The demand for NFTs may have exceeded even the wildest dreams of their creators. CryptoPunks, now the caviar of the NFT world, were free for anyone with an ETH wallet to acquire back in 2017. Now, they’re valued between several hundred thousand and several million dollars.
As NFTs gain popularity, their owners seek greater utility in the realm of DeFi. Because NFTs are non-fungible assets with unique value, they have been historically siloed in niche markets without the ability to serve as collateral on decentralized lending and borrowing platforms.
JPEG’d is an innovative decentralized lending protocol designed to unlock the full value of NFTs by allowing owners to leverage their digital collectibles while still retaining ownership. JPEG’d will accomplish this by allowing users to mint a decentralized stablecoin (PUSd) that is fully collateralized by their NFTs, starting with the original 10,000 CryptoPunks.
Ensuring the accurate price of NFTs is more complicated than accurately pricing fungible assets like ERC-20 tokens. In order to establish non-fungible debt positions (NFDPs) as a new DeFi primitive, JPEG’d is integrating a custom-built Chainlink price oracle to mint PUSd.
“We think JPEG’d is the gateway that brings DeFi to NFTs,” a JPEG’d team member told Chainlink Today. “JPEG’d aims to combine both communities by enabling NFT holders to use their artwork and collectibles as collateral in order to use existing DeFi protocols and applications.”
JPEG’d users will be able to swap PUSd for other stablecoins or provide liquidity in a curve pool to earn rewards and incentives. In the future, the JPEG’d team plans to introduce an auto-compounding vault that will allow PUSd depositors to passively earn yield.
The JPEG’d Chainlink oracle will determine the collateral value of floor CryptoPunks using the time-weighted average price (TWAP) of sales and floor prices to mitigate outlier events and prevent manipulation. Tracking the average price of only the lowest-valued floor CryptoPunks ensures users don’t borrow more than their NFT is worth.
“Chainlink oracles respond to price movements in the Cryptopunk market and ensure the lending protocol remains fully collateralized at all times,” said JPEG’d’s spokesperson. “It is a critical part of the lending infrastructure.”
JPEG’d’s big-picture goal is to expand its platform to allow all well-established NFT collections – such as EtherRocks, Art Blocks, Dino Pals, Autoglyphs and Bored Ape Yacht Club – to function as trusted collateral within the broader DeFi ecosystem via Chainlink oracles.
Said JPEG’d’s spokesperson, “We are excited to join the Chainlink ecosystem, as Chainlink is the industry-leading decentralized oracle provider securing the vast majority of DeFi applications.”