The Next Step for HyperDAO
HyperDAO is an open, fair and interconnected DeFi service ecosystem. Smart contracts have enabled HyperDAO to build sophisticated services such as exchanging one asset for another, implementing automated trading strategies, creating stablecoins and more. In July 2020, HyperDAO rolled out its first product, the HyperDAO mobile application, which have made investing, trading, lending and information sharing easier. However, as HyperDAO continued to work on improving its offering, it realised that there still exist obstacles to financial inclusivity brought about by unnecessary constraints within the digital environment.
Most cryptocurrency enthusiasts are familiar with the concepts of depositing their digital assets as collaterals and borrowing against it to generate stablecoins. This effectively allows users to put their “HODL” crypto portfolio to good use. But why does it have to stop there? What if you could conveniently put your real-world assets such as your watch or even your house as collaterals on-chain and borrow against it? Blockchain has made this concept a very real possibility through minting non-fungible tokens (NFTs).
NFTs are special cryptographic tokens that have a unique value and are indivisible.The current NFT market is a niche one that caters primarily to gamers and collectors. While these sectors are exciting, HyperDAO wishes to take it a step further by integrating real-world assets with the blockchain. But how exactly will HyperDAO take it to the next level using NFT as a base?
HyperDAO has introduced an NFT minting system that allows users to conveniently put-up real-world assets as collaterals and borrow against them. At first thought, this might seem a little far-fetched and difficult to actualize but given the right partnerships and the right community, this is definitely achievable. Before we dive into the specifics, let us first take a look at how HyperDAO’s NFT Minting System would work.
HyperDAO’s NFT Minting System
As a start, HyperDAO invite famous crypto KOLs to put up their physical assets as collateral. The value of these collaterals will then be verified by HyperDAO’s nodes (professional valuers, lawyers and blockchain experts). Next, the community will get to vote on whether or not they would accept these NFTs. If the vote is passed, the NFT will be minted, after which 50% of the NFTs value will be made available to the NFT owner through stablecoins. For example, if a NFT is worth 1m, then only 500 000 dollars’ worth of stablecoins can be generated.
However, for the NFT owner to withdraw these funds, they must first contribute to the platform by becoming an initial liquidity provider. Currently, HyperDAO has set the contribution to be 20% of the loan, this can be adjusted through community governance in the future. Other users can then participate in this liquidity pool by contributing their digital assets, in the process, they will earn fees from the transactions in the pool while also mining HDAO governance tokens in the process.
In other words, for NFT minters to benefit from being able to obtain funds from putting up their real-world assets as collaterals, they must contribute to the platform by creating an initial pool of liquidity. They are also simultaneously creating a “debt” of which they must pay interests on in order to retrieve their NFT collaterals. These interest payments are passed on to other liquidity providers. If the NFT owner defaults on his or her loan, then the asset behind the NFT is liquidated to cover the debt. This can be understood as an added protection to liquidity providers as opposed to other lending protocols.That covers the overview of HyperDAO’s NFT Minting system. HyperDAO will publish more related NFT articles in the future, so please be sure to follow and stay up to date with HyperDAO.