there are other ways of doing it

There are always potential other ways of doing something, but blockchains are readily available now. It’s like looking at a python library and commenting “i could implement some of that functionality in C, you don’t need to use python”. At some point it becomes a matter of reinventing the wheel.

I think no bank would accept my Minecraft diamond sword as a collateral for a loan

Nftfi and BendDao are two protocols that can be used to obtain cryptocurrency loans on NFTs.