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Mantle Finance: A Lending Protocol with NFTs as Collateral

By 2sats | 2sats | 20 Apr 2022


*obligatory not financial advice*

 

What is Mantle Finance?

Mantle is a special lending protocol that allows it users to take p2p loans with NFTs as collateral. It is available on Ethereum but also on the Flow blockchain that uses a unique technique to be more scalable and has attracted countless of NFT projects. The platform gives all supported NFT collections slightly more utility by letting its owners use them to take loans like with a pawn shop.

Since NFTs are Non-Fungible Tokens, they cannot be pooled together and priced with an oracle like normal lending protocols do with all other kinds of digital assets. That’s why Mantle Finance uses a different approach where NFT holders can propose a wanted loan on a marketplace and lenders that want to earn a yield or receive the underlying NFT can choose to accept the terms and give the loan. Or lenders can propose loans to potential borrowers with set terms like which NFTs they would accept.

If a borrower and lender come to an agreement, then the NFT will be locked in a smart contract and should the borrower fail to pay the loan pack when its time, then the lender will receive the NFT instead. That way NFT owners can gain needed liquidity in the short term without actually needing to sell their super useful monkey jpeg and people that want to own certain NFTs can give loans to potentially receive them or at least earn interest.

 

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This is a p2p process because all NFTs are different. It can take a while to find someone who is willing to give you a loan or is offering a wanted NFT and because of that it can take much longer to lend or borrow than with applications like Aave or Venus where all supplied tokens can be pooled together and are offered to borrowers automatically. NFTs are simply more illiquid than over crypto assets due to being non-fungible. For that reason you can imagine Mantle more as a sort of NFT marketplace where people can sell their NFTs (likely at a discount) but with the option to buy their NFT back and the buyer can buy an NFT they want or receive their money with interest back after a while.

The platform accepts NFTs from many popular projects including Bored Ape Yacht Club, Decentraland, The Sandbox and NBA Top Shot. Mantle Finance charges a 5% fee on all the interest that the borrowers are paying, this means that if you borrow 100 ETH and have to pay back 101 ETH, then the fee is 5% of 1 ETH. Each NFT collection itself can also charge its own fees for all the interest on loans with their NFTs as collateral.

The Flow version of Mantle Finance will also soon have a regular lending feature where users can supply FLOW coins, USDC stablecoins or other tokens to earn interest or use as collateral to instantly borrow one of the other supported cryptocurrencies, just like Aave works. This is still in beta but it would make Mantle the first regular lending protocol on the Flow blockchain.

One big issue with Mantle Finance is that it is a centralized application. It is currently not a DAO and has no governance token. This could hopefully change and a native token and governance are on the roadmap. There is not that much traffic on the application, especially on the Ethereum version due to high gas fees. But it could still be an interesting platform for anyone who has a passion for NFTs.

 

 

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