[Request for Feedback] Proposal Pilot Program for Lending PUNK collateral on Drops Dao

Drops dao (https://drops.co/) is an NFT-loan protocol that currently allows NFT collateral to be borrowed against by their owners. The went live in May 2021, and launched NFT lending pools launched in May 2022.

Floordao has requested ERC20 collateral to earn a supply rate yield via loans to counterparties (similar to Rari). This would support the ability to short such tokens, which will allow speculators to outright short and other daos/platforms to offset NFT exposure Furthermore, this activity might be incentivized by token rewards from Drops dao.

Floordao requests feedback on a plan to launch a pilot program in which Floordao would provide up to 50eth of PUNK collateral for up to 1 month to determine counterparty demand for borrowing.

To assess demand, we would deposit in 10eth increments (starting at 10eth, then 20, and so forth) until the full amount is borrowed. At the end of the one month, we will leave the outstanding borrowed capital for up to 2 weeks while we analyze the pilot outcomes and determine a plan to continue scaling or pull back based on pilot performance (to larger size, other erc20s, etc.)

Open questions from Floordao to Drops dao to be determined:

  • how much incentives will be applied to the supply rate
  • what are the range of supply APYs configured to

Additional resources

Peckshield audit report on Drops dao:

https://1262801654-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2F-McKlQwRyMZvSyjwnggp%2Fuploads%2FugSmroZsQBlElM4GiqQ3%2FPeckShield-Audit-Report-DropsNFT-v1.0.pdf?alt=media&token=1ff06001-8269-4c52-ac7d-17f4f0217388

1 Like

Ty for drafting this

Looking at the Yuga pool Drops Loans it seems like $PUNK isn’t enabled yet, and the only borrowable assets are USDC and ETH.

  1. Is there a timeline for when $PUNK would be enabled?
  2. What is their Punk Wrapper for fiPUNK? Is it like a wrapped punk? Or an ERC20 punk like the NFTX $PUNK?
  3. Why aren’t the other assets available to be borrowed?
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NP aeto!

Answers:

  1. per conversation with dev (0xDarius), plan is to support this ASAP. Timeline was not made clear but conversation sounded like it would be easy to do and would be prioritized
  2. currently they only support actual NFT collateral (not erc20 nftx tokens), so i imagine this is for wrapped punk support
  3. in their backend they can configure whether assets are available for leverage vs borrowing from counterparties, i think they simply just haven’t enabled this yet but it just requires throwing a switch in the backend

More info:

0xDarius has proposed to use ‘30 min TWAP’ as the oracle algorithm to determine price for any erc20 collateral