In the first segment of a two-part series on how borrowers and lenders can make use of the PWN platform, we’ll dive into borrowing strategies and top reasons why cryptonatives and active DeFi users are using PWN to borrow funds.
Hey, you. Yes, you! Which of the following descriptions do you identify with?
You’re an active DeFi user.
You have a high DegenScore.
You like to try new stuff.
Finally, you hold NFTs but find yourself sitting on them (either while waiting for a game to launch or the project to advance). You don't want to sell them, so what can you do?
If any of the above sound like you, we want you to become a borrower on PWN. For those of you who hold NFTs or fungible tokens and are looking to invest in these volatile markets, we’re here to give you options on what to do with them.
So how can you get things started? Simply open the PWN platform and take a look around. We’ve also put together a collection of tutorial videos that make it even easier to familiarize yourself with the PWN platform.
Here’s how easy it is to list a loan request:
Below, we’ll dive into some strategies for successful borrowing and walk through how borrowers can reach their financial goals while borrowing on PWN, thus unlocking liquidity from NFTs and increasing financial flexibility given the current market volatility. Here’s what we’ve been seeing people doing and the strategies that they’re using.
There’s no time like the present: List your NFT on PWN!
You hold a significant amount of NFTs, some of which are especially valuable. You see the opportunity to buy into a new project, but you have little to no liquidity at the moment. Perhaps you had signed up to the waitlist months ago, or maybe a close friend told you about this project recently.
This scenario is all too common. For example, when Otherdeed went live, a number of Otherdeeds were reserved for current members of the BAYC community. At the start of the sale (wave 1), there was a limit of two Otherdeeds minted per wallet. As soon as gas fees returned to reasonable levels and the amount of wallets minting decelerated, wave 2 began, during which wallets with KYC could mint up to an additional four Otherdeeds. At this point, the Mint price was 305 ApeCoin (equivalent to $6,197.60 plus gas fees at the time) per NFT. This means that four of these equaled just under $25K, which makes it obvious why borrowing against your NFTs would make sense.
Minting multiple NFTs gives you a higher likelihood of minting a rare one. To mint more, though, more liquidity is needed. Once you have quite a few NFTs and the rarity ranking is released, then some owners sell some to keep only the really valuable ones.
In a nutshell, BAYC holders wanted to maximize the number of Otherdeeds that they could mint, as it served as the perfect flipping opportunity. However, they were using the concept of “other people's money” (i.e. loans) to mint and then repay back.
In another detailed example of this strategy, Yaniv Neu-Ner explains how one anon was able to turn $642 to $800K in a single transaction.
Advantages of this strategy:
You don't lose exposure to the asset that you believe in.
Non-taxable liquidity. Some people also use this strategy to “snipe” floor price/rare NFTs that show up.
You're taking little to no risk because it’s a relatively quick strategy. As we’ve explained above, instances of this strategy typically last for just a few weeks at a time.
Being whitelisted means that you will get the mint at a good price (and even more importantly, that you can afford to buy a lot more!)
An ENS-backed loan waiting for funding on the PWN platform.
Today, there are a number of issues that cryptonatives face related to real estate. Take getting a mortgage, for example: Around 80% of real estate purchases are financed through mortgages.
The problem? The crypto industry faces certain gatekeeping from banks. Certain banks might not even want to work with you whatsoever if you mention crypto. Cryptonatives often don’t have proof of earning any money. For two years, PWN CEO, Josef Je, had to fake that he had an income — and he’s not alone. So many of us do this so that banks are happy.
You're competing against the fact that you need a small deposit to pay a bigger price. For cryptonatives, this means that you either have to choose to keep your crypto assets for the future or sell them.
So how is PWN trying to tackle these issues, you may ask?
PWN’s open protocol can use any token, even allowing users to combine different assets together. For more info on how we do this, check out PWN’s token bundler dev docs.
At PWN, there’s no whitelist. We like to think of PWN as the OpenSea of lending.
We offer fixed cost, fixed interest, and only one transaction on-chain.
Some might say we're too early here, but at PWN, we like to consider the possibilities and future use cases that crypto can help us solve. Loans could be used toward down payments or even to purchase one’s home entirely.
The buzz is growing around mortgages for virtual real estate (although some people remain skeptical :))
Advantages of this strategy:
Keep what’s yours: When making use of crypto in real estate, it’s possible for you to own your crypto for the long term.
You get to enjoy tax benefits.
You can get an instant loan without encountering annoying credit checks and dealing with banks.
Another strategy to consider is hedging. In case an NFT drops in price below the amount borrowed, a borrower can default on the loan and walk away with more value in cash. (Note: As this is a rather risky strategy, we’re not offering it as financial advice!)
Similar to buying a put option, you can short an NFT. What this looks like in practice: You buy a CryptoPunk for 100 ETH then ask for a 70 ETH loan. Now, the value of the CryptoPunk is 60 ETH. Instead of picking up the loan, you can get a CryptoPunk for 70 ETH.
Hedging is a great strategy to employ when you’re not bullish on a given project. Even if you’re not, it’s undeniable that someone else is — this creates the perfect opportunity. This is especially true for bigger collections like BAYC, ENS, CloneX, and so on. (By the way, check out the CloneX deal funded on the PWN platform!)
Advantages of this strategy:
Hedging against your NFTs leads to diversification.
It’s an attractive strategy to some lenders (especially those who are super long on popular NFT collections).
Buying more NFTs leads to capital efficiency.
Ready to get things rolling? List your NFT on PWN.
Borrowing on PWN is done on-chain via smart contracts. As mentioned, we offer users target duration loans without liquidation risks on collateral price swings.
Importantly, we’re opening up the possibilities for lending using anything as collateral. Let’s take ENS as an example. While protocols like Aave have made it possible to use ENS tokens as collateral, we’re taking this a step further by allowing the NFT to be used as collateral.
(The answer to the above is a definite yes when using PWN!)We look forward to seeing what borrowers will accomplish using the PWN platform. Next up, we’ll be releasing an entry walking through lending strategies and benefits on PWN. Stay tuned!