Introducing Stater — Building an open-source lending platform for NFT digital assets
Stater allows borrowers to get loans by using their NFT assets as collateral and unlocks a new way of generating returns for lenders for providing liquidity in our ecosystem.
The NFT market has seen amazing growth in 2020 by surpassing 100m in lifetime sales and the overall market is still in its early stage if we look at the actual potential that we see in specific markets that already have traction like gaming and art or promising use cases like real estate.
If we take a look at what works today, we see promising traction in gaming, art and virtual real estate.
In gaming, the global market is expected to generate over $159 billion in sales in 2020 and most of the sales will be done through in-game purchases. NFTs are promising in this space because they can provide users with true ownership over their in-game assets and creators have the possibility to build micro-economies that can generate real world value inside their games.
In art, we can see a digital renaissance taking place today, where creators can instantly expose their works directly to the market without the need for a 3rd party that would naturally create a barrier to entry and eat up revenue from creators through fees.
More promising use cases are appearing every week and we can’t wait to see what creativity will bring to this market in the future.
Stater Lending Platform Overview
At Stater our goal is to build an P2P open-source lending platform for NFT digital assets that can provide a seamless experience for borrowers and lenders alike.
In the first version that we are expecting on launching in December 2020, the lending process will have an approach that will be marketplace-driven at the beginning with improvements that will automate the process even more in the future.
Borrowers — will list their NFT asset on the stater marketplace by specifying the asset value, loan duration and borrow amount (that will be derived from the loan to value ratio). Borrowers have the option to borrow with one or multiple assets (bundle).
Lenders — will see all the listed assets from all the borrowers inside the marketplace and will have the option to easily provide loans to the packages that they find attractive. They will also see specific game and asset information that will help during the due diligence process and be able to filter specific loan parameters in order to find the best loan opportunities inside the marketplace.
Stater Platform — will mainly act as an escrow for the entire duration of the loan. After the borrower submits the asset on the platform, the NFT token will be locked in a smart contract inside the platform. The borrower can always claim his NFT if the asset has been listed on the marketplace but it hasn’t received a loan yet or if he has fully completed the repayment of the loan.
Liquidation Practices — in the scenario where the borrower doesn’t repay the loan on time or at all, the lender will have the option to call the loan and receive the asset in his custody.
Risk Mitigation for Lenders — we believe that there are three key components that will help lenders properly asses and manage risk: asset value, LTV ratio and game/asset market data.
Even though the borrower has the ability to manually evaluate his loan package (individual or bundle), the marketplace system will disincentivise improper valuations because of the risk of not receiving a loan or increasing the duration until the loan is received.
On top of that, the maximum LTV ratio of 60% will reduce the motivation for the borrower to not repay the loan because of the risk that the lender will be able to claim the asset (or bundle) at a discount.
Market data for specific game/asset will help lenders understand the terms of the loan and make proper due diligence before acting on a specific package.
we believe that a marketplace approach is the best solution at the beginning and it will remain so for rarer assets that have a high intrinsic value and lower market volume.
In the next iterations, we will automate as many processes as possible in order to reduce friction and provide faster borrowing options and automated lending (market making) solutions for assets with higher volume and a market-driven valuation.
Interest rate — will be variable depending on global information for specific collections.
Stater platform fees will be as following:
40% from the interest rate.
1% from the initial loan.
We are expecting to launch in December 2020.
More to come
In the next articles we will discuss about our liquidity mining campaign, governance and more. In the meantime, feel free to check out our website: https://stater.co/