Original author:0x Laughingfirst level title
introduction
introduction
The NFT lending platform allows users to borrow liquid assets by mortgaging their NFT to achieve the purpose of releasing the liquidity of NFT funds. However, these issues cannot be bypassed when designing NFT loans:
• How to improve the matching efficiency of borrowers and lenders?
• How to release the liquidity of NFT and other assets as much as possible?
• How to support lending of multiple asset types at the same time?
• How to liquidate safely and efficiently in the event of default?
How exactly did this NFT lending protocol become a rising star? Let's break it down.
Introduction to ParaSpace
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What is ParaSpace?
To put it simply, ParaSpace allows users to package the asset portfolio of ERC-721 tokens or ERC-20 tokens, and then mortgage and borrow the packaged assets to improve the problem of low capital efficiency of assets on the user chain.
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ParaSpace official twitter will be operational from August 2022Parallel FinanceParaSpace is a DeFi protocol based on Polkadot
Launched by the team, the Parallel Finance protocol has a community-centric ecosystem of composable and interoperable DAPPs. Currently, 7 DeFi products including liquid staking, AMM, DEX, and wallets have been launched.
December 11, 2022, ParaSpaceAnnounceThe main network was officially launched and has been running smoothly for 2 months so far.
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Currently, the ParaSpace platform supports BAYC, MAYC, BAKC, Swer Pass, CryptoPunks, Otherdeed, Azuki, Moonbirds, CloneX, Doodles, Meebits, Pudgy Penguins, a total of 12 blue-chip NFT assets, and supports APE, cAPE, ETH, DAI, WETH, stETH, USDC and USDT have a total of 8 ERC-20 assets.
Platform usage
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According to defillamadataIt shows that the TVL has continued to rise since the launch of the ParaSpace mainnet, and is currently $55.01 million, ranking second in the TVL ranking of NFT lending agreements, second only to BendDAO, but there is still a big gap (only a quarter of BendDAO about).
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Most of the NFTs mortgaged on the platform are NFT series owned by Yuga Labs. As of the publication, a total of 186 BAYC, 382 MAYC, 101 Otherdeed, and 33 BAKC have been mortgaged on the platform, and the number of other blue-chip NFT series mortgaged is less than 10 .
Financing Information and Audit Status
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Investors in ParaSpaceinvestorpage.
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Audit status of ParaSpaceIn terms of contract security and auditing, according to the officialannouncementAudit Report）
ParaSpace's Innovative Mortgage Lending Model
Cross Margin Leverage
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Traditional Segregated Margin Pool Model
Like BendDAO, the underlying lending business of ParaSpace also adopts the Peer-to-Pool model. Users can act as a borrower to mortgage NFT for real-time lending, or provide funds as a lender to earn interest paid by the borrower.
ParaSpace's innovation is pioneering the first cross-margin credit system, which will allow users to lend against all collateral with one line of credit, rather than using the segregated margin pool design adopted by existing platforms.OfficialIntroductory article
An example is given in:
Suppose you have 61 BAYC, you decide to mortgage 5 to borrow, and then buy one. Using the existing lending agreement and its isolation deposit model, you need to use these 5 BAYCs to borrow ETH, and then go to the market to buy new BAYCs.
This process has at least two disadvantages:
2. If any of your borrowing positions are about to be liquidated, you have no choice but to repay the loan immediately in order to avoid being liquidated by the auction.
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ParaSpace's "Cross Margin" NFT Lending Model
However, staking your NFT assets through ParaSpace will generate a credit line for you and a health factor for your entire mortgaged asset portfolio. As long as the health factor of your entire collateralized portfolio stays above 1, any of your NFTs will never trigger a liquidation auction.
This also means that, to reduce risk, you always have the option to deposit more collateral (NFT or ERC-20 Token) to maintain a high health factor.
This credit system is similar to a valuation system that assesses the value of all your collateral and automatically approves loans based on that assessment. It doesn't matter whether your collateral is NFT or ERC-20 Token, or whether your NFT is from a different NFT series. You can borrow against their total value as long as they are a type of collateral supported by ParaSpace.Cross-margin cross-margin leverage mode.
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In addition, users can package their asset portfolio as collateral when borrowing through ParaSpace. According to the officialexampleexample
, the maximum amount a user can borrow is based on a weighted collateral factor.
