In recent developments within the decentralized finance (DeFi) space, real-world assets continue to gain prominence. Investors are extending their focus beyond private loans and tokenized Treasuries, exemplified by a recent collaboration between Arcade.xyz and 4K.
On September 1, 4K, a decentralized protocol specializing in bringing physical assets onto the blockchain, validated a comprehensive collection of Supreme box logo T-shirts dating from 1994 to 2020. This collection was utilized as collateral for a $1.1 million loan on the lending platform Arcade.xyz.
The partnership between Arcade and 4K highlights the capacity of decentralized protocols to establish trustless systems, allowing participants to leverage real-world assets (RWAs) within the digital asset ecosystem. According to a Dune query, Arcade has consistently processed over $10 million in monthly loan volume since March.
The increased loan activity reflects a growing interest in RWA-backed digital assets. Platforms like 4K are at the forefront of this trend, enabling owners of luxury goods to acquire digital representations that can be traded or used as collateral on-chain. For Arcade.xyz, loans secured against verified luxury goods in the form of non-fungible tokens (NFTs) have become a significant product offering.
Arcade has previously incorporated other high-end merchandise, including Rolex and Patek Philippe watches.
Gabe Frank, Co-founder of Arcade.xyz, notes that the blockchain provides liquidity opportunities for owners of unique items that were previously overlooked by traditional lending institutions. He explains, “Pawnshops would never loan against an item like the box logo collection. It’s too esoteric. And there aren’t enough buyers for it. The blockchain is perfect for these types of assets, being able to plug the NFT into DeFi’s global liquidity.”
The portfolio of RWAs on Arcade.xyz currently stands at $1.5 million across 19 loans, representing just over 10% of the platform’s total outstanding loans amounting to $14 million.
Frank emphasizes that the challenging aspect of the RWA equation lies in custody and authentication, akin to the role of a pawn shop. He states, “If you solve that, blockchains and DeFi are amazing tools for financialization and capital efficiency. You’re clicking two buttons to get a million-dollar loan without any middlemen.”
Regarding RWA NFT lending on Arcade.xyz, 4K assumes the responsibilities of custody and authentication. Steven Gonzalez, Chief of Staff at 4K, explains the process, stating, “We need somebody who can hold the item, who can validate that the item is as it is, who can authenticate the item.” 4K manages physical assets, validates supporting documentation, and stores the goods until a token holder chooses to redeem them.
Gonzalez anticipates further developments in this space, noting, “I think it’s just beginning because the pieces are still being built as we speak.”
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