Besides 4 loans that got almost liquidated (saved by the liquidation button that was missing on the UI - fixed now!), this week has been pretty quiet.
we are still working on the Sudo and NFTX integration (yep, borrow on your sudo pool through abacus and essentially get an interest-free loan by compensating it with earned Sudo trading fees.).
oh, we also partnered up with @0xhoneyjar this week, we educated them on how to use an abacus (and how it can be useful to better manage their honey jars) and we got some free mints (mint this article and get free mint, basically for first 20 // no secondary market - real honeyjar style). more stuff planned with them in the future!
With royalties racing to 0, many collections look to alternatives in order to get some revenue!
We are looking for a collection to try out Abacus pools. The idea is that the collection puts some of the treasury funds into the abacus spot pool linked to their entire collection (linked!! not deposited. no holder has to deposit their NFT in order for this to work), thereby pricing all the NFTs in the pool (kinda like a collection offer - that collection offer can be much deeper though (as in more people can sell into it)).
Holders can now make use of that liquidity deposited by the team. They can borrow some money, or sell their NFT into the pool. This generates revenue for the collection.
You might think “in order to collateralize an entire collection, the team needs a lot of funds”.
Well… in the screen above you might’ve seen collateral slots. It's like fractionalized banking, we assume that not all holders need liquidity at the same time! this is best explained in an example:
if you have a collection of 2k NFTs and 100 collateral slots, this means that 100 holders can make use of that liquidity in the pool at the same time. For a floor price of 0.2 ETH, team would need 20 ETH (100 collateral slots*0.2ETH) in the pool to have a pool floor price of 0.2 ETH.
(Of course that liquidity can also be deposited by outside capital (maybe some traders that want to earn part of the generated revenue), and/or are bullish on the collection and think that 0.2 ETH is undervalued.)
You might think: “but if everyone can sell the NFTs into the pool, the pool is emptied pretty quickly and we lose all of our treasury?”
If someone sells the NFT into the pool (or someone is liquidated as a borrower), the NFT is auctioned off for 24 hours. The auction outcome is used to replenish the pool. If it closes above the initial sell price, the treasury makes money, if not, it loses some money (auction outcome – sell price by former holder).
However, even with NFTs auctioning off at a slightly lower price than pool closure, the treasury has additional income that might make up the potential loss (this holds true for positive auction outcomes as well): (1) interest paid by borrowers, (2) liquidation spreads and (3) closure fee.
Interest paid by borrowers:* Treasury lends money to their collection holders & pockets interest paid by them. Interest rate can be fixed by treasury in advance.*
Liquidation spreads:* in the case of a liquidation, let's say someone borrowed 90% and got liquidated for whatever reason, the treasury gets the difference between 100%-90%)*
Closure fee*: Selling an NFT in the pool has a fee of 1%. Treasury gets that fee.*
Now.. advanced: if you know how Sudo works, in a week or so, we will launch Abacus on top of Sudo. if you are an LP or collection, you will be able to deposit two-sided liquidity (floor nft + eth) and borrow against their Sudo pool through Abacus and throw bids at the floor in Sudo with borrowed money.
In summary: provide liquidity to your holders by opening up a pool with use. they borrow and/or trade and treasury earns some fees. all you have to do is estimate potential price decrease for the week and replenish pool accordingly.
Together with the Sudo & NFTX update, we will release a new closure system as well. In case of liquidations or closures, the highest risk point owner (which would be the treasury in this case - cause the majority of liquidity provided) could buy the NFT directly at the closed price, before an auction begins. Any LP in the pool can make their claim during the pre-auction grace period and the claim made by the highest risk point holder will win the right of purchase. So, if the floor of your collection is 0.2 and a holder defaults on a 0.1 loan, the collection treasury has first dibs on a discounted buyback for 0.1 - a cheap buyback!
If you are a collection that is interested, please reach out to us. if you are unsure or have more questions, feel free to reach out as well. if you know a collection that could be interested, please let us or them know!
see you next week,
good project, good frens