Gm from Sodium!
We’re excited to share more details about our steezy borrowing flow with you. Furthermore, we’ll explain the design behind the Hybrid Liquidity that’s going to power your NFT-backed loan.
Before moving on, let’s have a look at how current NFT lending platforms do it…
The most common P2Peer and P2Pool models have proven their individual advantages in the past. Although these two models have already served a high number of Degens, they neglect the growing needs of the NFT lending landscape due to low efficiency, poor collateral valuation, or limited scalability (or a combination of all three).
Sodium’s Hybrid Liquidity combines the best of Peer & Pool mechanics to solve the NFT Liquidity trilemma:
> Fair collateral valuation
> Efficient loan fulfillment
> Wide collection variety
Basically, Sodium allows users to get access to the high LTV instant loans against a wide variety of whitelisted collections. Pretty slick, right?
We can imagine you’re curious to know more. Let’s dive into the details!
1. Loan Requests
As a holder of a whitelisted ERC-721 or ERC-1155 NFT, you’re able to collateralize your digital asset and take out an ETH loan by opening a ‘Loan Request’.
To create a request, first set the three following variables:
1. Desired Loan Amount [ETH]
2. Loan Term [Duration]
3. Initial APR [Initial loan interest rate]
After these variables are set and confirmed, the Loan Request is published and will remain open for the next 48 hours. During that time, the initial APR set by the Borrower will increase automatically with each passing hour, offering increasingly attractive returns to potential Lenders. Now, both Borrowers and Lenders will be able to rest easy, knowing that our loan request mechanism enables hyper-efficient price discovery for the pledged collateral.
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2. Loan Fulfillment
You’re looking to lend some $$$? That’s great because an open Loan Request represents an opportunity to contribute some ETH and earn interest from any resulting loan.
As we already know, a Loan Request’s APR continues to increase over time, meaning that early loan participants will be compensated at a lower APR than those contributing at a later stage.
When the Lender sees the APR is at a number they like, they can go ahead and submit an offer. Thanks to our wicked smart devs, no gas fees are required to make a loan contribution.
Wait, am I missing something? Why can’t Lenders just wait for a higher APR?
— Don’t worry, Degen, we’re just getting to the fun part…
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3. Lending Queue
Lenders who contribute to a Loan Request are placed into the Lending Queue. Their place in the queue represents the risk they take when making a loan. Each Lender’s loan contribution increases the collateral valuation by the amount of their contribution.
That means that early participants not only have a lower APR but also lower risk. While lenders from the top of the Lending Queue are willing to offer a higher LTV ratio for a greater reward, they are also exposed to a higher chance of not being repaid in the event of a liquidation.
If you are a Lender who doesn’t want to actively manage your funds on the Peer market, we got you covered! The Lending Queue design allows a hybrid combination of both Peer & Pool liquidity to be offered to a Loan Request. Lenders can simply create a lending pool for one or multiple collections or stake their funds into any existing lending pool that meets their risk/reward expectations.
☞ We’ll tell you more about Lending Pools and Sodium AMM next time, promise ♡
Benefits of using the Lending Queue as a loan fulfillment process:
⇢ Efficient Loan Fulfillment:
Price discovery mechanics combined with instant Pool Liquidity guarantees rapid loan fulfillment.
⇢ Wide Collection Variety:
Sodium’s design is practically collection agnostic, except for scams and rugs, which are not welcome (sorry).
⇢ High LTV Ratio:
Users can leverage their NFT market knowledge to get high APR, while borrowers are able to get the maximum amount of liquidity the market is willing to provide.
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4. Loan Acceptance
The Borrower will be able to partially or fully accept available offers, thereby adding to a loan at any time while the request is open. Additionally, Lending Pool offers can also be added to a loan, instantly.
As a Borrower, you don’t have to accept all the loan contributions offered, as some might exceed your APR expectations.
☞ Let’s take our example from above:
The Borrower requests a 10 ETH Loan, and the Lending Queue has three different lenders in it, offering 10 ETH with an avg. APR of 22%. The Borrower decides to accept only part of the offered loans and chooses to borrow 8 ETH on avg. 18.75% APR.
Borrowers will see a quick summary including all loan details — by confirming these details, they start their loan!
With Sodium’s Hybrid Liquidity
Design we’re not only bringing a great solution to the NFT Liquidity Trilemma but also introducing a brand new lending primitive to power the next generation of Web3 finance.
☞ As we’ll have many more exciting things to share in the coming weeks and months, make sure to hop over to Twitter, and subscribe to access further info about the upcoming launch, whitelisted collections, and more!
P.S. sending us a Gm will demonstrably increase your karma points.
Now that you’ve unlocked all that NFT money, what will you do with it?