For example, a user mortgages a BAYC worth 80 ETH, 4 ETH, and 800 USDC worth 0.6 ETH. Assuming that the loan-to-loan ratios of BAYC, ETH, and USDC are 30%, 82.5%, and 82.5% respectively, the total amount that users can lend is:
When borrowing assets, users receive an equivalent amount of dTokens (such as dETH, dUSDC, dAPE, etc.), and dTokens are responsible for tracking the principal and interest amounts for each block. The interest owed on the loan will be added to the total loan amount, and the user can repay it at any time.
With the ApeCoin pledge activity, ParaSpace is the latecomer
ApeCoin staking goes online, ParaSpace launches "Peer to Pool" point-to-pool staking solution
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On December 6, 2022, Horizen Labs, responsible for creating the ApeCoin DAO pledge system, officiallyAnnounceAnnounce
ApeStake.io's pledge mining system divides user assets into 4 pools according to categories, namely ApeCoin pool, BAYC pool, MAYC pool, and BAKC matching pool. Users need to hold the assets required by each pool to pair themselves. Described as "independent combined staking mining".
BendDAO adopts "Pair Pledge Mining" (Source: BendDAOdocument）
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On the same day, BendDAO, the largest NFT lending agreement, launched the "Joint Pairing Pledge" function. Different from the official ApeStake.io, BendDAO breaks the restrictions on holding assets and adopts a "pair pledge mining" scheme. Users can participate in the pledge even if they only hold part of the assets required by the mining pool, that is, It is said that if the user only holds ApeCoin or a certain NFT (BAYC\MAYC\BAKC), they can also mine.
In return for improving the pairing of NFT and ApeCoin holders, BendDAO will charge 4% of user pledge income as a matching service fee.
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ParaSpace adopts the "point-to-pool pledge mining" model
December 11, 2022, ParaSpaceAnnounceThe main network was officially launched, and the "point-to-pool pledge mining" mode for Ape Coin was also launched. Similar to BendDAO, it also breaks the restrictions on holding assets. Users can also mine if they only hold ApeCoin or a certain NFT (BAYC\MAYC\BAKC). But for NFT holders, there is no need to wait for other asset holders to match, and they can complete the three steps of "pledge NFT - lend Ape Coin - combined pledge mining" with one click.
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ParaSpace's "one-click configuration"
Still using the same example above, Xiao Ming only has BAYC (or MAYC\BAKC) NFT in his hand, or he does not have enough Ape Coin to pair with his NFT, Horizen Labs’ official pledge mining activities cannot meet his conditions. Now Xiaoming can use ParaSpace to achieve the highest expected rate of return:
1. On the "Ape Pairing Page" on the official website, select "Pair $APE" under the NFT you want to pair with;
2. On the pairing page, you can enter two sources of paired $APE: one is the $APE in your own wallet, and the other is the $APE from the lending pool on the platform;
3. Then click pairing.
However, although ParaSpace launched the ApeCoin staking business almost at the same time as BendDAO, which has the advantages of "one-click configuration" convenient operation and "point-to-pool" instant matching, it fell short at the beginning.
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It is also "point-to-pool", with different businesses and different effects
Looking back at the gradual popularity of BendDAO's "point-to-pool" NFT lending:
Due to the lack of liquidity and pricing difficulties of NFT, it is inefficient to match borrowers and lenders through the "peer-to-peer" model of NFT lending agreements such as NFTfi. BendDAO's "point-to-pool" lending model is to price the same series of NFTs at the floor price. The advantage is that borrowers can borrow from the lending pool immediately after mortgaging their own NFTs. The disadvantage is that those rare/valued ones are higher than the floor price. NFTs with low prices cannot borrow at fair market value, resulting in low capital efficiency.The "point-to-pool" lending model for NFT improves the problem of insufficient liquidity of NFT to a certain extent by realizing "instant borrowing of NFT". Therefore, BendDAO using this model is more popular with users in the NFT lending business. But it is another case for Ape Coin lending.
