JPEG’d platform bridges the gap between NFT and DeFi, giving users the opportunity to use their NFTs as collateral.
Decades ago, using a virtual image as collateral for loans would seem unimaginable. Today, it’s as real as can be, thanks to NFT X DeFi lending protocols such as JPEG’d.
What is the JPEG’d Platform?
The platform includes a lending protocol where anyone can use NFTs as collateral for loans. Launched on April 28, the protocol allows stakers receive PUSd for staking their NFTs.
The protocol has existed since September 2021 but only started being active this April with the launch of its lending platform, which has gained lots of popularity.
Many NFT users like to hold their pieces for a long time in their wallets, instead of selling them and missing out on holder benefits and utility. Some others like to flip for a quick profit and care less about utility. However, instead of just holding them for nothing, JPEG’d offers special incentives, the opportunity to earn yield while holding your NFTs.
How does the JPEG’d Protocol work?
So, how does this actually work? This tweet gives a summary of how the NFT-DeFi protocol works. It combines Chainlink’s price feeds to obtain what is known as Time-Weighted Average Price (TWAP) feeds on selected crypto punks.
These TWAPs collect information on floor prices and sales, determining the worth of each punk in real time. For the NFT to be ‘locked’, it has to be deposited into a vault.
Already, the Crypto Punk vault has up to 65 CPs locked in less than 2 days (Each Crypto Punk is roughly around 65 ETH)! There are two staking pools the JPEG/ETH pool which yields an APR of 93.96% and the $JPEG pool with an APR of 16.07%.
Both pools have $74.5 million of Total Volume Locked (TVL) at the time of writing.
What NFTs can be staked on JPEG’d protocol?
Currently, only CryptoPunks can be staked on the new protocol. Holders of Crypto Punks can use their punks to get lost or use them to generate PUSd, the lending protocol’s stablecoin.
PUSd holders can choose to exchange their coins for other cryptocurrencies, if they are not interested in DeFi yield farming for the platforms native coin.
For example, users can immediately exchange their minted PUSd for ETH. Such ETH can be used to buy another NFT or trade. Sweet?
The current debt ceiling for the Crypto Punks collection is $5 million, although the protocol says it will double that by next week. In this tweet, JPEG’d promises ‘the first 50 individual addresses’ that deposit a CP plus and mint a minimum of 30k PUSd a whitelist spot. The whitelist Spot will grant acess to mint “The Weenis Warmers.”
TThe Weenis are an NFT collection, derived from an inside joke originating from the teams official discord account.
Now, if you do not have a Crypto Punk, you might feel like you are already missing out. Not to worry, JPEG’d announced that it would soon open staking for other blue-chip NFTs like Apes, Azukis, EtherRocks, Clone X, and Doodles.
Does the JPEG’d protocol have fees?
Yes, there are fees applicable to anyone who is interested in using the protocol. Firstly, before you deposit your NFTs, you pay 0.5% of their worth as a ‘deposit fee.’ This is only applicable when you create a loan.
Then, of course, you have to pay interest on your loan. The interest rate is very friendly: 2% per annum. So if you borrow $10,000 you get to pay only $200 by the end of the year.
That’s not all. You also have to pay a 1% insurance fee. You can not get your insurance fee back, plus, if you obtain another loan, you pay another insurance fee.
The fees tend to higher from here you get liquidated. Now, liquidation happens when your debt/collateral ratio is more than 33%. This means if you owe 33% more than the collateral with JPEG’d, you will get liquidated. Liquidation can happen in two scenarios:
- if you borrow far more than the value of your NFT or
- if the price of your NFT dumps significantly.
According to JPEG’d, ‘If liquidated, a 25% liquidation fee will be charged alongside the debt if you intend to buy the NFT again.’
What else can I do on JPEG’d platform?
Apart from the lending and staking features, being on the JPEG’d platform has a number of perks. For one, as a $JPEG holder, you get governance and voting rights on decisions affecting the protocol. For example, holders can vote on which collections they want to see on the protocol next.
You can also get JPEG cards, which can be used to increase your threshold to 40%, reducing your chances of liquidation. However, this is only available to JPEG cards with the cigarette attribute. The cards, are available on OpenSea for a minimum of 2.5 ETH each. The ones with a cigarette attribute are only 99 in number.
JPEG’d is not the first NFT lending protocol. In fact, other similar lending platforms like Drops and NFTfi have been offering NFT lending features for a while now. What makes JPEG’d different is that it is the first peer-to-pool protocol that is completely decentralized and requires no permission whatsoever.
With the rise of NFTs, we might see even more lending protocols that will allow people to borrow money with their digital pieces. Overall, JPEG’d seems to have great utility in future and if the protocol onboards more blue-chip NFTs, it might just snowball into something bigger than a lending platform.
Ready to get JPEG’d, anon?
