Decentralized finance (DeFi), non-fungible tokens (NFTs), and the metaverse are currently the three most talked about applications based on blockchain technology. NFTs were considered as mere arts stored in an asset but with more innovations springing up, NFTs are evolving with additional use cases that add value, including lending/borrowing and acting as collateral. Thus, firms like Drops seek to show how NFTs can be utilized to contribute to the growth of decentralized finance in the long run.
To that end, Drops came with permissionless lending pools where NFT holders can obtain an instant loan, manage the length of the lending period as well, just like Ether on Aave. To enable actual yield farming using NFTs, Drops allows holders to create NFT vaults where funds borrowed against NFTs are sent to a yield farming strategy. By depositing into the vault, users can earn dPoint tokens which are considered as ‘coupons’ that can also be used to get cashback in DROP tokens.
To note, loan markets for fungible tokens based on NFT-related tokens and DeFi assets are already in existence with Aave and Compound championing the protocol. However, Drops is here to bring its own innovations and projects aligning with its roadmap. As a result, Drops is dedicated to listing NFT-related projects, offering an appealing liquidity mining program. Alongside, it is launching on multiple chains.
Drops is a leading platform that provides loans for NFT and DeFi assets, thereby supplying them with a much needed utility on its native governance token — Drops Ownership Power (DOP) which is IDO’ed on Polkastarter. To attract more users to the platform, Drops enables any kind of asset to be used as collateral, such as metaverse items, DeFi tokens, financial NFTs, and NFT collectibles to mention a few.
Going back, the team first got the attention of the crypto community with the launch of the NFT game project — Node Runners, in October 2020, which then birthed Drops. Afterward, Node Runner released a new $DROP utility token with the $NDR token acting as the governance token.
Ever since they have gone ahead to launch fungible loans mainnet and an NFT loans testnet. Moreover, with a Total Value Locked (TVL) being 2.5 million, the brand has made a mark in the industry and by far, gained the trust of top blockchain organizations.
🙌📢The wait is over!
Our Loans protocol with liquidity mining program is live!🥳
You can lend/borrow $ENJ, $USDC, $ETH, $WBTC
and mine $DOP here👉https://t.co/YCh56YE5hk
🎯More #NFT related tokens are going to be added soon.
📒More details: https://t.co/BfJYBd1pwH pic.twitter.com/Xmg5VK74cz
— Drops DAO (@dropsnft) July 14, 2021
Remarkably, the CEO of Enjin, Maxim Blagov, Charged particles, Polkastarter, Solv Protocol, Oraichain, and Parsiq are some of the key partners who have journeyed with Drops. More so, Drops is listed on Uniswap and Gate.io at the moment.
Not only that, Drops integrated Chainlink Price Feeds on its Ethereum mainnet to ensure that loans are accurately and securely priced against various stablecoins and cryptocurrencies. Similarly, Drops partnered with Enjin to enable staking and borrowing by Drops users against Enjin-powered NFTs and in-game assets.
Unique Features of Drops
Borrow Against DeFi And NFT Tokens
Drops reduces the opportunity cost of holding governance or liquidity tokens by supplying them as collateral and earning sizable returns & rewards on short-term loans. Users can use any supported NFT as collateral to borrow up to 80% of the value of your asset which is determined by the floor price. In the same vein, receive an instant permissionless loan from the Drops lending pool.
To clarify, there is a liquidation risk associated with using the borrowing function in the protocol. Users are clearly communicated collateral ratios and limits, which will need to be adhered to in order to avoid liquidation of the collateral.
Use Your NFTs For Loans
In the Drops ecosystem, individuals can use NFTs as collateral and receive instant access to a trustless loan without having to talk to the lender. Or wait to be approved as a result of the permissionless NFT Lending Pools.
To use the Drops Loans protocol, approve and deposit a supported asset through the official Drops Loans GUI at https://drops.co/loans/.
Nevertheless, interacting with the Drops Loans protocol requires nothing aside from blockchain transaction fees for the network you are using.
Turn Your Idle Assets Into Active Yield
Drops allow you to get more from your portfolio by supplying stable coins & governance tokens to fungible or NFT lending pools in exchange for attractive returns & rewards. What’s more, users can make money when their collection is not on display, and boost their cash flow with instant loans.
How Drops NFT Loans Work
- Create or Join Pools: Join existing lending pools that meet your goals and terms or create one by choosing which NFTs you wish to accept & the amounts that can be borrowed against them.
- Lend: Earn attractive returns on your cryptocurrency & NFT assets by choosing a lending pool of your choice and supplying liquidity that meets your needs.
- Borrow: Users can use any supported NFT as collateral to borrow up to 80% of the value of your asset, which, however, is determined by the floor price. As well as, receive an instant permissionless loan from the Drops lending pool.
Drops DAO and Its Key Features
Drops DAO is a trustless liquidity platform that gives users access to loans, leverage, and utility for NFT assets and DeFi tokens. This is built around the Drops Loans protocol, a permissionless liquidity protocol based on the Compound smart contracts and designed for NFT assets and DeFi tokens.
The perk of it is that anyone holding NFT and DeFi tokens can use Drops DAO to access additional utility and returns on these assets. Thus, reducing the opportunity costs of holding them.
Permissionless lending pools
Many major assets are whitelisted on Drops Loans for native lending and borrowing markets. Users will be able to use any token with liquidity on Uniswap or Sushi to create a lending pool which will be allocated to isolated lending pools.
DOP Token and Governance
DOP will help direct the future of the Drops platform. They are used to govern Loans protocol and set price ranges for NFTs that are accepted for Margin NFTs solution. Due to the complexity of the protocol, the on-chain voting is split into two: DOP and voting escrow DOP (veDOP). Users can participate in ‘vote-boosting’ by locking up their DOP for veDOP.
Of note, a total of 2,420,000 DOP (16.1% of total supply) tokens over 5 years will be allocated across asset markets as liquidity incentives.
Drops Depositing and Earning
To deposit, visit https://drops.co/loans/ and connect to the Drops Loans dApp via your wallet. Click on the asset you wish to deposit from within the ‘Supply’ column.
To withdraw your deposited funds, click on the asset within the ‘Supply’ column and select the ‘Withdraw’ tab. With that, you can enter the quantity of the asset that you wish to withdraw and submit the transaction.
Likewise, claim your accrued DOP by clicking on the ‘Claim X DOP’ button in the pop-up window and signing the transaction.
Conversely, If you no longer want an asset to be used as collateral, simply find the asset in the ‘Supply’ column and toggle the collateral switch to the ‘off’ position. Click ‘Exit Market’ in the pop-up window and submit the transaction.
In conclusion, Drops is targeting the NFT audience that wants to reduce the opportunity costs of holding NFTs or access liquidity without selling. To add on, the NFT segments targeted are metaverse items, collectibles, and financial NFTs.
Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.