Ecosystem Architecture
There are two main types of NFT-backed loans in the NFT Finance industry: peer to peer (P2P) loans and peer to pool (P2Pool) loans. Likewise, there are two main types of marketplaces which service these different loans.
SPICE aggregates both types of loans and marketplaces.
P2P Marketplaces
P2P marketplaces facilitate loans with terms that are agreed upon between borrowers and lenders through negotiation. They are subject to time-based liquidations, with a fixed interest rate and a set maturity date dictating when the loan's principal and interest must be paid.
If the principal and interest is not paid by the maturity date, lenders (such as SPICE) will take custody of the collateralized NFT (see Liquidations for how we handle defaulted assets).
P2Pool Marketplaces
P2Pool marketplaces generate loans that use lending pools and marketplace-specified oracles to automatically determine LTV and liquidation thresholds for borrowers.
Structurally, P2Pool marketplaces are very similar to lending systems found in DeFi such as Aave or Compound.
Unique P2Pool Properties:
Variable interest is determined by pool utilization and accrues to the pool continuously.
Loan liquidity is much more consistently available (vs. P2P marketplaces).
Lending is a set-and-forget experience.
If the borrowed amount > the oracle price of the NFT * the marketplace's liquidation threshold, the marketplace will take custody of the collateralized NFT and auction it off internally. Proceeds from the auction flow back into the lending pool.
Marketplace Integration Process
Integrations of new NFT lending marketplaces by SpiceDAO will be based on quantitative & qualitative success measures, smart contract security and business development opportunities.
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