The Flagship Vault: Unleashing the Power of NFT Lending with Spice Finance

Spice Finance
5 min readApr 17, 2023

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The Spice Guardian, wandering in the vast dunes.

This document was written in collaboration with the Tailored team.

Introduction

In the vast desert where Spice is extracted, the guardians of the Spice continue their relentless pursuit of unlocking the hidden potential within the NFT realm.

Their journey has already borne the fruits of the Prologue Vault, accessible only to those possessing the enigmatic Prologue NFTs.

However, the guardians believe that the power of the Spice should not be limited to a select few, it should be shared with all who dare to venture into the world of NFT Lending.

And so, they have unearthed the next hidden treasure: The Flagship Vault, a portal that promises to bring the magic of NFT Lending to everyone from degen farmers to prudent portfolio strategists.

The Desert Oasis of NFT Lending

Deep within the dunes, the Flagship Vault is designed to transform the arid landscape of NFT Lending into a lush oasis of yield opportunities.

The guardians have spent countless hours studying the secrets of the market, perfecting their moon math, and decoding ancient clay tablets with runic loan parameters.

They have devised a structure that allows depositors to place their ETH into the Spice Vaults, which will automatically initiate lending strategies to earn yield.

The winds of the desert whisper their secret benefits of the Spice Vaults:

  • Low-touch exposure to diversified NFT loans, across the best marketplaces, collections, and parameters.
  • Minimized gas costs due to socialization among vault depositors.
  • Straightforward and accessible user experience.

Unlocking Liquidity with the Triple-A Strategy

The guardians of the Spice, in their search for ultimate knowledge have discovered a way to break the cycle that has long plagued NFT Lending: to unlock borrower volume, one must first have lender liquidity.

By providing consistent lender liquidity, borrowers can feel secure in the knowledge that their loan requests will be fulfilled. This means the vast treasures trapped inside NFTs can finally be unleashed.

The guardians have devised a three-pronged strategy, known as AAA, to make NFT Lending an effortless experience:

  • Aggregation: By consolidating the best NFT lending protocols and appraisal tools, the guardians ensure that users have access to the most optimized loan parameters.
  • Automation: Through the power of smart contract interactions, the Spice automates the lending process, making it seamless for users to deploy their loans.
  • Accumulation: The Spice Vaults serve as vessels for users to deposit and interact with these strategies. Users supply ETH, and get more ETH back. This comes from interest earned from borrower repayments of their loans.

The Architecture of Loans and Vaults

Loan Marketplaces:

In their quest for optimal yield, the Spice Vaults utilize two types of NFT collateralized loans: lending pools and P2P loans.

P2Pool loans utilize price-based liquidations and variable interest, while P2P loans hinge on parameters such as time-based liquidations, fixed interest rates, and set maturity dates.

Spice is unique in that it houses the only NFT Lending Vault which uses a hybrid-lending model. Spice is able to offer the benefits of BOTH: P2P & P2Pool.

The Spice Vaults have integrated renowned NFT lending marketplaces, such as X2Y2, ParaSpace, NFTfi, Arcade, BendDAO, and DropsDAO. Future integrations will be determined by community feedback, quantitative lending opportunities, and automated lending infrastructure.

The guardians have harnessed the power of the Black-Scholes Options Pricing model to determine optimal APRs and loan pools.

Historical NFT prices and a proprietary closed-source algorithm are employed to calculate volatility and implied volatility. The optimal portfolio distribution is algorithmically determined based on Modern Portfolio Theory, then adjusted for NFT collateralized lending.

Efficiency is maximized by executing computationally heavy NFT and options pricing models off-chain, while user funds are stored and transferred non-custodially on-chain.

Vault Architecture:

The Spice Vaults are of two distinct types: Base Vaults and Aggregator Vaults.

Base Vaults integrate P2P NFT lending marketplaces and deploy one P2P loan strategy per vault, while Aggregator Vaults wrap Base Vaults and P2Pool NFT lending marketplaces.

Users can only deposit into Aggregator Vaults, but will be able to access a single Base Vault’s strategy by routing capital through a custom-built Aggregator Vault in the future.

Spice Merchants will eventually have the ability to create custom Base Vaults and Aggregator Vaults to suit their preferences and risk tolerance.

In the event of default, the Spice Vaults take custody of the collateral and list it for liquidation through various channels. Mechanisms are in place to ensure the Vaults will operate under any and all market conditions.

The comprehensive architecture, thoughtful loan pricing, portfolio creation, and execution, as well as the labyrinth of vault structures, make the Flagship Vault a unique product in NFT Finance.

The Flagship Vault: The Ultimate NFT Lending Experience

To date, only two Spice Vaults have been released: the Prologue Vault (only available to Prologue Holders) and the Prologue Leverage Vault — a public vault, but not for aggregated lending strategies.

In their tireless pursuit of innovation, the guardians are now unveiling their crowning achievement: the Flagship Vault.

This vault represents the FULL public release of the Spice Finance protocol, allowing all enthusiasts of DeFi and NFTs to partake in the aggregated yield generated by the best NFT lending protocols.

With the Flagship Vault, the guardians of the Spice have made NFT Lending accessible to all, breaking down the barriers that once stood between everyday adventurers and the boundless opportunities of the NFT finance.

As the desert sun casts its golden rays upon the horizon, the Flagship Vault emerges as a haven for seekers of fortune and yield in the realm of NFT Lending. With the imminent release of the Flagship Vault, Spice Finance is poised to revolutionize the DeFi and NFT landscape, bringing its unique brand of innovation and accessibility to all who dare to venture into the desert oasis of NFT Lending.

Official Links

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