Michael Levy: How to Turn Your NFT Into a Loan

Levy, a speaker at the Consensus festival, was an early investor in NBA Top Shot, a catalyst for the NFT boom. Now he runs Flowty, an NFT lending platform.

AccessTimeIconApr 11, 2022 at 4:20 p.m. UTC
Updated May 11, 2023 at 5:35 p.m. UTC

Michael Levy is a non-fungible token (NFT) investor and crypto entrepreneur, currently launching a portal for NFT-collateralized loans called Flowty. But Levy is not a diehard “crypto native” – and that’s exactly what makes him significant.

Rather than arriving in the space from the technical side like so many current leaders and builders, the self-described “relative normie” got sucked in by following a lifelong yen for sports collecting towards its logical future.

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  • “Before I found NFTs, the most passion I had for collecting was around MLB bobbleheads,” he told CoinDesk. “A friend of mine and I would pick out a new stadium every year and travel there for a bobblehead game.”

    This article is part of Road to Consensus, a series highlighting speakers and the big ideas they will discuss at Consensus 2022, CoinDesk's festival of the year June 9-12 in Austin, Texas. Learn more.

    That, of course, was before the COVID-19 pandemic. Like just about everyone else, Levy found himself bored during the early-pandemic lockdowns. But unlike noob traders who fired up Robinhood or Coinbase to fill the gaping existential void, Levy didn’t have to stray far from his before-times pursuits.

    “In September of 2020,” he said, “I saw a tweet that the NBA had announced and released digital collectibles.” He immediately tried to sign up for NBA Top Shot, the video-clip NFT series, but the platform was still in closed beta at the time. Levy said he finagled an invite by messaging the Top Shot team directly, joining when “there were probably 200 or 250 active users. Very early days.”

    Top Shot quickly became the first truly successful major NFT brand, generating huge interest and skyrocketing prices in early 2021, before retracing significantly as the broader NFT frenzy cooled. Levy’s early involvement paid off big-time. But it wasn’t crypto expertise that opened his eyes to the opportunity.

    “I looked at this as someone who collected sports cards growing up,” he said. “In many ways, this is just sports cards 2.0. They’re much more shareable, and they’re essentially borderless.”

    Of course, the key difference is that you can hold a bobblehead or a baseball card in your hand. But as a veteran collector, Levy doesn’t think that’s a huge distinction.

    This is just sports cards 2.0. They’re much more shareable, and they’re essentially borderless

    “If you break down what makes a physical object attractive to you … a lot, if not all of those same principles apply to digital assets,” he argued. “What makes it meaningful is not the physical cardboard, not the image, not the reaction that the image evokes. It’s simply that it signals to people around you that ‘I’m a basketball fan, I value scarce objects and I like this player and I like this team.’”

    But crypto also makes it possible to do crazy new things with those collectibles, such as easily using them as collateral for loans. Levy’s new Flowty platform is meant to make that easy, and its peer-to-peer nature partly addresses the major challenge of how to value these volatile digital assets as collateral. The answer is simple: Flowty lets users decide.

    “You pick an NFT from your inventory and you input the [loan] parameters you’re looking for. You might say, I have an NFT. I think it’s worth $5,000. I want to borrow $2,000 against it, and I’m willing to pay 3% over a 30 day period. And if [a lender is] comfortable with the offer, they are free to fund that loan. Then lenders either get the loan paid back or they get the collateral [NFT], and the counterparty can’t do anything hostile. It’s all trustless and decentralized.”

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    There are concerns that financializing NFTs could have unpredictable market impacts or increase holder risk. But as Levy points out, once you get past the technology, Flowty isn’t doing anything all that radical. “You can take a watch or a painting to a pawn shop and get a loan. It’s a very, very similar transaction.”

    One uncertainty Levy sees for the NFT universe is the technical challenge of “bridging” assets from one blockchain to another. Flowty, like Top Shot and CryptoKitties, is built on the Flow blockchain. “As a relatively mainstream person myself, Flow is approachable and user-friendly, and aligned with these huge brands,” Levy said of the network’s core appeal.

    But that ease-of-use comes with trade-offs, including “giving up some decentralization and security,” Levy said. That can be mitigated by connecting to other blockchains, but huge recent hacks of connecting “bridges” like Ronin and Wormhole have cast doubt on the viability of such “cross-chain” connections.

    “It might just be recency bias, but a lot of people have said if we can’t solve the bridge issue, it might not wind up being a [cross-chain] future,” said Levy. If that thesis holds up, Levy thinks there will be long-term consolidation as isolated chains lose utility. “There will be spin-offs and alternatives, but probably a group of four or five that emerge over time,” he noted.

    Naturally he thinks Flow, and its library of infamous dunks, will be one of them.


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    David Z. Morris

    David Z. Morris was CoinDesk's Chief Insights Columnist. He holds Bitcoin, Ethereum, and small amounts of other crypto assets.