Liquidations
Using automated backend processes in conjunction with Reservoir, SPICE hosts listings on a number of marketplaces, such as OpenSea, X2Y2, Blur, and LooksRare, simultaneously.
The method SPICE uses to handle collateralized NFT liquidations depends on the liquidation engines of the underlying NFT lending marketplace.
There are key differences between Peer-to-peer (P2P) and Peer-to-pool (P2Pool) marketplaces which must be understood.
P2P Liquidations
For P2P loans, SPICE's liquidation engine is triggered when the borrower defaults on their P2P loan. This only happens if they do not pay back their loan by the required due date.
When a P2P loan originated by SPICE defaults...
SPICE will list the collateralized NFT through Reservoir to all available marketplaces for 10% higher than the repayment value (principal + interest amount) of the defaulted loan.
If a bid comes in equal or higher than that price, SPICE will accept that bid and sell the asset.
Otherwise, SPICE will continuously re-list the NFT at 99% of the price in the previous listing every 3 hours until the NFT is sold.
Revenue earned from the liquidation event is distributed amongst the SPICE vault depositors.
P2Pool Liquidations
P2Pool protocols implement their own liquidation mechanisms.
Loans on P2Pool marketplaces default when the value of the collateralized NFT multiplied by the liquidation threshold (set by the marketplace) falls below the amount borrowed.
When a borrower defaults on their P2Pool loan...
The P2Pool protocol liquidates the collateralized NFT through an internal fixed length auction.
The P2Pool protocol distributes the revenue earned from the liquidation event amongst the lending pool's LPs (one of which is SPICE).
SPICE receives earnings from the P2Pool liquidation event.
SPICE then distributes the earnings amongst the SPICE Vault depositors.
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