Loan & Marketplace Architecture

There are two main types of NFT collateralized loans in the NFT Finance industry:
  1. 1.
    Lending pools with price-based liquidations use marketplace-specified oracles to determine loan amount and liquidation thresholds (structurally very similar to P2Pool lending systems in DeFi like Aave or Compound).
    • Variable Interest, which is based on pool utilization, is accrued continuously.
    • Once the amount borrowed exceeds the oracle price times the liquidation threshold set by the marketplace, the marketplace takes custody of the defaulted borrower's collateral (NFT) and lists it for liquidation, typically on a fixed length auction within the protocol’s UI itself.
  2. 2.
    Loans with time-based liquidations have a fixed interest rate and a set maturity date determined by borrower and lender negotiation.
    • If the interest and principal is not paid by the maturity date, Spice’s Vaults will take custody of the collateral and list it for liquidation, typically through simultaneous listings on OpenSea, X2Y2, and LooksRare.