 4KProtocol, the escrow company who then mint the watch into NFT and sent it back to the owner.
This guy then listed the NFT on Arcade with the borrowing terms for lenders to place their biddings. He then accepted the best loan offer from the bidders. Then NFT was immediately transfer to an escrow wallet as soon as the loan offer was accepted until the term is up or the borrower repays. The acceptance of the loan offer automatically transfer the funds to the borrower's wallet on the platform.
The lender does not even need to know the borrower's name; all they need to know is that they are the lawful owner of the watch, which the NFT verifies through the Arcade Smart Contract. So, the borrower can take out loans from several people, each using NFT assets as collateral, who get paid back at the same time via Arcade.
The risks
The developers must very well aware of the risks involved, as there could be possibility that the platform can be hacked. As it is not open source, there are bound to be vulnerabilities. Therefore, it is an industry and a technology requires a lot of efforts and energy to be made, so, a user must be aware of the risk.
Nonetheless, Arcade and 4KProtocol are seen as the best option in this space. The novelty of the products is making them unique and leaving a lot of users eager to get into the field.
Sure, you can just go to your local bank to get a loan, but having your asset before a global liquidity providers versus local liquidity providers to get that loan makes Arcade the top alternative here.
This market is still young, so we aren't there yet, but there is a lot of opportunity to be grabbed by those who are keen on seeing their assets as collateral for them to get loans from anywhere and everywhere.
If you are looking for a loan and you have a valuable real physical Assets like watches, jewelries, shoes, 4KProtocol and Arcade can be very good option for you to get the loan to fulfill your dreams.
Conclusion
We must give credit to 4KProtocol and Arcade for pushing the boundaries and making this kind of unconventional business possible in the web3. They are working as a catalyst that leads the industry where it needs to be going, and we are sure they will put a lot of efforts to make sure this market becomes a success, paving the way for other similar businesses to come into the industry.
This is just the tip of the iceberg for whats to come for proving ownership of Real World Assets using NFTs.
What do you think about using real world Asset NFT for lending business? Let us know in the comments below.
For more details about this subject check out the 4KProtocol and Arcade platforms.
Reference links: 4KProtocol and Arcade. Other references from Leoglossary.
