SPICE Protocol offers a unique opportunity for users to engage in automated NFT-backed lending strategies by depositing ETH into specialized vaults. This system is designed to generate real yields through a simplified, user-friendly interface that minimizes the need for direct interaction with the complexities of the NFT lending markets.
Vault Options in SPICE Protocol
SPICE provides four distinct vaults where users can deposit their ETH:
1. Prologue Vault
2. Leverage Vault
3. Flagship Vault
4. SP-BLUR Vault
These vaults are categorized into two main types:
- Gated NFT Vaults: Specifically, the Prologue Vault falls into this category.
- Public ERC-20 Vaults: This includes the Leverage, Flagship, and SP-BLUR Vaults.
Advantages of Using SPICE Vaults
By participating in SPICE Vaults, users benefit from an array of features designed to enhance their investment experience:
- Diversified Investment: Users gain exposure to a broad spectrum of loans, NFT collections, and lending platforms without the need for extensive planning.
- Reduced Gas Costs: The protocol aggregates transactions, reducing the number of individual transactions and thereby lowering gas costs.
- Potential for Additional Rewards: Participation may lead to farmed tokens or airdrops as a result of early-stage platform engagements.
Operational Dynamics of SPICE Vaults
SPICE vaults operate by pooling user deposits of ETH and strategically deploying these funds across various NFT lending marketplaces to maximize yields. Each vault is tailored with a specific lending strategy, and portfolio rebalancing occurs daily for the Prologue and Flagship vaults to maintain optimal yield performance.
Withdrawal Processes
The liquidity available for withdrawal from any vault is determined by the total value locked (TVL) minus the ETH allocated to peer-to-peer loans. The available balance for each vault can be easily viewed on the SPICE dApp under the withdrawal section.
Prologue NFT: More Than Just a Digital Asset
The Prologue NFT collection comprises 555 unique tokens, each serving multiple roles beyond just being a profile picture (PFP). These NFTs grant holders exclusive access to the Prologue Vault, act as a receipt for their ETH deposits, and can be leveraged to enhance yield potential.
Leveraging the Prologue Vault
Prologue NFT holders have the exclusive ability to leverage their vault positions. This feature allows users to borrow against their deposits, with the potential to reach a maximum loan amount of 150% of the initial deposit. The system is designed to auto-compound borrowed ETH back into the vault, amplifying the yield.
Managing Leverage
Users can adjust their leverage levels after the initial setup, with the option to increase up to the maximum or decrease leverage, depending on their strategy and market conditions. The protocol offers refinancing options to adapt to changing annual percentage yields (APYs) in the lending market.
Liquidation Protocols
SPICE incorporates a novel liquidation protection mechanism that prioritizes reducing the borrower's leverage rather than proceeding with a full liquidation, thus safeguarding the user's investment. In cases where liquidation occurs, the process is automated to settle the loan and accrued interest, with the borrower retaining the remainder of their deposit after a default fee deduction.
