Use 1 BAYC to get 2 airdrops? Detailed explanation of "NFT bank" BendDAO

Written by: 0xLaughing, Rhythm BlockBeats

The NFT market in April was hot and restless. The NFT PASS track led by Moonbirds has become famous for its remarkable wealth effect. Later, the event that the NFT project Akutar was permanently locked with a value of 34 million US dollars of ETH due to a contract loophole became a hot topic in various communities. At the same time, the sale of Otherside will be ushered in at the end of this month. As one of the important components of the "Ape Universe" built by Yuga Labs, Otherside will be paid with ApeCoin, and will be airdropped to holders of BYAC and MAYC.

For a long time, BAYC has kept most investors away because of its high price. If you empty your wallet and buy a BAYC, it will greatly limit your own Liquidity of funds affects your investment efficiency. But a blue-chip NFT should be valuable. As an encrypted asset, it should be used as collateral for loans like a house or a car. In order to solve this demand, a brand new economic model has emerged: NFT lending that combines DeFi and NFT.

NFT loans are executed by smart contracts, through which NFT holders can mortgage their NFTs to obtain liquidity according to a certain loan ratio. Redeem your own NFT after repayment.

A simple example to explain how to get 2 Otherside airdrops with 1 BAYC, and also explain the basic principle of NFT lending:

1 BAYC received 2 Otherside airdrop illustration

(in the example for the convenience of calculation and demonstration , assuming that the floor price of BAYC is 100 ETH, the floor price of MAYC is 40 ETH, the lending platform adopts over-collateralization, and the maximum loan ratio is 40% of the floor price (assuming that the floor price remains unchanged, there may be fluctuations in fact). Assuming that the Otherland airdrop adopts and The same method of claiming ApeCoin, instead of snapshots or direct airdrops to the holder’s wallet)

1. Mortgage a BAYC in your hand and lend 40 ETH 

2. Use the loaned 40ETH to buy a MAYC 

3. On the day of airdrop collection, first use MAYC to receive the airdrop 

4. After receiving the airdrop, sell MAYC at the floor price and get back 40 ETH 

6. Use this BAYC to receive another airdrop , and finally got 2 airdrops

In which you can see the key role played by NFT lending: for lenders, to provide liquidity for lenders , which improves the utilization rate of funds; for borrowers, interest can be obtained as a reward for providing liquidity.

There is an idea of NFT lending, but how to determine the price of a certain NFT to borrow, how to improve the matching efficiency of borrowers and lenders, and how to solve related liquidation The problem is one that NFT lending platforms are currently exploring. Among the many NFT lending agreements, the performance of BendDAO, which has been launched on the mainnet for only one month, is very impressive: the governance token BEND has achieved a 17-fold increase in less than 24 hours, and has become the largest holder of BAYC and MAYC, and the deposit lending TVL More than 65,000 ETH.

BendDAO quickly "occupied" the NFT lending track, and its success can be said to have "the right time, place and people".

Business logic of BendDAO

BendDAO is the first decentralized peer-to-pool The NFT liquidity agreement is mainly composed of the following subdivisions.

mortgage loan

BendDAO’s Mortgage Lending Business

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Collateral lending is the core business of BendDAO. Through BendDAO, lenders can provide ETH liquidity to the lending pool to earn interest, and borrowers can use NFT as collateral to immediately borrow ETH in the lending pool. Currently, BendDAO uses BEND Token subsidies to achieve negative interest rate borrowing.

Oracle price feed

When users mortgage their NFT on BendDAO for loans, BendDAO uses the NFT floor price from OpenSea as the price feed data for the NFT collateral price, so how to ensure the accuracy of the floor price is very important.

BendDAO mainly adopts the following methods to ensure the accuracy of prices:

1. At present, only some blue-chip NFT assets are supported, because the floor price of blue-chip NFT is not easy to be maliciously manipulated.  

