papr-An innovative NFT lending protocol

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0xf13E

November 28th, 2022

TL, DR

•papr provides $papr token for WL's NFT Lending demand

•The papr adjusts the Target of $papr to control $papr's supply and demand, thereby affecting the mark price of $papr

•The providers of Lending Liquidity are $papr's Traders.

•The instability of $papr's Mark Price brings the instability of debt

• The essence of the papr protocol is a generalized NFT debt issuance model, $papr is a general debt token, with two prices of Target and Mark

Brief Intro

papr is an NFT lending protocol, borrowers get the air token $papr which is minted by protocol (not USDC/ETH)

Instant borrower liquidity

Actually, papr provides an NFT debt issuance model, $papr is the debt token. The liquidity and mark price of $papr is supported by $papr's Traders in Uniswap.

Two Prices

$papr has two prices, Target and Mark Price.

Mark Price is determined by market supply and demand, which is the real-time price on Uniswap.

Target Price is the price controlled by the protocol, and papr controls Target to adjust the borrower's debt and interest.

Some Key Formulas

Maximum Borrow Amount= Collateral*maxLTV/Target

Debt = borrowed $papr

Interest=price of $papr upon return/price of $papr upon lending-1

Dynamic Adjustment

papr will control debt and interest by changing Target, and then control the supply and demand of $papr, affect the Mark price of $papr, and try to maintain Mark=Targe.

If Mark<Target, means that the market demand for $papr is small, and borrowers are motivated to buy $papr to repay debt, demand for $papr increases. Meanwhile, papr will increase Target, and $papr max borrow amount will decrease, supply of $papr decreases. $papr Mark price increases.

If Mark>Target, means that the market demand for $papr is greater, papr will reduce the Target, borrowers could get more $papr, the market will circulate more $papr, the supply of $papr will increase, and the Mark price of $papr will fall.

Conclusion

• This mechanism is innovative. It is essentially a general debt issuance model. $papr is a general debt token. It is $papr’s Traders that provide liquidity and funds for Lending

• Not P2P, nor P2Pool, but P2 $papr Traders

papr improves the capital efficiency of NFT lending, but it also brings some problems

• Although papr can affect Mark Price through Target, Mark Price is a real-time transaction price, and its fluctuations bring about debt instability and risks for liquidity providers

• Not isolate the risk of different Collections

• Heavy reliance on $papr's Traders to provide liquidity

• It is difficult to maintain the Mark price of $papr

• No stable expectation. It’s not clear who gets the interest profit and who loses