Among the range of functions on DeFi protocol Rain.fi, there is a focus on NFTs and the platform allows users to borrow against both tokens and NFTs, while also providing a facility called Margin Swap, which allows for leveraged swaps but with a time-based format, meaning that while liquidations can still occur through loans not being repaid, price movements cannot directly trigger liquidation.
NFTs have been enjoying a resurgence lately. Sure, most major collections are still far from previous all-time highs, but there has been plenty of positive movement, led by Pudgy Penguins as its floor price soared in anticipation of the PENGU token drop.
Other big collections that have made significant gains towards the end of the year include CryptoPunks, Bored Apes, Azuki, Cool Cats, and Doodles, and sentiment in general feels improved after a year in which crypto attention was focused elsewhere–and especially on meme coins and AI tokens.
That all in mind, now is a good time to take a look at Rain.fi, as this is a DeFi protocol that has various functions and includes a strong focus on NFTs (which is unusual within the DeFi ecosystem). As such, let’s look at some of the features you can make use of on Rain.fi.
Various Borrowing Options
On the Rain app, if you hover over the Borrow tab, you’ll see options for three methods: Tokens, NFTs, and Buy Now Pay Later, so let’s look at each of these in turn, and note also that some transactions will make you eligible to earn rewards by picking up points called Droplets.
Borrow Against Tokens
This is a relatively simple function, as you just connect up your wallet and then search for the token you want to borrow against, set the token you want to receive, and enter the amount that you will use as collateral.
You’ll then see a range of options with the loan-to-value rate (LTV) indicating how much you can receive versus your collateral. So for example, borrowing USDC against SOL has an LTV of 89%, meaning that against $100 of SOL you would be able to borrow $89 of USDC.
You can then check the various APRs and durations, with calculations given for exactly how much you will have to pay in interest over the specific duration.
As for why this kind of borrowing can be useful, the main advantage is that it allows you to free up liquidity without selling tokens or triggering a tax event. In a trading context, if you have reason to believe a token will increase in price, then this essentially allows you to leverage your position, accessing additional capital while remaining exposed to upside on the tokens you’re using as collateral.
Please note the risks involved here though: if the price on your tokens moves down then you are in danger of being liquidated and losing all of your collateral.
Additionally, there are the borrowing costs to consider, and there are the kinds of protocol risks inherent to DeFi, including the danger of smart contract vulnerabilities, front-end hacks, and platform insolvency.
Borrow Against NFTs
Where Rain.fi is distinctive is that in addition to borrowing against tokens, you can also borrow against NFTs. To do so, it’s the same process as when using tokens: click on the NFTs option under the Borrow tab at the top, and then search for the NFT you want to…