2. Calculate the time-weighted average price (Time Weighted Average Price, TWAP) of the floor price to avoid the short-term violent fluctuations of NFT prices on the OpenSea market Impact.

Illustration of the design and operation mechanism of the oracle

The design and operation mechanism of the oracle machine:

1. The off-chain node of the oracle machine obtains the original floor price data of NFT from the OpenSea trading market 

2. Filter the original floor price data, such as unreasonable deviation from the recent average price 

3. Use the time-weighted average price algorithm (TWAP) to calculate the floor price to ensure that the price is reasonable 

4. Compare the price on the chain Determine whether the floor price needs to be uploaded to the chain by the difference with the latest floor price 

5. Call the oracle contract interface to upload the floor price to the chain Contract

BendDAO claims that, for security and reliability, multiple oracle nodes will be run to ensure valid price data is always uploaded to On-chain oracle contracts. It is reported that BendDAO has integrated Chainlink Keepers to implement oracle price feed.

Liquidation Redemption Auction

Bend protocol uses "Health Factor (Health Factor)" to Evaluate the current lending situation, "Health Factor" is a digital representation of the security of the mortgaged NFT relative to the loaned ETH and its basic value, the higher the value, the safer the fund status , can resist liquidation risk. Its calculation formula is:

health factor = (floor price liquidation threshold) / Debt with interest

When the floor price of mortgaged NFT assets falls, causing the "health factor" of the corresponding loan to be lower than 1, Anyone can trigger the liquidation of the NFT auction, and the 48-hour liquidation protection and auction of NFT collateral will start simultaneously.

Liquidation, redemption, auction process

Explain the whole process with a specific example:

1. Assuming BAYC floor price = 100 ETH, the borrower mortgages BAYC and lends 40 ETH at a mortgage rate of 40%

 
2.Liquidation threshold is 90%, when the BAYC floor price falls to 44 For ETH, the health factor = (44 90%)/(40+interest), since the health factor is less than 1, it will trigger a 48-hour liquidation protection and start the auction process

 
3. When the borrower repays the 40 ETH lent, the interest generated by the loan and related penalties within 48 hours, he can redeem his BAYC to avoid liquidation

 
4. If If the borrower fails to repay the loan in time, the bidder with the highest bid in the liquidation auction will be responsible for repaying the corresponding related debt and get this BAYC in return

NFT Escrow

The mortgaged NFT will have a corresponding boundNFT

BendDAO When the borrower mortgages NFT to BendDAO, the NFT will be deposited into BendDAO's NFT pool and converted into boundNFT as a mortgage certificate. boundNFT can ensure that users have the same metadata and token ID as the original NFT, which can ensure that users can still use the metadata provided by the original NFT to present their own PFP on social media, and at the same time avoid hackers from causing the NFT in their wallets to Transferred, you can also receive the corresponding airdrop through boundNFT.

Liquidity Mining

Both borrowers and lenders of BendDAO have BEND Token subsidies

Lenders receive liquidity mining rewards by providing liquidity for the Bend protocol. After staking ETH, you will get bendETH linked to the value of the corresponding deposited assets at a ratio of 1:1. It adopts the same interest rate model as AAVE. bendETH is the same as aToken is the same.

Borrowers can get mortgage rewards after mortgaging their own NFT for borrowing, this is because the current Bend protocol provides BEND Token subsidies To incentivize users to stake.

Users can also stake BEND Token for liquidity mining,BEND TokenStakers (veBEND holders) can get all the income of the Bend agreement in accordance with the corresponding ratio.

Token Economic Model of BEND

BEND and veBEND

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BEND is the governance token of BendDAO. The total initial supply is 10 billion (10,000,000,000). BEND holders can pledge BEND to obtain veBEND. Currently, veBEND has two uses:

Voting: BEND stakers (veBEND holders) can participate in voting to choose which NFT to use as the Bend protocol can support borrowing ETH and providing liquidity collateral. As long as the backing NFT liquidity improves, all NFT holders will benefit.

