The Parallel Finance ecosystem, originally born in the Polkadot network, has expanded over time to include brand new products. Currently, the largest part of the ecosystem is Parallel Network, a Layer 2 scaling solution built on top of Ethereum based on Arbitrum's Nitro stack.
Here we will only talk about a part of the ecosystem - the lending protocol.
Margin NFT Lending Protocol
Parallel is a decentralized lending protocol that allows users to borrow and lend against both non-fungible and fungible tokens. Parallel allows users to use unused capital to fund further investments and generate income from them.
Cryptocurrency users store significant value in their non-fungible and fungible tokens, but in most cases these assets sit idle and remain inefficient capital. NFT users, in particular, are forced to sell their valuable assets to gain liquidity, which then enables them to invest further in NFT or elsewhere.
Parallel is a cross-marginal financial protocol for NFT, as it allows users to borrow and lend against ERC-721 and ERC-20 tokens from a single account with a single line of credit. Asset owners can utilize liquidity and/or generate yields on all of their assets through an easy-to-use protocol.
Key Features Parallel and Risk Control:
- Protocol Insurance Reserve: This is a pool that helps cover creditors in case the protocol suffers a loss in liquidation or is compromised.
- Tokenized NFTs and escrows: NFTs are delivered in escrow contracts that allow them to be transferred only under specified conditions. The user providing the NFT receives an nToken, a mirror of the NFT and its metadata, which restricts the redemption of the NFT by the owner of that nToken. Users also cannot transfer the nToken except in the case of loan repayment, which helps protect users' NFTs.
- Flash claim and airdrop coverage: Holders can use the Flash Claim feature to receive an airdrop in a single transaction without repaying the debt. Flash Claim utilizes Flash Loan functionality and integrates directly with supported airdrop contracts to allow you to transfer a provided NFT from ParaSpace to your wallet, claim an airdrop, and return the NFT back to ParaSpace in a single transaction.
Types of NFTs as collateral
- Art and collectibles collections including Bored Ape Yacht Club, Mutant Ape Yacht Club, CryptoPunks, Doodles, Otherdeed, CloneX, Azuki, Moonbirds and Meebits.
- Uniswap V3 liquidity pool position tokens
Loan amount
The maximum amount you can borrow is based on a weighted collateral ratio - i.e. the value of the assets provided and their corresponding collateral values according to our asset risk parameters.
For example, you have provided and pledged 1 BAYC (ETH value = 80), 4 ETH and 800 USDC (ETH value = 0.6). Given collateralization ratios of 30% for BAYC, 82.5% for ETH, and 82.5% for USDC, the total amount you can borrow would be 30% * 80 ETH + 82.5% * 4 ETH + 82.5% * 0.6 ETH = 27,795 ETH or the equivalent in other supported tokens.
When you borrow assets, you receive an equivalent number of dTokens (dETH, dUSDC, dUSDT, dDAI, dAPE, dSTETH, dWBTC) that track principal and interest on the blockchain. Interest due is added to the total amount borrowed and can be repaid at any time.
NFT Price Calculation
NFT prices are calculated based on Chainlink's NFT floor price oracles, which track NFT collection floor price data on major trading venues and filter outliers. Thus, the price used to calculate the borrowing limit is the same for all assets in the collection.
The collateral factor or LTV is set for each collection separately.
