Mechanisms
NFT Valuations
The first problem faced by any NFT lending platform is figuring out how to value the NFTs that they accept as collateral. Typically, existing solutions to this problem either:
(i) Rely on price oracles that are vulnerable to market manipulation leading to chaotic liquidation cascades
(ii) Involve isolated peer-to-peer lending pools that lead to fragmented liquidity and exorbitant interest rates for borrowers.
Goldilend aims to avoid this problem by capitalizing on the fact that the value of the Berachain ecosystem is intimately connected to the value of the Bong Bear (and rebase) NFTs. This observation allows the platform to determine a fair minimum value of the NFTs (denominated in iBGT) that can be used to establish a unified and highly liquid lending market that doesn’t rely on price oracles.
Specifically, Goldilend will allow LOCKS holders to vote on an initial minimum fair valuation of each NFT collection in the Bong Bear series (Bong, Bond, Boo, Baby, Band, Bit) denominated in. These valuations should be well below both the current floor prices of the NFTs at launch and the values of their (possible) respective airdrops. Because the loans are denominated in iBGT, the only situation in which the value of the capital loaned out by the platform would surpass the value of the collateral of those loans is one where the value of the iBGT token increases by many multiples against the value of the Bong Bear (and rebase) NFTs. Given the central role that the NFTs play in the Berachain ecosystem and the highly conservative initial valuations that employed by Goldilend, this is unlikely (since it would entail the NFTs failing to capture a meaningful share of the ecosystem), but is still possible, and the risk should be countenanced by users of the platform. In this unlikely event, the DAO can vote to compensate GiBGT holders via further PORRIDGE emissions, effectively using PORRIDGE to purchase the NFT at the price of the outstanding debt.
Over time, Goldilocks DAO can vote to further adjust the implied valuations of the NFTs in response to changing market conditions.
Interest Rate
Borrowers will be able to borrow up to the full valuation of their NFTs (when there is sufficient available capital locked on the platform) and will be able to borrow against multiple NFTs in a single loan. All loans will be fixed-term (maximum and minimum terms decided by Goldilocks DAO), and interest rates will scale with the duration of the loan (D), the ratio of the total utilized borrowing capacity of the platform to the total amount of locked capital (U), and a base interest rate (R) that is determined by Goldilocks DAO.
This interest rate function has several important features. Firstly, it sets a minimum interest rate of R, which is determined by Goldilocks DAO with the aim of remaining competitive and profitable. Secondly, the APR scales steeply with the duration of the loan, reflecting the increased risk of longer term loans and ensuring that short term loans are affordable and attractive to NFT holders. Finally, the APR will also scale with the utilization rate of the capital locked on the platform. When less than 1/2 of the locked capital is utilized, borrowers will receive a discounted interest rate. When more than 1/2 of the locked capital is utilized, borrowers will pay a higher interest rate.
Loans will be liquidated when borrowers fail to repay their full debt (including interest) by the expiration date of their loan. GiBGT stakers have the first right to liquidate loans by depositing iBGT equal to the value of the liquidated loan. This means that GiBGT holders will sometimes be able to effectively purchase NFTs far below market price. In the event that GiBGT holders do not liquidate the unpaid loan within 48 hours of expiry, the option to liquidate the loan will become open to everyone. In the event that nobody pays to liquidate the loan within 7 days of its expiry, the collateral of the loan will be sent to the Goldilocks DAO treasury, and the value of GiBGT will decrease against iBGT (in proportion to the size of the unpaid loan). Goldilocks DAO will then vote on whether and how to compensate GiBGT holders for their loss.
Partner NFT Utilities
Goldilocks DAO is partnering with Berachain ecosystem projects to allow their NFTs to have multiple utilities within Goldilend.
(i) A borrower can lock partner NFTs on Goldilend for the duration of their loan in order to decrease the interest rate paid on that loan. Partner NFTs can be stacked, e.g. locking 5 NFTs will generate 5x as much of an interest rate discount as locking 1 NFT, up to a maximum discount of 50% (in which case the locker is paying half the interest that a standard locker would pay).
(ii) Secondly, partner NFTs can be locked on the platform in order to boost PORRIDGE yield for GiBGT stakers. Each NFT represents an increase in the PORRIDGE yield rate for a GiBGT staker, and these boosts stack up to a maximum of 50%.
At the time of writing, we have partnered with several leading native Berachain projects and are actively seeking to establish further similar partnerships.
Goldilocks DAO
Of all interest payments made to the protocol, 4.5% will be sent to Goldilocks DAO treasury and 0.5% will be sent to ApDAO treasury.
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