Share the income of the agreement: veBEND holders can obtain 100% of the income of the Bend agreement according to the corresponding ratio.

BEND Token allocation and release

BEND Tok allocation and release of en

BEND Token allocation consists of six parts:

Development team

21% of the BEND Token is allocated to the Bend development team, locked in the first year, and then every 7% of the year will be released linearly in seconds. Therefore, in the first year, the Token allocated to the Bend development team will not be sold to the market, but can only participate in the distribution of protocol revenue.

IFO

1,000,000,000 (10%) The BEND Token will be released in the form of IFO (Initial Fair-launch Offering), which ensures that the Token will be distributed in the fairest possible way. 1 ETH can buy 333,333 BEND, and a total of 3,000 ETH has been raised. IFO has been completed ahead of schedule< /a>. Each participant can choose the lock-up period during the IFO, from 0 weeks to 4 years. 66% of the ETH raised will be used for the ETH lending pool on Bend, and 34% of the ETH will be used for the development of the Bend protocol.

Treasury Reserve

BEND Token 21% is locked as a treasury reserve, which is used to build an ecosystem and can be used to deal with emergency financial security. The use of these Tokens can only be determined through community voting.

Airdrop

According to BendDAO's airdrop rules, 5% of the Bends Token were distributed to some OpenSea as airdrops Users, blue-chip NFT holders, borrowers and lenders who have used NFTfi, and 500 lucky OGs in Discord.

Uniswap LP Incentive

To encourage Market makers provide liquidity on Uniswap, and 3% of BEND Token will be distributed through liquidity incentives. Uniswap LP incentives will be determined through DAO governance. Currently The incentive plan has been voted through, liquidity mining can be performed on BEND/ETH Uniswap v2 LP.

Lending Incentive

In order to encourage lenders And borrowers can provide liquidity for the lending pool, 40% of BEND Token will be distributed through lending incentives, and released linearly within 5 years at a lending ratio of 1:3.

Features and Advantages of BendDAO

The "Peer-to-Pool" model realizes instant loan repayment

Different from NFTfi’s peer-to-peer (Peer-to-Peer) NFT loan agreement, the Bend protocol uses a peer-to-pool (Peer-to-Pool) method.

When users borrow through BendDAO, a certain percentage of the floor price (up to 40%) is used as the collateral ratio, and the liquidity pool provided by the lender guarantees Sufficient liquidity can be provided for borrowers, and users can realize instant borrowing and repayment. There is no need for trust agency audits, and loan repayments can be completed instantly through smart contracts, which can greatly release the liquidity of the NFT market.

At the same time, most transactions in the NFT secondary market revolve around NFTs near the floor price, that is, NFTs near the floor price have a higher transaction frequency, while The transaction frequency of rare NFTs is relatively low, and the point-to-pool model can try to meet the needs of most users.

Peer-to-peer lending requires both borrowers and lenders to reach a consensus on NFT value, mortgage ratio, interest, etc. It takes a long time to reach a consensus on these aspects, so its matching efficiency is relatively low compared to the point-to-pool model.

"Multi-pronged approach" to avoid unnecessary losses for users due to market fluctuations

health factor Risk Level

BendDAO evaluates the current lending situation by calculating "Health Factor" Let users have corresponding expectations for market fluctuations in advance for multiple health factor levels.

48-hour forced liquidation guarantee enables the borrower to ensure that the mortgaged NFT assets will not As for being liquidated immediately, as long as the loan can be repaid within the 48-hour liquidation protection period, it will not be liquidated.

Oracle By calculating the time-weighted average price (Time Weighted Average Price, TWAP) of the floor price, it can also avoid the openSea market The impact of short-term sharp fluctuations in NFT prices.

True ownership

NFT has the characteristics of "indivisible" and "fragmented" The solution cannot meet the relevant needs, and at the same time, the "fragmented" NFT also has certain problems in asset confirmation.

