Can you hear it? The sound of inevitability. The noise of the banks crying and asking for a “why”. A “why” that would help them to justify their parasitic existence. Indeed, they charge you every month, they apply interest rates based on central banks and they spread the holy M2 supply like their masters told them to do. Panic not! Lending Pond comes with a refreshing project solving the how, the what and the why.
You will be able to borrow without a bank, without dollars and without identity to free yourself from the system. Just you and your ape in front of the almighty.
1. What Is Lending Pond?
Lending Pond is a DeFi platform allowing you to borrow and lend ADA using an NFT as collateral. What? Yes, you read me correctly. This protocol is based on Cardano, my favourite crypto network. As a user of Lending Pond, you can either borrow (and use that money as you wish) or lend and earn interest as your borrower is paying you back. It’s really important to understand that Lending Pond is very much trying to target one of the Cardano major goals: on-chain micro-lending without KYC.
2. How Does Lending Pond Work?
How does Lending Pond work? Well, first the borrower needs a collateral NFT from approved CNFT collections on the Cardano network. Here is the list at the moment: Spacebudz, Clay Mates and The Ape Society.
I’m sure this list will grow in the future as more and more CNFT collections will become references in the space. I think it’s a good thing to start small as you want to begin with the top ones that are relatively stable. Indeed, CNFT prices at the moment are SUPER volatile, especially if you look at collections with small-medium market capitalizations.
As you can see on the screenshot above, you can customize the amount of ADA you can borrow, the duration of the loan and the interest rate that depends on all the previous parameters.The biggest loan to date has been tweeted recently:
Here, a loan of 27k ADA got approved. The interest the borrower will have to pay back: 2160 ADA. This is a 8% loan on 5 weeks. There is no bank, there is no financial advisor, the platform does not know you, you’re simply transiting on the network.
But then, you may ask: what happens if a load is not repaid? “If the borrower fails to deliver the payment in the specified timeframe, the NFT will be automatically delivered to the lender through a smart contract-driven interaction”: in short, you lose your collateral (i.e: your NFT).
But how does it work exactly? In fact, it’s hard to say: there is no whitepaper and the code is not open-source. The website claims that there is an audit of the code coming soon which will give a lot of answers on the quality of the mechanism.
3. How To Use Lending Pond
Well, to use Lending Pond, you simply need to connect your wallet on their website, it’s here:
At the moment, it supports 2 wallets: Eternl and Nami. I’m sure more will come but these 2 wallets are a good start really.
There is surely some room for improvement on that front but you have to remember that the project is VERY new: it’s a couple of months old at time of writing (August 2022).
Once your favourite wallet is connected, you can borrow or lend. To lend, go on the lending page to browse the offers:
Then just have a look at the yields, it’s very very tempting. Let me remind you that the yield when you stake on a Cardano pool is between 4% and 6%. Meanwhile, this bad boy is looking for a 12% (!) loan against an NFT as collateral:
A good way to make good money fast! In fact, It’s a good opportunity to diversify your passive income from your ADA. I’m planning to split my funds between staking and lending to have different levels of risks and different levels of yields on my ADA. For example, maybe 80% in a pool and 20% that I will lend at high yield on Lending Pond to get a bit of alpha. You have to keep in mind that lending on Lending Bond is riskier than staking: the value of the NFT can brutally collapse and the code of Lending Pond is not audited yet. However, it’s definitely worth allocating a bit of funds depending on your risk appetite.
To finish, I recommend an interesting tutorial that I’ve found, if you like to learn with a video rather than a cold article:
4. The Team And The Partnerships
The team involves an NFT, 2 humans and a dog:
Check their Twitter, I think that they are actual humans with deep involvement with skills and passion. That’s all I want from a DeFi team, and no, I don’t have a personal issue with a dog running a project.
From a partnership point of view, the list is growing fast. In fact, It’s good to see that the projects of the Cardano ecosystem talk to each other, know each other and are implementing bridges. It’s not a detail to me, you need this approach to consolidate an ecosystem that lasts with a team mindset. For example, the partnerships I like:
-Partnership with “Trading Tent”:
Indeed, it’s now possible to live trade assets between 2 wallets:
For this, you just have to create a “tent” and invite someone or join an existing one. You will find those options on the “trade” tab of the website:
-Partnership with “SundaeSwap”:
What is it about? In fact, this allows to swap tokens to support the loans within Lending Pond:
Also, partnering with SundaeSwap is a big deal. It’s the elephant in the Cardano projects room and, in a way, it’s giving some credibility to the project. They’re not working alone and are connecting with the major players of the space which is a very good thing. If you want to convince yourself, check the list of partners.
Lending Pond is impressive: from a crazy idea to a live functional borrowing/lending platform using art as collateral. You might wonder, why does it matter? Well it’s just this little step that makes me happy. Anybody on earth can now get a loan with a JPG. Just let that sink in. What do you think HSBC thinks of that? What do you think Joe Biden thinks of that? Why does nobody talk about it? The impact is phenomenal and is opening a door: Cardano is becoming every day a bit more this financial OS where people can come, develop their financial product or derivative, release it and nobody can stop it. How many cops does it take to arrest thousands of liquidity pool operators worldwide? You can arrest the developer of Tornado Cash. However, can you put to jail thousands of pool operators? Spoiler: no. Maybe I’m getting a bit too excited about all that but I think that the cracks all over the legacy system are now becoming bigger and bigger. Lending Pond is just here to show 2 things: NFTs now matter and lending will be redefined. By us.
Thanks for reading.
n.b: this is not financial advice