OpenSky Finance is Live on Ethereum
GM NFT x DeFi enthusiasts
We are pleased to announce that OpenSky Finance is live on Ethereum. NFT holders can stake their BAYC, CryptoPunks, or MAYC NFTs to take out an Instant loan for up to 40% of the floor price. OpenSky borrowers can also pledge their BAYC, CryptoPunks, MAYC, Moonbirds, Doodles, Azuki, and 11 other whitelisted NFT collections to make a Bespoke peer-to-peer loan offer.
OpenSky Finance is the first integrated peer-to-pool and peer-to-peer NFT lending protocol built on top of Aave, the leading DeFi crypto money market. OpenSky Finance has received integration grants from AAVE Grants DAO, Rarible Protocol and Alchemy and raised seed and strategic rounds from MetaCartel Ventures, ALPHA_NONCE, FBG Capital, and SNZ Holding and other leading VCs.
OpenSky Finance has undergone extensive smart contract audits from the two leaders in Web3 audits (PeckShield and CertiK).
Current problems with NFT lending
The NFT lending space has made significant strides in 2022 but there are still critical problems that need to be worked out to satisfy lenders and borrowers and ensure the long-term viability of NFT lending protocols.
Peer-to-peer lending protocols
1. Capital and time inefficient
Many lenders spend too much time to compete for peer-to-peer loans but only one lender can ultimately fund each loan while all other lenders earn nothing. After each loan is repaid, lenders have to search and compete for new loans.
Similarly, borrowers have to wait for a lender to make an acceptable offer before they can get the needed funds.
Peer-to-pool lending protocols
1. Capital inefficient
Lending pools suffer from wasted capital because interest income from a few borrowers is shared among many depositors.
2. Poor UX for borrowers
Borrowers with NFT collateral can never fully relax because they are at risk of a sudden drop in the floor price triggering the forced liquidation of their beloved NFTs. A borrower could wake up in the morning and find out their favorite CryptoPunk or BAYC NFT is lost forever.
3. Cascading liquidation risk
If there are many pledged NFTs on the lending protocol, and the floor price goes down enough to liquidate some of the NFT loans, there is a real risk that the auctions of these NFTs will cause the floor price to decline just enough to trigger more forced liquidations. This could easily lead to a market rout and leave the lending protocol completely insolvent with a huge amount of bad debt.
OpenSky NFT Lending Solution
OpenSky is the first integrated peer-to-pool and peer-to-peer NFT lending protocol built on top of Aave. Let me introduce how OpenSky works and our innovative solutions.
- The OpenSky peer-to-pool optimizer.
Instant loans — Our peer-to-pool product that enables lenders with limited NFT knowledge to earn safe and attractive passive income on their crypto by simply depositing crypto into the Instant EARN lending pool to earn both Aave income and interest from borrowers.
Borrowers can borrow instantly based on the floor price at a fixed interest rate with no risk of forced liquidation during the loan term.
2. The OpenSky peer-to-peer optimizer.
Bespoke loans — Our peer-to-peer product built on top of our peer-to-pool protocol where OpenSky lenders can use their pool deposits to fund Bespoke loans to earn more with 100% capital efficiency.
OpenSky borrowers can make Bespoke loan offers to borrow more or borrow with NFTs that are not part of the Instant loan whitelists. Bespoke loans are repaid directly to the lending pool so lenders earn continuously and passively with no additional action required.
How the OpenSky liquidation mechanism works?
Price-based liquidation has proven successful with fungible token (FT) lending protocols, such as Aave, because many FTs are highly liquid and FT loans can be partially liquidated.
Some NFT lending protocols have adopted price-based liquidation but we believe it doesn’t work well for NFTs because they are illiquid and can’t be partially sold like FTs. This market reality creates a huge cascading liquidation risk because all the NFT ‘eggs’ are in one floor price-sensitive ‘basket’.
OpenSky has innovated time-based liquidation as an elegant solution to effectively handle peer-to-pool liquidations and eliminate cascading risk.
With price-based liquidation, a Black Swan event could cause many NFT loans to liquidate during the same period, potentially triggering a death spiral for the entire NFT market. In contrast, time-based liquidation is calendar-based and divides the NFT loans (i.e. eggs) into many ‘baskets’ with only a few up for liquidation on any given date.
Finally, OpenSky has a pre-funded liquidation strategy to protect both the lenders and the protocol by ensuring capital is always ready to be deployed, especially during times of extreme market stress.
Join us today
We have completed two smart contract audits with two top-notch audit firms, PeckShield and CertiK.
We look forward to welcoming you to the OpenSky community to build the future of NFT Finance together. We will reward early adopters with airdrops and other incentives, please click the link below to find out more.