🖼️ NFT & Web3: Nft Lending

NFT lending continues to struggle as total value locked (TVL) slips toward all‑time lows, with recent data from The Defiant showing a 35% drop over the past month. TradingKey highlights that the integration of NFTs into DeFi protocols—via collateralized lending, fractional ownership, and liquidity pools—has yet to generate the same volume of activity seen with ERC‑20 assets. The slowdown is partly due to tighter regulatory scrutiny in the U.S. and EU, which has increased compliance costs for platforms offering NFT collateral services, and the recent uptick in market volatility that has dampened risk appetite for illiquid NFT assets. Energy‑heavy proof‑of‑work blockchains, where many NFT collections reside, are also facing higher transaction fees, further discouraging users from staking NFTs as collateral. Consequently, liquidity providers are shifting toward more liquid, fungible assets, and the NFT lending niche may see a gradual pivot toward Layer‑2 solutions to reduce costs and regulatory exposure.