BendDAO realizes "true ownership" through boundNFT. Users mortgage NFT for loans. If there is an airdrop reward matching the mortgaged NFT, the user can still get The airdrop reward. boundNFT is anchored to the mortgaged NFT at a ratio of 1:1. The boundNFT held by users can be easily integrated into NFT wallets and social media accounts. For example, even if the NFT in hand is mortgaged in the Bend protocol, it can still be used as Twitter Blue's authentication profile picture.

Flash Claim is more convenient to receive airdrops

Because of "true ownership", users can also use BendDAO Developed Flash Claim in the It is more convenient and faster to receive the corresponding airdrop under certain circumstances. This can also release market liquidity. For example, the previous airdrop of ApeCoin enabled holders of NFT projects such as BAYC and MAYC to obtain new funds, which made the market more dynamic.

Fair Launch guarantees fair distribution of Token

1,000,000,000 (10%) of BEND Token passed IFO Comes with fair distribution, no VC financing. BendDAO completes the supply of liquidity in the agreement lending pool through IFO, and users can obtain fair Token distribution.

Improve the liquidity of the NFT market

NFT lending as the infrastructure of the NFT market , the demand has been great. Originally, NFT users faced a dilemma: hold NFT, but the liquidity of funds will be greatly limited, especially for high-priced blue-chip NFTs; selling NFTs to obtain liquidity may miss the future growth of blue-chip NFTs and be "dumped" car".

After the emergence of the NFT lending agreement, users can obtain capital liquidity without selling NFT, and this part of the funds can feed back the NFT market and promote NFT transactions, further accelerating the development of the NFT market.

The NFT loan agreement before BendDAO did not have a good solution, they were inefficient in matching and could not be widely used. It is reported that the BendDAO team started development in September last year, and the mainnet was officially launched in March this year, which took half a year. Aiming at the pain point of low lending efficiency in the NFT market, as the first NFT liquidity protocol based on a decentralized point-to-pool, BendDAO has a first-mover advantage and head effect.

High scalability

The function of BendDAO trading NFT will be launched in the future

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In addition to the NFT lending business, BendDAO also seems to want to get a share of OpenSea. official website shows plans to launch NFT transaction function, users can purchase/ Sell NFT to get BEND Token rewards. In the future, it is also possible for users to purchase a blue-chip NFT through "down payment", "installment purchase", "credit loan" and other methods.

There are various needs in the NFT market, and BendDAO does not seem to want to be limited to the NFT lending business. It is an "NFT bank".

Potential problems of BendDAO

Per-to-pool lending leads to underestimation of rare NFT value< /h4>

Even BAYC with rare attributes can only borrow at the floor price in BendDAO

An NFT with rare attributes can only be borrowed at the floor price of the NFT series in BendDAO, but if the value of its rare attributes is reasonably evaluated through peer-to-peer lending, the actual amount of funds that can be lent should be more. Although the peer-to-peer (Peer-to-Peer) lending model is relatively inefficient, if the borrower and lender can reach a consensus on the value of an NFT itself, the loan can be completed at a price that is more satisfactory to both parties: the borrower lends more funds, Lenders earn more interest.

However, there is currently no oracle model in the NFT market that can value non-floor price NFTs. It is understandable that BendDAO adopts a relatively conservative loan ratio. Margin of safety and efficient and sustainable operation are currently the optimal solution, but the NFT market is looking forward to an oracle solution that has wider applicability and maximizes the utilization of funds.

The selling pressure of "mining coins" and "vampire attack"

Currently BEND Token is mainly As a subsidy for both borrowers and lenders, it is produced in the form of liquid mining. The high APY subsidy may attract a large number of "liquid locusts" to mine in the short term, and the continuously produced BEND "mine coins" may be "mined and sold" The formation of a large selling pressure has an impact on the currency price, which in turn leads to a decrease in APY and enters a "death spiral". Although the ve model is adopted, the veBEND obtained after staking BEND only has the functions of voting and sharing protocol revenue. That is to say to incentivize users to pledge BEND to reduce selling pressure, it is necessary to maintain a sustainable high APY subsidy, and this depends on whether the BEND protocol can maintain high income growth.

