Starting today, the NFT lending service JPEG’d will enable owners to borrow against one of the most well-known non-replaceable tokens, CryptoPunks. The service will use decentralized Oracle provider Chainlink as its data source.
The non-fungible tokens, or NFTs, are encrypted unique digital assets that can be linked to content such as images or videos. In the case of CryptoPunks, they form a collection of 10,000 randomly generated little mashups of pixel art images, each with a unique set of properties. Rare CryptoPunks have sold for millions of dollars each.
However, CryptoPunks and other NFT projects exist in an isolated market, a statement from the team behind JPEG’d said. Their goal is to better integrate these pools within the broader decentralized finance (DeFi) space so that users can gain liquidity by using their NFTs as collateral while still retaining ownership of the tokens themselves.
JPEG’d is not the only service in this fast-growing space; others include NFTfi, backed by Roham Gharegozlou, CEO of Dapper Labs – the company behind Cryptokitties and NBA Top Shot.
The DeFi money marketplace Aave also utilizes the concept of Aavegotchis, NFT crypto collectibles used in the gaming universe; each Aavegotchi has Aave’s aTokens as collateral, which means each Aave generates revenue.
JPEG’d and Chainlink
JPEG’d, managed by a decentralized autonomous organization (DAO), is offering owners of CryptoPunk the opportunity to open a so-called NFDP (non-fungible debt position). This provides them with liquidity and the ability to earn in DeFi by allowing them to deposit their CryptoPunks into smart contracts and mint a synthetic stablecoin (PUSd,).
In addition, JPEG’d introduces safeguards to provide additional protection for investors. Its insurance mechanism will be “the first of its kind” and will give depositors “peace of mind that in the event of liquidation they can buy back their NFTs from the DAO rather than selling them immediately on the secondary market,” a JPEG’d spokesperson told us.
But pricing NFTs accurately is no easy task. The team argues that spot pricing is not an accurate method for a number of reasons, including the ease of manipulation and the range of prices in most pools, which can skew overall valuations.
Instead, JPEG’d has partnered with Chainlink to accurately price NFTs used as collateral through a custom-designed solution based on CryptoPunks price feedback.
Chainlink is building a billion-dollar bridge to the multi-chain world
At the heart of the feed is what is called a time-weighted average price (TWAP) to measure the sales and floor prices of individual pieces, creating a mix of prices to mitigate outlier events and make it harder to manipulate pricing.
Eventually, JPEG’d plans to serve other popular NFT series, including EtherRocks, Art Blocks, Dino Pals, Autoglyphs, and Bored Ape Yacht Club.
In the meantime, Chainlink aims to set a new industry standard for how established NFT series can be fairly and securely priced on the chain.
“This is an important step in merging the NFT and DeFi worlds and will enable some very interesting use cases,” Johann Eid, Chainlink’s head of integration, told us.
And that’s not all.” JPEG’d says: “Our outlook for the future is that the NFT space will expand to include music royalties and albums.
We could even make money from that dusty Mariah Carey album.