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nftperp 244 days, 7 hours ago


Look At My JPEG — Ep.27Recap — Arcade.xyz

Welcome to another summary of our recent conversations with NFT Finance teams, where we delve into their projects, market views, future plans, and much more. This time, we had the pleasure of speaking with Rob and Cashtro from Arcade.xyz, a peer-to-peer NFT-backed lending protocol that allows NFT holders to get loans against their NFTs.

Introducing Rob and Cashtro

Rob, one of the co-founders, shared his intriguing journey into the crypto space, which began in 2016 when a friend introduced him to Bitcoin. Having libertarian values, Rob was instantly drawn to the decentralized nature of cryptocurrencies. He ventured into several startups and started mining Bitcoin before stumbling upon the potential of NFTs. His attention was caught by NFTs in mid to late 2020, just before the big NFT craze took off, when his co-founder, Gabe, reached out to him to discuss the possibility of providing liquidity using NFTs as collateral. This was a novel concept at the time, as NFTs were relatively uncharted territory and were mostly illiquid, non-fungible assets.

Rob’s acquaintance with DeFi systems influenced him to explore integrating NFTs into the borrowing and lending ecosystem. With his experience in building startups and teams, Rob found the idea exhilarating and plunged into developing Arcade.xyz with Gabe at the start of 2021. The concept was to create a DeFi platform that would financialize NFTs by allowing users to use them as collateral for borrowing.

Cashtro embarked on his crypto journey in 2016 and took a keen interest during the DeFi summer of 2020. With a creative background, he was captivated by the artistic aspect of NFTs. He began purchasing NFTs, not as financial assets but as artistic pieces he found fascinating and worthy of display. Cashtro met Gabe during the DeFi summer, and their friendship eventually led him to join Arcade.xyz in 2021.

About the protocol

Arcade is a decentralized protocol that facilitates peer-to-peer NFT-backed loans, allowing users to access liquidity without selling their NFTs. Through the protocol, users can list one or more NFTs as collateral and request loans in a variety of cryptocurrencies, including Ethereum, stablecoins, and Ape coin. In terms of performance, Arcade boasts a very low default rate of around 3% and an average loan size of around $50,000. This reflects a sophisticated user base that actively engages in managing their loans.

Arcade has evolved since its initial launch. The first version (V1) was launched in early 2021, while the second version (V2) was released in August of the same year. V2 introduced several enhancements, including a more gas-efficient vaulting mechanism and new features such as rollovers and collection offers. The team consistently listens to user feedback and adapts the platform accordingly.

The speakers also touched on the platform’s fee structure. As of the time of the podcast, Arcade does not charge any fees for trading. They believe that charging fees at this stage would create additional friction for users. Instead, they aim to let value accrual go to the users, as they see this as a growth phase for the space.

Vaults, Rollovers, and Liquidation Mechanism

Instead of listing each NFT separately, users have the option to bundle them together, allowing for borrowing against a combined value of the NFTs. These groups of NFTs are referred to as “Vaults”. This feature is particularly efficient in terms of both time and gas. Vaults act as smart wallets that borrowers control. It needs to be highlighted that Arcade’s vaults remains locked during the escrow period to ensure security. Users can send assets to the vault and use it multiple times, but once the withdrawal is enabled, the vault is considered broken and cannot be used again. This mechanism is in place to avoid compromising the vault’s integrity.

Borrowers have the ability to roll over their loans by creating new terms and paying the interest owed. Essentially, this allows for the extension of a loan. Interestingly, a different lender can take over the loan during a rollover. Arcade has created a competitive bid market for loan extensions. If the principal remains the same, the borrower only pays off the interest for that term, and a new term starts. If the principal changes, adjustments are made accordingly.

Transitioning to the topic of defaulting, the speakers explained what happens if a borrower fails to repay the loan along with interest. In the case of a default, the loan’s status changes to ‘past due’. The lender then has the option to claim the assets in the vault. However, there is a small window of time during which the borrower can still repay the loan even after it’s past due. This system offers some flexibility and, as the speakers mentioned, has contributed to a very low default rate on Arcade of about 3–4%.

Airdrop-Friendly Lending Protocol

Arcade vaults are Airdrop-friendly, which means that users can still maintain utility, such as staking or claiming Airdrops, on the NFTs even when they are used as collateral. However, it is important to note that the yield or the assets received through Airdrops cannot be withdrawn from the vault until the loan is repaid. Moreover, Arcade has collaborated with a ticketing platform that allows users to get tickets to live events, thereby enhancing the functionality of the NFTs in the vaults. This innovation allows NFT owners to continue participating in NFT community events even when their NFTs are locked in a loan. Additionally, the protocol allows users to delegate another hot wallet to their smart vault.

Big thank you to Rob and Castro for joining us and having a thrilling discussion! Follow them on Twitter: https://twitter.com/rkmasiello and https://twitter.com/CashtroCrypto

Listen to the full podcast episode with the following links: https://open.spotify.com/episode/6QrZDtrxTMDQyn1KEUCByv?si=ba643c50925d49f0

Twitter Spaces Recording (limited time only!): https://twitter.com/nftperp/status/1654501094452613127?s=20

Arcade.xyz

Website: https://www.arcade.xyz/

Twitter: https://twitter.com/Arcade_xyz

Discord: discord.gg/arcadexyz

Docs: https://docs.arcade.xyz/docs/introducing-arcade

nftperp

Website: https://nftperp.xyz/

Twitter: https://twitter.com/nftperp

Discord: https://discord.com/invite/nftperp

Docs: https://nftperp.notion.site/nftperp-xyz-2b456a853321481bac47e5a1a6bbfd4e

Look At My JPEG on Spotify: https://podcasters.spotify.com/pod/show/lookatmyjpeg/

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