BendDAO, as the first NFT liquidity protocol based on a decentralized point-to-pool, can currently take advantage of its first-mover advantage Early dividends in the NFT lending market, but if there are similar competing products, using "vampire attack" to attract users to pledge with a higher APY (similar to Sushi attracting a large amount of Uniswap liquidity through Token rewards when it first went online), it may It will further increase the selling pressure of BEND Token, causing the currency price to fall. It remains to be seen whether BendDAO can maintain its core competitiveness and secure the top spot in the NFT lending track.

Associated risks

CertiK's audit results on BendDAO

According to CertiK In the audit report of BendDAO, there are some problems, such as the auction may fail due to price fluctuations, centralization-related risks, etc.

BendDAO founder @CodeInCoffee responds to rug pool related remarks

< p>At the same time, twitter user @0xQuit pointed out that BendDAO’s claim Airdrops and transactions are safe, but its contract uses an upgradable proxy contract that makes it look like a "trap". BendDAO's reply is that the use of an upgradeable proxy contract for the airdrop contract is to ensure the safety of funds, and at the same time official documents also pointed out that BendDAO has set the owners of all Bend lending agreement contracts as 24-hour time lock controller addresses, and has set all owners of boundNFT agreement contracts Set to 7 days time lock controller address.

In addition, 66% of the 3000 ETH raised in the IFO provided liquidity for the lending pool, and another 34% was used for "Bend protocol development", It seems that the team retained more than 1,000 ETH in this way, which is somewhat different from the "21% BEND Token allocation locked for one year" in the Token allocation announced by the team. In addition, the constant anonymity of the BendDAO team is also one of the potential risks.

Summary and Outlook

In the past week, BendDAO combined DeFi and NFT It can be said to be a star project in the encryption circle. Some people have just heard about it, saying that it is like an outbreak of "demolition households"; some people have learned about it a long time ago, and good things take time, and excellent projects need time to settle.

In fact, its success has "the right time, place and people":

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Time: At the end of the month, Otherside developed by Yuga Labs will be available for sale and airdrop. The NFT market needs a lot of liquidity. The emergence of BendDAO allows users to pledge their blue-chip NFTs to obtain funds to participate in the sale of Otherside.

Location:The NFT lending market lacks good solutions, and BendDAO has no strong competitors. This innovative lending mechanism quickly gained a large number of users.

Renhe: There are giant whales divided twice to A total of 2290 ETH The total amount almost "booked out" the IFO, which made the IFO end early and the price of BEND Token skyrocketed. In less than 24 hours that day, the price of BEND skyrocketed from a minimum of 0.00786 to a maximum of 0.13812, an increase of 1,757%. The wealth effect is the best advertisement, and BendDAO became a hot topic in various communities for a while.

Currently the total market value of the NFT market has exceeded 18 billion US dollars, and the NFT lending agreement has broad prospects as the infrastructure of the NFT market. With its multiple innovative lending mechanisms, BendDAO uses its first-mover advantage and head effect to try to secure the top spot in the NFT lending track. It may have some problems, but it's not bad. To a certain extent, it solves the problem of low lending efficiency in the current NFT market, releases the liquidity of blue-chip projects, injects more liquidity into the market, stimulates the vitality of the market, and opens up more ways to play .

On the web Search "NFT loan", you can see that this track is changing with each passing day, and new NFT loan projects and related financing information emerge in an endless stream. They can not only help the NFT market to expand further, but also act as competitors to restrain each other to seize market share. But NFT lending is only part of the NFT market demand, and NFT players are also looking forward to a full-featured "NFT bank" that can develop new ways of playing like "down payment", "installment purchase", and "credit loan" like real estate.

So, will BendDAO be the first "NFT bank" to successfully open?

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