Rolexes in DeFi? NFT Marketplace 4K Raises $3M to Combine NFTs and Luxury Goods

4K, a novel marketplace that issues non-fungible tokens (NFTs) paired with luxury items held in storage, has raised $3 million in a seed round of funding that was led by Electric Capital, Crosscut Ventures, Collab+Currency, ConsenSys and IDEO CoLab Ventures.

Testing of the 4K platform also kicks off Tuesday, as the company aims to issue digital deeds to luxury items such as Rolex watches and rare sneakers. Those deeds can be used to earn yield within the burgeoning decentralized finance (DeFi) realm, the startup said.

Bringing real-world assets into DeFi is viewed as a highly lucrative addition to the world of crypto lending. DeFi refers to finance that is based on blockchain technology and that doesn't rely on a central intermediary such as a bank.

With 4K, customers send a physical item to be authenticated and stored in a secure storage facility. Once an item is stored, the customer receives an NFT, which has the potential earn interest, 4K CEO Richard Li says. If a customer sends the NFT to 4K, the physical item is sent to the address provided by the redeemer.

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NFTs come in three flavors, Li said – digital art, digital items from virtual reality platforms, known as "the metaverse," and digital property rights, which is the part 4K is interested in.

The platform is hoping to attract crypto-curious sneakerheads, watch aficionados, wine connoisseurs, trading card experts or collectors of any other investment-grade physical goods.

“If you bring physical aspects into crypto, which is purely digital right now, that introduces an entirely new asset class and dynamic to the ecosystem,” Li said in an interview.

“We can NFT anything and bring it into the digital world," he added. "Imagine an NFT of a real-life horse and bringing it into [digital horse racing platform] ZED RUN; or if you NFT’d a Michael Jordan rookie card and brought it into NBA Top Shot.”

By the same token, how might someone with a million-dollar Rolex collection go about getting a loan against it? “Do I go to a pawn shop?” Li said.

In terms of storing customers’ valuables, Li said 4K will be using independent auditors and high-security vaults based in the U.S. to begin with. Everything will be 100% insured, he said.

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So if a limited edition Omega Moonwatch or some Travis Scott Air Jordans have been sent to 4K to be held in storage and NFTs have been sent to the owner’s wallet, where can the customer then go to use that collateral?

It’s a little early for Uniswap, Li said, pointing to next-generation NFT platforms like NFTX, NFTfi and Taker. Uniswap is an exchange where customers can trade digital tokens.

“It’s going to be very interesting when you start getting yield on your digital NFTs and physical items. It will happen,” Li said.