NFT Underwriting
Each NFT project (e.g. Treasure DAO Genesis Legions) will have a dedicated liquidity pool for underwriting NFT put option contracts. Initially, we will start with just one project and gradually add more viable NFT projects, developing unique NFT option pricing mechanisms for each one. Over time, creating standards for NFT projects with similar mechanisms to easily tap into. As a lender, you will be able to choose which NFT project you would like to underwrite by depositing ETH into that project's liquidity pool.

Why underwrite?

  1. 1.
    To buy NFTs you want below the current price.
  2. 2.
    To earn an immediate return on USDC deposits via premium fees.

How does it work?

  • All ETH minting proceeds are controlled via the DeFrag DAO Treasury. After minting Metamaticians, NFT holders will have an opportunity to propose & vote on an NFT project they believe should be used initially for underwriting. Metamaticians could actually propose anything (e.g. keep ETH mint proceeds in yearn's ETH vault until the initial underwriting pool is deployed), staying flexible as the protocol matures.
  • Once the first NFT put option underwriting pool is deployed, ETH mint proceeds are converted to USDC and deposited into the underwriting pool to jumpstart lending. Borrowers will be able to deposit eligible NFT assets as collateral and instantly generate a loan. Based on average value of your NFT, volatility and borrow amount, the protocol will automatically lock required USDC from the pool to underwrite put options for borrowers NFT assets. You can think of this as insurance that guarantees liquidity in case borrower's NFT needs to get liquidated.
  • The first underwriting pool will kick off Phase 1 during which lenders will not be able to deposit additional liquidity for NFT put option underwriting on top of what they deposited during the mint. This puts a limit to the amount available for borrowing and is done by design to make sure everything is running smoothly before we expand our lending capabilities to more NFT projects.
  • In phase 1, each Metamatician will proportionally receive fees generated from writing NFT put options premiums. These fees will accrue in perpetuity. Once additional deposits are open, you will be able to stake additional USDC if you want to. Your Metamatician will track how much liquidity you've provided to the LP.