Arcade is Building a Pawnshop for NFTs

An NFT can be almost anything — a work of art, an item in a game, a post on a decentralized social graph, a song — but most high-value NFTs lack one useful quality: liquidity.

Just as pawn shops will loan you money against a valuable physical item like a diamond ring, new DeFi platforms are offering loans collateralized by NFTs from blue chip collections such as the Bored Ape Yacht Club, Cryptopunks, and Azuki.

Gabe Frank knows a thing or two about pawn shops — his family's experience in the business goes back generations. But after stints at BitGo and Curve, Frank was ready to take that core concept into Web3, founding Arcade alongside Robert Masiello in 2021 after raising over $15 million from crypto VCs.

"From where we started about eight months ago to now in April we're going to do about $13 million in loan volume," said Frank in an interview with Coinage. "It's continuing to grow even though NFT floor prices are going down."

Building a DeFi platform from scratch is certainly a challenge. Frank talked frankly (sorry) about the many different challenges the Arcade team faced when entering the nascent market for NFT loans.

"There's a lot of different domains we have to be experts in. It's crypto, it's NFTs, it's smart contracts, it's finance, it's tech," said Frank. "Across all these different domains, you have to find people that believe in the same vision you see for the future."

Still, the platform continues to develop. In collaboration with the crypto firm Fabrica, a loan was recently taken out on Arcade using an NFT representing a real plot of land as collateral. It's clear that we're still early to all the possibilities that NFTs unlock.

"[Developments in] tokenization, in new asset classes, in new sources of yield, especially in DeFi, are very interesting to institutional capital," said Frank.

You can check out our full interview with Arcade CEO Gabe Frank above.