Multi-NFT Collateral

NFT collectors and investors often hold a portfolio of various tokens. Recognizing the need for flexibility and leveraging power in the DeFi space, Unlockd introduces the feature of Multi-NFT Collateral.

This unique offering allows borrowers to collateralize a bundle of up to 100 NFTs from different collections for a single loan, providing a more substantial liquidity option than could be achieved with individual NFTs.

It's important to understand the parameters within which this feature operates to ensure a smooth borrowing experience.

Pool-Specific Collateral Bundling

For a Multi-NFT Collateral loan, all bundled NFTs must be eligible to extract liquidity from the same pool. This ensures that the collateral package aligns with the risk and valuation parameters set for that particular liquidity pool.

Consequently, borrowers can create a loan that combines Real World Assets (RWAs) with Token Streams (because they access the USDC Pool) or a mix that includes Token Streams, PFPs, and Gaming NFTs (WETH Pool), provided they all qualify for liquidity extraction from a single pool.

This feature is designed to maintain the integrity of the liquidity pools while offering flexibility to the borrowers.

Maximum Number of NFTs

While the Multi-NFT Collateral feature allows for significant diversification, there is a recommended limit of 100 NFTs per bundled loan. This threshold is suggested to ensure transaction reliability and to avoid potential reverts due to excessive computational complexity or gas limits on the blockchain.

Although there isn't a hard cap set on the number of NFTs you can bundle, transactions involving more than 100 NFTs might fail due to blockchain limitations. Therefore, it is advised to keep the number of NFTs in a bundled loan below 100. For those who wish to bundle more than this suggested limit, it is recommended to proceed with caution and at their own risk, as this might lead to increased chances of transaction failure and potential loss of transaction fees.

In multi-NFT collateral loans, you have the flexibility to remove NFTs from the collateral bundle. This can be done as long as the action keeps your loan's Health Factor (HF) above 1. Carefully assess your loan's HF before and after the removal of any NFT to ensure it remains healthy and not at risk of liquidation.

Advantages of Bundling NFTs

  • Diversification of Risk: By bundling multiple NFTs, borrowers can mitigate the risk associated with the volatility of individual assets. A diversified portfolio as collateral helps in balancing out the loan's risk profile.

  • Increased Loan Value: Collateralizing multiple NFTs can potentially increase the overall loan value accessible to the borrower. This is particularly beneficial for those looking to maximize their borrowing power.

  • Efficient Management: Managing one loan with multiple NFTs is easier and more gas-efficient than obtaining and managing multiple loans for individual NFTs. This streamlined approach saves time and transaction fees.

Appraisal and Loan-to-Value (LTV)

The value of each NFT within the bundle is individually assessed using Unlockd's advanced appraisal providers, which take into account factors like rarity, market demand, and the NFT's intrinsic characteristics. For specific information about how this works, check the Collateral Valuation section.

The LTV for the loan is then dynamically calculated based on the combined appraisal of the bundled NFTs, ensuring a fair and accurate representation of the bundled collateral's worth.

Repayment and Liquidation

Repayment terms for loans with multiple NFTs remain as flexible as they are for single NFT loans. Borrowers can repay the loan in installments or as a lump sum based on their financial convenience. In the event of a liquidation trigger, where the Health Factor falls below 1, the smart liquidation process activates, which is designed to be as minimally disruptive as possible while protecting the interests of both borrowers and lenders.

In the event of liquidation, after a substantial grace period for the borrower, automatic liquidations may need to be conducted via an External Liquidation Gateway, as detailed in our Liquidation Process.

The smart algorithm is designed to minimize the total number of assets needed to be liquidated in order to recover the Health Factor.

We strongly recommend reviewing the Liquidations section to understand how this could affect your bundled assets.

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