How borrowing & lending works on NiftyApes
A step-by-step guide to auto-refinancing loans that provide instant liquidity for your NFTs.
NiftyApes is an evolution in financing for borrowers and lenders.
- Lenders deposit capital to earn yield. They can then make offers on any asset or collection in existence. Successful offers receive interest and default rights for the asset(s).
- Borrowers lock their NFTs into NiftyApes for instant liquidity. Loans are always on-auction for refinancing, guaranteeing that terms only improve for borrowers.
This post shares:
- How lending works on NiftyApes
- How borrowing works on NiftyApes
- How NiftyApes auto-refinancing provides the best terms
- A practical example of the NiftyApes protocol
- Why this is an evolution in finance
How lending works on NiftyApes
Lenders deposit capital into NiftyApes to earn a baseline passive yield via Compound. They can then make an offer on any asset or collection (with zero liquidity fragmentation).
When a loan offer is executed, Lenders don't own the loan. They own the rights to the interest payments and collateral in the event of a loan default. They have interest and default rights as long as they offer the best terms for the Borrower.
How borrowing works on NiftyApes
On the NiftyApes protocol, there is already, right now, an active lending auction for every theoretical asset or collection in existence.
Borrowers lock their NFT into NiftyApes to execute any loan offer they choose. Once a loan is executed, liquidity is immediately deposited in the Borrower's wallet.
How NiftyApes auto-refinancing provides the best possible terms
Any Lender can refinance a loan at any time if they provide better terms.
- Refinancers must offer better terms on a loan to receive its interest and default rights. When this occurs, automatic refinancing occurs for the Borrower's loan.
- Refinanced loans result in payment to the original Lender. This includes: the principal, any interest accrued, and an origination premium (principal * 0.25%) paid by the Refinancer.
- Borrowers can refinance between any offer for free, provided the new offer can pay the Lender their principal and interest accrued.
Auto-refinancing provides the best possible terms by enabling a competitive market for a loan's interest and default rights while ensuring a borrower’s terms only improve. Borrowers get true market terms, Lenders gain exposure to value they were previously locked out of, and the market gains high fidelity pricing data.
The NiftyApes protocol: a step-by-step example
Below is an example of the NiftyApes protocol in action.
Lender 1 has an ocean of capital. They're comfortable with a modest Loan-to-Value (LTV) and a respectable APR on any Bored Ape. They set an offer at 50Ξ for 90 days offer on all Bored Apes.
The Borrower who owns BAYC #6974 connects their wallet on the NiftyApes platform. They see the "Top offer," the best offer currently on NiftyApes.
Over the life of the loan, the Bored Apes Yacht Club's price increases but the active loan has not responded to the collateral's increase in value.
A new, hungry lender decides to bid on the active loan.
Lender 2 makes a better offer. To refinance the active loan, they pay:
- a 0.25% premium
- any outstanding interest accrued
Lender 1 then receives all accrued interest and a 0.25% premium for conducting initial price discovery for the asset.
New lenders can provide better terms, lower APR, or extra funds many times over the life one the loan.
At the end of this example, the borrower and lenders all enjoy positive-sum terms.
This is how finance evolves
Why commit to a single lender and rely on their generosity to refinance the loan? On the NiftyApes protocol, market competition refinances your loans for you automatically. This is how the social contract makes the leap to a permissionless smart contract.
How can our financial systems empower global good? NiftyApes is a protocol that acts like a public good. One percent of all revenue funds regen initiatives.
> Using a protocol, you could turn loans into a public good. Values can be programmed into our systems, even segmenting revenue for further public goods projects. In theory, every transaction the global economy makes could be pointed at improving the world. Fighting climate change, for example. (via)
Want to help?
- We're hiring
- We're actively approving grant proposals
- We’re excited to encourage builders on the space utilizing our smart contracts.
Connect with the NiftyApes team in our Discord or on Twitter @niftyapes. Or, ping founders @zherring or @captnseagaves with any questions or banana-related memes.