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The price trend of BAYC and Ape Coin is basically the same
We know some prerequisites for Ape Coin staking mining:
1. The maximum amount of APE that can be paired for staking mining: 10,094 $APE for BAYC, 2,042 $APE for MAYC, and 856 $APE for MAKC;
2. BAYC/MAYC/BAKC has a high correlation with the price trend of Ape Coin. For example, since the staking mining was launched, the price fluctuation range of $Ape is $3.2 ~ $6.4, and the fluctuation range of BAYC floor price is $70,000 ~ $124 , 000, the price trend is basically the same.Under this premise, BendDAO's "Pair Pledge Mining" allows users to mortgage their NFTs on BendDAO for loans or pending orders during the pledge mining period. In addition, BendDAO will release on December 20, 2022.announcement
Announced to increase the collateralization ratio of BAYC and CryptoPunks from 40% to 60%, and the collateralization ratio of MAYC from 30% to 50%.in this way,
The funds lent by staking NFTs such as BAYC on BendDAO are sufficient to purchase the Ape Coin required to achieve the highest expected rate of return.Comparing BendDAO with ParaSpace, they have the same goal in the matter of "mortgaging NFT to lend Ape Coin and then pairing". Ape Coin is a homogeneous token, which does not have the characteristics of insufficient liquidity and pricing difficulties of NFT. The lending/transaction matching efficiency of mainstream homogeneous tokens is very high,
ParaSpace's "one-click configuration" function implemented by "point-to-pool" only simplifies the operation steps and does not have absolute advantages.In addition,
BendDAO can also be paired "peer-to-peer" by itself, giving users more flexibility; as the largest NFT lending protocol, it has long been the first choice for many blue-chip holders when lending, with high popularity and user stickiness.At that time, ParaSpace and BendDAO had the same effect in "Ape Coin lending-pairing-staking mining". From a user perspective,In this case, ParaSpace, which has just launched, has no significant advantage, and it urgently needs to find a breakthrough point.
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Compound interest brings high return on pledge, ParaSpace takes off
ParaSpace gives such an example:
It might seem like $100,000 sounds like a lot more than doubling a penny, but in reality, that penny will grow exponentially over 30 days to end up at $42,949,672.96, which is how compound interest and exponential growth work. strength. "
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Since the ApeCoin DAO official contract does not support automatic compounding, in order to significantly increase ApeCoin's pledge rewards through the power of automatic compounding, ParaSpace announced on December 28AnnounceAnnounce
Introduced "auto-compounding" function:
• After $APE holders pledge $APE to ParaSpace, they can receive an equal proportion of $cAPE (compounding APE), which serves as a proof of user pledge and compound interest, and can be exchanged with $APE at 1: 1;
• The $cAPE income comes from the "$APE Only Pool" staking rewards and automatic compound interest rewards in Horizen Labs, and a small part of the interest earned by providing funds to the lending pool for ParaSpace.
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Compare ParaSpace's staking APY with the official Horizen Labs
This forms a forward loop:
• $APE stakers will choose to stake on ParaSpace in order to reap higher returns;
• Holders of NFTs such as BAYC/MAYC/BAKC can instantly lend and match, and the combined mining reward $cAPE can be reinvested in the ParaSpace ApeCoin Pool to generate higher returns.Whether they are holders of $APE or NFT, they can enjoy higher APY on ParaSpace due to "automatic compound interest". At the same time, high APY attracts more people to pledge, making platform matching more efficient.
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On February 9, 2023, ParaSpace will be back againAnnounceAnnounce
The "Share Pool" function was launched, that is, users can not choose loan matching, but through free matching. This function is similar to the current model of BendDAO.As we mentioned above,first level titleofficial document）
epilogue
epilogue
Ruan Yubo, the founder of ParaSpace, who is only 26 years old, said in an interview with 36 Krypton earlier: "We must make more valuable products that return to users in the financial world of Web3."
In addition to the mechanism introduced in this article, ParaSpace has also designed a "hybrid Dutch auction" liquidation mechanism, "buy first, pay later" under the credit system, high-rare NFT now with high-amount loans, borrowing money to sell short and other functions, which accurately hit the current NFT market user needs.
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The total amount of loans issued by mainstream NFT lending agreementsBefore the launch of ParaSpace, the team had already been familiar with the gameplay in the DeFi field through the Parallel Finance protocol. In the NFT field, there were also many lending products. ParaSpace combined the characteristics of the two fields and became a rising star with the help of Ape Coin pledge mining activities.
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refer to
[ 1 ] https://para.space/
[ 2 ] https://docs.para.space/para-space/
[ 3 ] https://medium.com/parallel-x/paraspace-ape-staking-program-faq-23 c 81 b 2075 ef
