I’m going to start using examples that I have used on the Tron network. Feel free to commence rage, derision, Justin Sun hate (valid), plagiarism, etc…Done? Good. Ok, now that we’ve established that Tron sucks, let’s move forward.
So Tron doesn’t suck. I know, I know, it totally does but really, it doesn’t. They’ve solved the gas fee problem in their own way on their L1 by having the amount of Tron you stake to bandwidth (number of times you can execute a contract) and energy (complexity of said contract) or by burning Tron to execute. For executing 2-4 contracts in a 24hr period, you need to have about 13,500 TRX ($1200 in today’s value) staked with a 1:9 ratio (bandwidth/energy) and it will replenish within 24 hours. That’s the basic mechanics. Now onto the interesting stuff.
Justlend.org is their lending/borrowing/collateral platform. The APY ranges from .29% to 20% (depending on the asset) with the return being the JST platform token. Here’s where it gets fun. Justlend has 4 stablecoins (USDJ, USDT, TUSD, and USDC). What is cool is the different lending and borrowing rates. Currently, USDC has a borrow of 0.69% and TUSD has a lending rate of 13+%. That means that I can supply an asset I have (let’s say JST at 20%), I can use it as collateral to borrow up to 40% in USDC. I can then trade that for TUSD for 13% or for more JST at 20% and re-add that to my lending pool. Now, I’m effectively lending out a borrowed asset at 12-19x what I’m borrowing it at, meaning I can use the lending returns to pay off the borrow interest.
As we all know, if the supply asset is a non-stablecoin crypto, the value will swing quite a bit up and down, and if that swing drops more than the 40% maximum, you get liquidated. Sad face.
Now it gets into the degen shit. Let’s say we’re now in a bear market and I don’t want to lose the value of my stack. In that case, I want to trade it all for the highest yielding stablecoin (TUSD in this case at 13%). So if I have this stack of stablecoin, I can, of course, borrow against it and I’ll want to do that with the lowest interest rate (USDC in this case at 0.69%). But I can confidently borrow the absolute MAXIMUM amount because I know that 1 TUSD will always = 1 USDC, there will be no swinging of value. So, when I trade the USDC for TUSD and turn that -0.69% into + 12%, I effectively lower the 40% thresshold without incurring any danger of liquidation. That means I can borrow again against the total and repeat the process at least one more time safely.
I’m not going to pretend to know how the mechanics are working with everything inside of their algorithms but that’s the mechanics of how things work there and I’m pretty happy with it at the moment but I could easily see that kind of system brought over here in some form. Let me move over to my real idea that’s loosely based on this system.
Property as NFT’s. We all have probably thought about it, there are most likely some companies that are already working on it. The low down and dirty of it is, I think this system that Justlend has can work for property as NFT’s. Say you buy a house and you are paying down the mortgage. What if there was a DAO or platform that would be willing to buy that mortgage (and many others) from the bank and turn the property into an NFT/smart contract. The owner could then be paying into the NFT but also collateralize that NFT. In collatoralizing it, the owner could take the value that they have paid down and borrow against it, then lend out that borrow on the platform. The interest they could earn on that loan out would help pay off the loan and once it was paid off, the platform/DAO would simply transfer the NFT fully into the owner’s wallet and they could continue to collatoralize the full value of that NFT/Property, earning interest on what they are loaning out.
This is a way we can MASSIVELY shrink the amount of time it takes to pay off a home loan. In the event that the owner defaults on the loan, the platform/DAO could have tiered options to vote on a decision on how to proceed, either increasing the interest rate on the loan or taking a chunk of what the owner is loaning out or take full legal possession of the home/NFT, and then spreading the collateralized loan throughout the platform/DAO’s token holders.
I’m just rambling so go ahead and tell me I have a dumb idea or whatever but it’s just what I’m thinking. I’m currently planning on using Justlend to convert my LP profits to a TUSD or USDJ, borrow against it, and use that to pay my taxes for this year and just have the platform repay the interest but if the mechanics work, the mechanics work. Thoughts?