NFTfi lending bot Expanded Program

Brief Authors: Arkaydeus, NiftyFifty
Project lead: NiftyFifty
Squad: Acquisitions
Creative approval: N/A

Abstract

After a successful execution of “SDIP-30: NFTfi lending bot MVP” (see “Motivation” section for more details), we propose authorizing 150 ETH for doing Squiggle-backed loans on NFTfi using our bot.

Arkaydeus and NiftyFifty will have discretion to set the bot specific loan terms and adjust them based on market conditions (all specifications and changes will be automatically recorded and timestamped).

Motivation

The bot has been monitored closely and everything has worked according to plan: offers were made in the terms specified (and within seconds of a Squiggle being listed), changes were updated in a timely manner, loans were approved and repaid without issues, and funds were moved in and out of the lending bot wallets successfully.

As per SDIP-30’s authorization, we made one loan on a Slinky. We lent 7.5 ETH, during 30 days at a 20% APR. At the time, it was around 65% LTV. Loan was repaid and we received 7.62 ETH, generating a 1.6% ROI and a 20.7% IRR.

If we have an authorization of 100 ETH for manual lending (SDIP-28: NFT Lending Expanded Program), why are we requesting additional funds for automated lending? There are three primary reasons:

  1. Increase our loan offers reaction speed. This bot allows us to be active 24/7 and owners will be receiving an offer within seconds of the Squiggle being listed on NFTfi. We have observed that many borrowers are time sensitive and tend to accept the first reasonable offer, hence this bot is a significant competitive advantage for SquiggleDAO.

  2. Having an increased budget will allow us to make offers with different terms on the same piece (different durations, different LTV / APR combinations, differentiate by Squiggle type, etc). Due to how NFTfi works, we need a different wallet for each offer, hence having enough ETH to fund different wallets will significantly increase our edge.

  3. As Squiggle lending demand increases, automating this activity will allow us to scale our operation (putting manual offers is time consuming, manageable now that there are a few Squiggles on NFTfi, but will not be if the number of Squiggles grows substantially).

The goal behind the 150 ETH request is twofold: 1) to be able to fund multiple wallets so we can make multiple offers on each particular Squiggle (each offer needs to come from a different wallet) and 2) to account for some potential growth, as we become more active and competitive we’ll keep gaining market share and also we’ll expect some increased demand for loans (NFT lending penetration on Squiggles is currently below 0.2%).

As a reference for the expected returns on this capital, we have received repayment of 7 loans generating 24% IRR on the funds deployed. Additionally, we had one default that allowed us to get pipe #9395 for 25 ETH and currently we have 54 ETH loaned at APRs between 20% and 40%.

Finally, NFTfi has confirmed a token airdrop. This activity will increase the probability of us being included in any potential airdrop.

As already mentioned, this SDIP is to keep building our lending activity that the DAO has been pursuing for some time. Please see previous SDIPs for further details:

Success Conditions

  1. Issue multiple loan offers on Squiggles, automatically and with the specified terms
  2. Issue multiple loans successfully (note that success is based on making the loan with the specified terms, not based on repayment or default)
  3. Generate yield and/or acquire some Squiggles at a discount to market prices
  4. Become one of the most competitive lenders in the space for Squiggle-backed loans

Specification

  • Bot wallets (controlled by Arkaydeus) will be funded with ETH from the Treasury. It is important to mention that the wallets for this activity will be stored in hardware wallets controlled by Arkaydeus (multi-sig wallets are still not available)
  • NiftyFifty and Arkaydeus (both SquiggleDAO core contributors) can specify and make changes to the loan terms. All changes are automatically recorded and timestamped
  • Performance of the program will be reported periodically to the DAO
  • If an NFTfi airdrop does occur, a vote will be held in the “Ongoing Votes” channel in Discord to determine what to do with the tokens (sell, keep, etc)
  • Launch marketing campaign around the expansion of this program

Launch Details

Project will be launched according to the specifications above, at the timing and discretion of the operators.

Costs

150 ETH (though some or all of this could return back to the treasury depending on the outcome of the lending activity).

Rewards

N/A

1 Like

I fully support the idea and the lending program. That said, it would be very very helpful for transparency’s sake to get a regular monthly report of the financial performance of this program.

Capital deployed, rate of return, default rate, interest revenue, realized gain/loss on defaults - all the relevant stuff.

Particularly as we’re getting to the point where a material portion of our treasury is being requested for the lending program.

This will give the DAO a good view as to how the program is performing so that we’re better informed on whether to support future expansions.

Hey glory! Thanks for the comment, we are including that info (together with NFTX performance) in the weekly TownHalls.

Currently, this is the situation:

7 loans repaid (45 ETH total)

  • Profit: 0.71 ETH
  • ROI: 1.6%
  • IRR: 24% (in ETH)

Manual Lending (SDIP-28: approved 100 ETH):

  • 25 ETH loan defaulted and we got pipe #9395
  • 54 ETH loaned (6 loans: 2 ribbeds, 1 double-digit, and 3 floors)
  • 20.5 ETH available (1 extra ETH for gas)
  • Next maturity: October 9th

Lending bot (SDIP-30: 10 ETH for one 30d loan):

  • Loaned: 7.5 ETH - 30 days - 20% on a slinky
  • Repaid: we received 7.62 ETH, generating a 1.6% ROI and a 20.7% IRR

Congratulations on the pilot program and very supportive of expanding this. Great way to use treasury to support Squiggle liquidity and generate yield.

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Thanks Nifty! Would it be possible to do a regular update in the Discord for those members who aren’t able to make it to the town halls?

I think having this info available could also help build excitement within the community.

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glory! please check today’s market update (included Squiggle-DeFi report) and let me know any thoughts

that’s great info! thanks for adding it - the only other datapt that might be helpful for ppl is how much ETH we currently have in outstanding loans. otherwise thanks so much for adding this color.

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SD has done a great job with this pilot project and I would love to see it expanded.

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Excited that the program seems to been running so smoothly, increasing the amounts available will bring some more eyes too after we push through!

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