Why is Unlockd different?
The next move in NFT finance
Peer-to-peer NFT-backed loans work by allowing borrowers to display in the marketplace their NFTs as collateral for a loan. Lenders can then choose to offer a loan to the borrower based on the value of the NFTs. The borrower can accept the terms of the loan and then receive the capital, with a high interest rate and a fixed expiration time. This agreement usually takes too much time.
Although this initial model tries to meet the basic demand of NFT-collateralized debt, it suffers from many limitations : a clear lack of efficiency matching supply and demand, inflexible maturity periods, and higher interest rates that do not fit the real market needs, due to the limited liquidity nature of this model.
Most NFT-backed lending protocols obtain the NFT valuation based on the floor price of each collection. The value given to each NFT is related to the lowest price recorded for a specific collection, resulting in limitations on LTV since lenders will be willing to lend less capital and the APYs to be paid for erasures will be very high, thus creating a highly inefficient and illiquid market.
Non-Fungible-Token should be valued independently: our appraisal mechanism relies on several third-party tools specialized in ingesting historical sales data and NFT metadata to construct features based on this information to generate accurate, reliable, individual pricings. Learn more here.
We have conducted a deep analysis on the extreme events that occurred on other NFT-backed lending protocols involving liquidity crunches and loan insolvencies, and have adjusted all our protocol parameters to ensure even the most unexpected events would not have a critical impact on the protocol reserves.
Our lenders security is and will remain to be our top priority. In order to ensure it, we have designed the risk framework with variable and volatile asset characteristics in mind. All parameters adjust themselves based on market conditions and, if needed, can be updated by DAO proposals in the future. Constant simulations are being run to forecast the protocol’s behaviour in every possible scenario.
In the event that the price of a collateral drops to the point where the solvency of the loan is compromised, NFT-backed lending protocols must liquidate the NFT to ensure that liquidity is returned to Lenders. Most protocols only rely on an in-house Auction that receives little traffic and interest, so the collateral ends up being sold well below its price resulting in bad debt for the protocol.
Unlockd has a system that calculates in each situation the optimal liquidation setup, through traditional Auctions, Dutch Auctions with several variants and instant liquidation schemes through External Liquidation Pools. Plus, our followers and community members get notified when they can buy or bid for a collateral for a (safe for the protocol) discount. Learn the complete process flow here.
This feature is still in development.
What’s the point of mitigating the opportunity cost of buying an NFT if you lose the exclusive benefits of holding it? What good is the liquidity you unlock with a loan if you block your access to a potential airdrop? At Unlockd we are committed to unlocking all the utility and liquidity of your assets.
This feature is still in development. At the moment, the Unlockd protocol only operates on the Ethereum chain.
Unlockd is being developed as a cross-chain NFT-backed lending protocol, which means that the NFT deposited as collateral and the tokens borrowed won't need to be on the same chain.
When you want to borrow involving different chains in a protocol that does not feature cross-chain technology, the process is slow and costly.
For example, currently: if you have a NFT in Ethereum and you need ETH in Polygon for a new opportunity, you have to collateralize your NFT in the Ethereum chain, get the liquidity and transfer it through a bridge and then consider your next operation. And every time you want to repay part of the loan... the same tedious procedure in reverse!
You should be able to: borrow ETH on Polygon against your Ethereum NFT or MATIC on Ethereum against your Polygon NFT instantly, hassle-free.
With Unlockd cross-chain liquidity, your uncommon investments will become the fuel you need in the protocols you use, with just a couple of clicks.