# How does the value of an NFT is calculated as a loaning asset?

I’ve been thinking, could it be that the very high NFT prices is an economic trick? In other words, is this scenario possible:

-Alice have X value -So, Alice hires Bob off-chain to submit a rubbish NFT in an auction -Alice buyes the NFT at price X -Alice redeems (X-Y), pays Y to Bob -Alice put the NFT as an asset&get a loan2/3X -Alice makes a Profit=2/3X-Y

-If we assume Bob won’t settle for less than half Y=X/2 -Then Alice gains X/3 out of nowhere, probably less than the loan cost ( I mean interest rate)

-Infact, Alice could create like N addresses & make them look like N bidding account in her own auction with no need for Bob; ie transfer the Flashloan money to a different account of hers

-Makes me wonder, what are the liquidation rules for NFT assets??

-I'm not a developer, more of academic, so I do not pretend to know the accurate implementation details. In this thread post 45/46 https://ethresear.ch/t/cross-rollup-nft-wrapper-and-migration-ideas/10507/55

It is stated. *"A smart contract would have no way to check if the NFT is genuine. Only users will. If the smart contract is a market for trading NFTs, then user verification is probably good enough. Clients will disregard the fake wrapper and therefore not buy it through the contract.

But if the contract needs to do more complicated stuff with the NFT, such as use it as a collateral, then this method won’t work and we need canonical ownership. That would require occasional L1 transactions, although it could be O(1) for any number of NFTs by using a version of what I demonstrated here https://github.com/yoavw/cross-rollup-bridge "*

Still I can't find in there how it's calculated, there is the implementation details but not the formula/the auction details/... ie, how do you prevent the above scenario?or why it's not possible to happen

• I didn't say people shouldn't use NFT as a loaning asset,; I think they are already used with their known risks, I was asking what are the rules, precautions, possible attacks to be aware & mitigate them
– ShAr
Sep 18, 2021 at 9:19