Dear Bankless Nation,
NFT volumes may be down bad, but crypto bulls aren't giving up on on NFTfi! There are still plenty of new and newly revamped projects in the NFT + DeFi space worth discovering.
Today, we dig into the newly launched NFT lending protocol Arcade V3.
-Bankless team
Built on Ethereum, Arcade is a protocol + platform combo that facilitates NFT-based peer-to-peer lending and borrowing.
In short, the project lets NFT owners leverage their assets for liquidity while lenders can earn interest by providing funds. Borrowers list their NFTs or Vaults with set loan terms on the Arcade Loan Marketplace, making them available for offers from potential lenders.
Instant loans are also possible by accepting open collection offers after depositing NFTs into a Vault. Vaults in Arcade are contracts that securely hold one or multiple compatible assets, which can be used as collateral for loans.
Zooming in, Arcade supports NFTs from ERC-721 and ERC-1155 collections as loan collateral and ERC-20 tokens like WETH, USDC, USDT, DAI, and APE for funding loans.
Once a loan agreement is reached on Arcade, borrowers receive the principal amount, and both parties get promissory notes. If a borrower defaults, lenders can extend the repayment time or claim the collateral, forfeiting any repayment of the loan's principal and interest.
Currently, Arcade does not charge lending fees, but this may change.
Arcade V3 released
Arcade V3, the latest version of the Arcade Protocol, was just launched on Ethereum.
Building off the momentum of the V2 system, which facilitated over $120M worth of volume to date, the immutable V3 offers several new features and upgrades, including collection-wide loan offers on non-vaulted assets, onchain allowlisting, and customizable fee structures.
Of course, this new version of Arcade Protocol should be considered experimental in any case.
The V3 has been tested internally, reviewed by auditors, and has an Immunefi bug bounty program, so that's a great start. But use at your own risk in these early days and never deposit more than you can afford to lose!
How to use Arcade
Setting up a Vault 🛅
- Mint and deposit: To use your NFTs as collateral, you must first deposit them into an Arcade Vault. Start by connecting your wallet to the Arcade platform.
- Select NFTs: Choose the NFTs you want to deposit from your collection.
- Mint a Vault: After selecting your NFTs, mint a new Vault. This Vault is an NFT itself and will represent your deposited NFTs and can be used as collateral for loans.
- Confirm transaction: Confirm the mint transaction in your wallet to complete the process.
- Manage your position: Unlock and withdraw your NFTs as needed.
Borrowing 🔃
- List NFTs & set loan terms: Start by listing your NFTs or Vaults on the Arcade Loan Marketplace. Set your desired loan terms, including the loan amount, duration, and interest rate.
- Accept loan offers: Once your NFTs are listed, potential lenders can make loan offers. Review these offers and accept the one that suits you best.
- Receive funds: After accepting a loan offer, you'll receive the principal amount in your wallet. Arcade supports crypto like WETH, USDC, USDT, DAI, and APE for funding loans.
- Manage your position: Extend active loans and pay off your loans as needed.
Lending 🔀
- Explore the marketplace: Connect a funded wallet and navigate to the Lending Marketplace on Arcade. Here, you can view all available listings with set loan terms.
- Option A - Start an instant loan: Filter by "Has Terms Set," then once you find a Vault or NFT you'd like to fund, select "Start Loan." Confirm the access to the ERC-20 funding token and the withdrawal from your wallet.
- Option B - Make loan offers: Click on a Vault or NFT you're interested in, select "Make an Offer," then you can input your desired terms and sign a transaction to send them to the depositor. Collection-wide offers are also possible.
- Loan initiation: After successful confirmation, a loan is initiated. The principal amount is transferred to the borrower, and the collateral is moved into escrow with the Arcade Protocol. Both parties receive promissory notes, i.e., NFTs, representing the loan.
- In case of default: If a borrower doesn't repay a loan on time, a lender can claim the underlying NFT collateral at their convenience.
Zooming out
Arcade's new V3 approach to lending and borrowing showcases the evolving versatility of NFTs beyond just buying and holding digital assets. For NFT enthusiasts and financial strategists alike, Arcade offers a glimpse into the future of DeFi, where economic and cultural assets will seamlessly interplay.
Action steps
- 👾 Explore Arcade V3: Check out the Arcade Loan Marketplace
- 🥑 Catch up on the previous tactic: Getting Started with Avocado Multisig